Attendees at last week’s WiMAX Forum Global Congress in Amsterdam were treated to a procession of operators committed to WiMAX, but attendance was significantly down from last year, and behind the scenes vendors fretted about rollouts being delayed due to everything from a lack of spectrum—for example in India and Brazil—to a lack of funding due to the financial crisis and economic downturn. For vendors, this means it could be 2010 before they see significant revenues from selling WiMAX equipment. That is several years later than many vendors expected, which is likely to lead more players to withdraw from the segment.

On a more positive note, operators such as Packet One Networks (p1) in Malaysia are gaining significant momentum. P1, which has 30MHz of 2.3GHz spectrum, launched services in August 2008 and now has 350 base stations installed in Malaysia’s five largest cities, covering 25% of the country’s population. The operator says it had 35,000 subscribers at the end of 1Q09, will pass 100,000 by August, and aims to have more than 200,000 subs by year-end. The operator says that in 1Q09 it took 30% of fixed broadband net additions in Malaysia, despite having a population coverage of only 25% compared to near 100% for the incumbent fixed broadband operator.

Yota, which claims a nationwide footprint of 2.5GHz spectrum in Russia, launched commercial services in Moscow on June 1, following the launch of free trial services in Moscow and St. Petersburg in November 2008. Yota’s WiMAX devices include USB modems, notebooks with embedded WiMAX, and an HTC smartphone supporting both WiMAX and GSM. Yota’s tariffs include a $30 per month plan offering unlimited usage, speeds up to 10Mbps and unlimited downloads from Yota’s online music service. Yota says that since its trial launch in November it has sold 75,000 WiMAX devices, 15,000 of those the HTC mobile device, and expects 70-80% of trial users to convert to paying customers. During the trial at the end of May it had 75,000 customers and is adding an average of 40,000 per month. The operator plans to have full coverage in Moscow, St. Petersburg and three other cities by end-2009, for a total population coverage of 26 million via 1600 base stations.

Comstar, the largest fixed broadband operator in Moscow, says it soft-launched WiMAX services in Moscow in May with 170 base stations running in the 2.5GHz band. The operator is focused on portable devices including USB modems and notebooks, and says the network supports peak downlink speeds up to 12Mbps and typical speeds of 2-7Mbps. Its tariffs start at $9 per month for 1GB and increase to $16 per month for 2GB and $22 per month for 5GB. Comstar says it has invested $20 million in the service so far, but does not detail subscriber numbers.

US-based Cleawire launched Mobile WiMAX services in Portland, Oregon in January 2009 and in Atlanta in May, and says it is on track to have services in 80 US markets with 120 million people by end-2010. Time Warner Cable, an investor in Clearwire, says it will be an MVNO on the Clear WiMAX network and will launch services in at least one of its existing markets by the end of 2009. The operator’s significant cable markets are New York, Los Angeles, North and South Carolina, Texas and Hawaii. Clearwire plans to launch services in Dallas Ft. Worth, Honolulu and Charlotte in 2009, along with other major markets including Chicago, Philadelphia, Baltimore and Charlotte. The operator, which says it has more than 18,000 base station sites in deployment, plans to launch services in 2010 in New York City, Washington DC, Houston, Boston and the San Francisco Bay area.

Meanwhile Japan’s UQ Communications says it launched trial services in February and is on track to launch commercial services in July. The trial service runs on 600 base stations running in the 2.5GHz band, and provides peak downstream speeds of 10-15Mbps. UQ says it plans to have 4,000 base stations deployed by end-March 2010, when it expects to have some 300,000 subscribers. The operator plans to have 90% population coverage by March 2012 via 38,000 base stations, some 19,000 of which will be indoor solutions including femtocells. UQ has the only WiMAX license in Japan and must provide open access to MVNO operators. The operator says it has had discussions with 50 potential MVNO partners. One confirmed MVNO partner is mobile operator KDDI, the lead investor in UQ.

WiMAX Vision speaks to CC Puan, CEO of Green Packet Malaysia, and MD of the Green Packet Group, about the firm’s WiMAX interests as both supplier and operator.

How did Green Packet start?
I co-founded Green Packet, headquartered in Silicon Valley, in late 1999. We started off as a software and solutions developer to enable the convergence of multiple networks through seamless integration. We help operators solve network problems and increase ARPU, mainly in the mobile broadband space.

Why did you set up operations in Malaysia?
After the dotcom crash, we couldn’t get any more funding. But looking at the solutions we had been developing, we still felt we had huge potential. And the Malaysian government had been doing many things to promote multimedia and technology development [through the Malaysian Multimedia Super Corridor project] and to attract foreign companies to set up their base in Malaysia. So I decided to scale down the US operations, focus on the Asia-Pac market, and move the HQ to Malaysia. Our first major operator contract to sell our solutions to was China Telecom. We then took the company [Green Packet Berhad] public in May 2005.

Why did you branch out into the operator side by acquiring a 2.3GH WiMAX licence in Malaysia and setting up Packet One (P1)?
While we were doing a lot of business in Asia, the Malaysian government was keen that we help them with their goal to reach 50 percent of the population with broadband by 2010. There is a high pent-up demand for broadband in Malaysia, so we thought why not? It has a PC penetration close to 30 percent [in a population of around 28 million] but around two million of those PCs are connected with dial-up rates of 56Kbps. There is a lot of low-hanging fruit for fixed broadband. So we went to the financial markets and raised nearly $100m as part of our bid and, in March 2007, we were awarded one of the 2.3GHz WiMAX licences.

What are the WiMAX rollout plans for P1?
The first phase is to have 1,800 base stations using 600 sites – three base stations per site – to support coverage of 25 percent of the population. We started commercial launch in August 2008 using Alcatel-Lucent equipment but now we are starting on the second phase, with equipment from ZTE, to cover 40 percent of the population, which requires 3,000 base stations and 1,000 sites. We anticipate finishing that by the end of H1 2010. By the end of this year, we are confident we will have 2,100 base stations as compared with about 1,000 base stations now. If you look at the network and subscriber growth for P1, we are moving at a fairly remarkable rate.

What about P1 subscriber numbers?
We had 10,000 subscribers at the end of last year. At the end of 1Q 2009, the net subscriber additions were more than double compared with the last four months of 2008. We see that growth trend continuing and we expect to have 250,000 subscribers by the end of this year.

Is there any conflict of interest between being an operator and an equipment supplier in the same market?
The group strategy is to spin-off the service provider. We have a plan to IPO P1 within the next three years. To have an interest in an operator may have a worse impact in a country where we are a [direct] competitor to our customers. That’s why, in the longer term, we plan to spin-off P1. At the moment, we don’t see much impact on the solutions business [by owning P1]. We do sell solutions, however, to 3G operators in Malaysia.

What do you sell to the mobile operators?
The main product is our connection manger platform, which is used to achieve fixed mobile convergence and seamless integration across multiple networks. The 3G operators, after they upgraded to HSPA networks, have been selling a lot of data cards. But their networks are getting quickly overloaded, so they are in a bit of a dilemma. What we do is provide a connection manger that can offload traffic from 3G onto cheaper wifi networks where it is available. The seamless connectivity is a unique aspect of our solution. We’ve also built a lot of widget-based applications into the connection manager, which is getting a lot interest from both the 3G and WiMAX operators.

How have you helped P1?
At the time P1 got its licence at 2.3GHz, there were very few devices available. So, to ensure P1 success, we also invested in a big team based in Taiwan to help us develop all the devices – USBs, data cards and CPE. We also have WiMAX devices for the 2.5GHz and 3.5GHz frequency bands.

What about WiMAX CPE costs? How far can they be driven down?
The first thing to say is that WiMAX is an open platform based on open standards. But as we are still in the early days of the technology, there are still long IOT [processes] to go through. But the maturity of the WiMAX ecosystem is unprecedented in that it is happening so fast. The 802.16e standard was not ratified until late 2005 but the price of the CPE has gone from between $250 to $300 in 2007 to under $100 today across each of the WiMAX standardised bands. And the price of the USB dongle today is cheaper than a HSPA modem. The maturity of the WiMAX ecosystem in terms of device prices and variety is really remarkable. And one of the advantages of the open standard is that it doesn’t have the IPR and royalty issues related to CDMA and the future LTE. I think it’s possible to get simple WiMAX CPE [no voice or wifi] below $70 by the end of this year.

What is the cost difference between an HSPA and USB dongle today?
There are royalty payments on HSPA, which range from a few US dollars to tens of US dollars depending on the volume, which has to be added to the cost of the chipset. But WiMAX chipsets are now under $20 [with no royalty payments], so it probably costs about $15 to $20 more for a 3G chipset. There are more than 20 WiMAX chipset companies compared with CDMA, which is mainly a Qualcomm play.

How many WiMAX CPE units are you shipping?
We’re probably looking at between 700,000 to 800,000 units this year [including dongles], which is about 7-8 percent of the total market share. Apart from Malaysia, which we estimate at around 250,000 [with P1] this year, we already have global reseller CPE partnerships with Alcatel-Lucent and Huawei.

How do you see the WiMAX device market developing?
I think it will be in four stages. The first stage is fixed-line services and CPE, followed in the second stage by nomadic services with USBs and embedded devices. The third stage is mobile handsets, and the fourth stage is embedded CE devices and M2M applications.

Why have you set up a WiMAX operator consultancy business?
We want not only to be a WiMAX operator in Malaysia but also a regional player, so we have set up another arm called P1 International. It is designed to help aspiring WiMAX operators have a quicker time-to-market by leverage our experience.

NFC comes to Malaysia

Malaysian mobile operator Maxis launched what it claims to be the world’s first commercial mobile payment system based on NFC (Near Field Communications) technology on Thursday.

Maxis FastTap is an integrated mobile payment service established under a partnership with Nokia, Visa, Maybank and Touch ‘n Go.

Available on the Nokia 6212 classic device, the NFC system allows users to purchase goods and services at more than 1,800 Visa payWave merchant locations as well as pay for toll, transit, parking and theme park charges at over 3,000 Touch ‘n Go points nationwide by waving their device over a reader at the point of sale.

The quick payment system is geared up for small item purchases up to a maximum of RM150 (Eur31) per transaction, as well as for ticketing and transportation payments.

Packet One outlines ZTE deal

Malaysian WiMAX operator Packet One Networks (P1) has fleshed out the terms of its agreement with ZTE, which it alluded to last week.

On the Thursday signing of the $28m deal with the Chinese supplier, P1 said it would use ZTE kit for phase two of its rollout plan this year.

“Currently, the company is well on track to provide WiMAX coverage to 35 percent of the population in the peninsular by end of this year,” said P1′s chief executive officer Michael Lai at the signing ceremony.

ZTE is to supply WiMAX network planning and design, equipment supply, engineering services and WiMAX network optimisation, which will be used in parallel with Alcatel-Lucent WiMAX kit for phase one of P1′s network.

Phase two of P1′s network rollout is focused on the East Coast and Penang. By the end of this year, P1 expects to have established 700 new sites.

P1 says it is expecting to spend RM1bn in capex to support its network and product rollout over the next five years.

Packet One looks to ZTE

P1′s first WiMAX deal was with Alcatel-Lucent. In January 2008 the operator announced it had picked the Paris-headquartered supplier to provide an ‘end-to-end WiMAX wireless broadband solution’, a deal valued at RM320m (approximately $71m at the time).

Alcatel-Lucent recently announced, however, that it would be focusing all its ’4G’ mobility efforts on LTE, preferring to use WiMAX for fixed and nomadic applications only. This may have been a factor in P1′s decision to go with ZTE, which appears fully committed to mobile WiMAX.

At the Mobile World Congress 2009 event in Barcelona, a ZTE spokesperson told WiMAX Vision that the Chinese firm was already talking to some of Alcatel-Lucent’s WiMAX customers.

P1 acquired its WiMAX licence in March 2007, giving it a 30MHz chunk of spectrum across Peninsular Malaysia in the 2.3GHz frequency band.

In an e-mail exchange with WiMAX Vision earlier this year, Michael Lai, P1 CEO, said: “Our target is to cover 25 per cent of Malaysia by 2009, 40 percent by 2010 and 60 percent by 2012. This is in line with the Malaysian government’s national broadband plan to provide broadband access to 50 percent of Malaysian households by 2010.”

Since its licence award, P1 has been building up a number of strategic partnerships to add extra clout to its WiMAX presence. These partnerships include Oracle Systems (billing and revenue management) and EMC Corporation (IT infrastructure). It has also signed agreements with Fiberail (the owner of a nationwide fiber-optic network in Malaysia), and AIMS Asia (an internet transit provider). Fiberail gives P1 a quicker route to market through access to its high-speed network for backhaul and core transmission, while AIMS gives P1 voice and data interconnect capability with local and international service providers.

Redtone, using base stations and CPE equipment from Motorola, has launched the first commercial WiMAX service in East Malaysia. The first phase of the WiMAX network covers the Kota Kinabalu business district.   

Redtone’s WiMAX licence – a 25MHz slice of spectrum in the 2.3GHz frequency band – will allow the company to extend coverage across Sabah and Sarawak, the two main cities in East Malaysia.

“We are impressed by Motorola’s ability to provide advanced features like MIMO-B in a live system,” said Redtone Group CEO, Zainal Amanshah, in a prepared statement that outlined some of the reasons why the company selected Motorola. “These features will ensure a smooth network upgrade when we need to increase system capacity in the future.”

Redtone’s announcement comes hot on the heels of the unveiling of the first commercial WiMAX network in Peninsular Malaysia by P1.

Green Packet, which owns P1, also announced this week that it would invest up to RM1bn ($300m) in WiMAX structure over the next four to five years. To date, Green Packet has invested around RM300m (just under $100m) in its WiMAX operations.

Packet One (P1), a 2.3GHz mobile WiMAX licence holder in Peninsular Malaysia, has become the first operator in the country to launch commercial WiMAX services.

The initial promotional offer is RM99 ($30) per month for customers signing up to a 12-month contract for a 1.2Mbps service. A 2.4Mbps service is available at RM299 ($89) per month for a one-year contract. P1′s WiMAX tariffs are pitched just below the combined price of an equivalent-speed ADSL service and PSTN connection offered by Telekom Malaysia.

Green Packet, which owns Packet One, has invested around RM300m (just under $100m) in its WiMAX operations to date. 

According to analysts at local investment firm Aseambankers, P1 will need at least 350,000 subscribers paying an average of about RM92 ($27.5) over the course of five years before it can break even. P1 is aiming to acquire 100,000 subscribers over the next 12 months.

The Malaysian Communications and Multimedia Commission (MCMC), the country’s regulator, has stipulated that all four 2.3GHz WiMAX licence holders – the other three are Redtone (for East Malaysia), Bizsurf and Asiaspace (both serving Peninsular Malaysia) – should have 25 percent population coverage of their respective WiMAX licence areas by the end of 2008. P1 has said it will meet that target and subsequently increase its population coverage to 35 percent and 46 percent in 2009 and 2010 respectively to meet MCMC requirements.

At first glance, Malaysia looks a promising place for WiMAX to make an impact. Broadband penetration is low (around five percent at the end of 2007) and GDP per capita is reasonably high at around $6,500.

One potential drawback, however, is that the regulator has awarded WiMAX licences in the 2.3GHz frequency band, which does not enjoy the same level of vendor support as 2.5GHz and 3.5GHz. Lack of economies of scale, of course, pushes up prices.

Although WiBro in Korea uses 2.3GHz and is supported by local vendors such as Samsung, the system is based on 8.75MHz channels. WiMAX operators in Malaysia use 5MHz and 10MHz channels, which means they can’t turn to the Korean vendors to supply kit.  

According to a recent report in ’3G Wireless Broadband’, a newsletter published by Informa Telecoms & Media, MCMC has not ruled out issuing WiMAX licences in the 2.5GHz frequency band. Spectrum at 2.5Ghz was originally handed over to several triallists for pre-WiMAX technology in 2003, but not much progress has been made. If WiMAX licence awards did happen at 2.5GHz, it would clearly put the 2.3GHz business case under more strain.

Earlier this year, Intel invested RM50m ($15m) in Green Packet with a view to speeding up WiMAX development in Malaysia.

REDtone, Malaysia

Malaysian operator is pushing for much cheaper WiMAX kit ahead of commercial launch.

It was back in March 2007 when the Malaysian Communications and Multimedia Commission (MCMC) awarded REDtone, along with three other companies, a WiMAX licence in the 2.3GHz frequency band. More than one year later and REDtone, which targets SME and enterprise customers with voice and data services, is still in WiMAX trial mode. Commercial launch is not scheduled until 3Q 2008.

“The challenge for WiMAX technology is that the eco-system hasn’t yet reached full maturity,” explains REDtone Group CEO, Zainal Amanshah. He points out that the absence of WiMAX economies of scale and limited equipment availability have led to high prices for base stations and CPE units. This is putting a strain on the WiMAX business case for large-scale rollout.

“In the unlicensed bands, the price of a WiMAX base station is quite reasonable at about $30,000 to $40,000, or sometimes even less than that with bigger volumes,” says Zainal. “In licensed bands, however, we are talking about $60,000 to $70,000 per WiMAX base station, which is far too high. We want to drive down the price to the levels of base stations using unlicensed spectrum.”

In East Malaysia, REDtone holds a 25MHz slice of spectrum in the 2.3GHz band covering the cities of Sabah and Sarawak. The other three operators who were awarded 2.3GHz licences by MCMC? Bizsurf, Asiaspace Dotcom and MIB Comm?each hold 30MHz chunks of spectrum and serve Peninsular Malaysia, although none has yet to launch a commercial WiMAX service.

But REDtone is not without a presence in Peninsular Malaysia. Via its associate company EB Capital (in which it holds a 23 per cent stake), REDtone has access to 2.5GHz and 3.5GHz spectrum assets. WiMAX trials are underway in these bands, although REDtone has yet to set a date for commercial deployment. The Malaysian government intends to re-farm this spectrum, currently used by the country’s mobile operators, which means that WiMAX commercial rollout in 2.5GHz has been put on hold.

REDtone and EB Capital has also more than 100 base stations in the unlicensed bands of 2.4GHz and 5.8GHz. Originally used for proprietary broadband wireless systems, Zainal says that WiMAX is now being trialled to “relieve congestion” in those frequencies. (REDtone and EB Capital use unlicensed spectrum both for backhaul and in the last mile.)

For WiMAX CPE equipment, Zainal says that needs to come down to below $100 per unit, although he would not be drawn on what prices the vendors he is negotiating with are quoting.

One way to reduce CPE costs would be to place one WiMAX antenna on multi-tenanted buildings and then run cable through to individual PC-connected customers. In East Malaysia, however, the placing of antennas on buildings is prohibited. “This makes CPE pricing even more critical to Malaysia’s WiMAX players, as each customer needs to have an indoor CPE” says Zainal.

The high prices for WiMAX kit (at least for the moment) and lack of availability of certified WiMAX base stations have contributed to a delay in MCMC’s original schedule for WiMAX rollout. When the 2.3GHz licences were awarded in March 2007, the MCMC was asking the licence winners for 25 percent coverage by the end of that year and 40 percent coverage within three years. The 25 percent target has now been shifted to the end of 2008 but Zainal feels it is still unlikely REDtone will meet it.

“MCMC has not made it clear whether coverage refers to population or geography but, either way, due to a lack of equipment availability, it is unlikely we will be able to do it,” says Zainal. “We’re trying to educate the regulator on these issues.”

Other than the coverage targets, MCMC stipulates that the 2.3GHz licence holders must invest between RM250m ($78m) and RM300m ($93m) in WiMAX technology during the first three years from the licence award. This is part of the Malaysian government’s programme, dubbed MyICM 886, to connect 75 percent of households with broadband by 2010.

At the end of 2007, broadband penetration stood at a lowly 5 percent in Malaysia. Given that the country’s GDP per capita was a reasonable US$6,500 in 2006 (according to data from the World Bank), the country seems fertile ground for broadband growth, which gives WiMAX a fighting chance to make its mark.

A hybrid data strategy

Founded in 1996, REDtone built up its subscriber base (15,000 business customers) on the back of discount voice calls. Despite success in this space (it has a 35 percent share in Malaysia’s discount voice call market), price competition has meant lower prices and thinner margins.

That is why REDtone is turning to higher margin data services, using a mixture of WiMAX, 3G and FTTH. To deliver 3G, REDtone has an MVNO agreement with Celcom, Telekom Malaysia’s mobile subsidiary. Mobile services were launched during 1Q 2008.

For FTTH, REDtone leases capacity from Telekom Malaysia, which has ambitious plans to roll out FTTH in the country’s major cities with the help of government funding.

With so many different broadband technologies at its disposal, where does REDtone see WiMAX as fitting in?

“Primarily for urban deployment for business customers as it would be too expensive to roll out in rural areas due to the low density of potential users,” responds Zainal. “And within urban areas, WiMAX could be used to give business customers with fibre connections extra redundancy, or to offer better point-to-point performance in places where fibre is not available. We don’t see WiMAX as being ready yet for true mobility, though. We use 3G and HSPA to offer that.”

Although some mobile operators around the world are using HSPA as a form of DSL substitution to break into the fixed-line broadband market, Zainal doesn’t view this as an optimal solution for the business customer, especially if WiMAX is available

“WiMAX provides better performance for point-to-point connections than 3G and the ability to offer SLAs, specifically in enterprise networks’ data environments,” says Zainal.

In both cellular and WiMAX networks, customers located within one cell compete for the data throughput that is available. The more customers in one cell downloading data, the slower the average downlink speed for all those users. Zainal argues, however, that it is still possible to offer SLAs over WiMAX because the download behaviour of business customers is far more predictable than it is with consumers.

“Enterprise customers tell you exactly what they need and when they need it,” he says. “Consumers can download anything from anywhere at anytime.”

WiMAX on trial

From the WiMAX trials that REDtone has conducted, Zainal says he is pleased with the performance. Under optimal conditions (using MIMO technology and 10MHz channels) throughput of a three-sector base station totals 69Mbps (which translates to 23MBps per sector or cell). From that, REDtone reports that a user can typically receive between 1Mbps and 5Mbps on the downlink depending on the number of other active users in the cell.

REDtone is still in the process of calculating the optimum number of business customers per WiMAX base station in order to offer meaningful SLAs.

Tactfully, Zainal describes the general and far-reaching claims made by some vendors a couple of years ago that WiMAX could offer as much as 70Mbps over 70km as simply “exaggerated”. From the REDtone trials, the typical radius reach of a base station at 2.3GHz is between 3km and 4km. Distances of 70km can only be achieved for point-to-point connections where there is non-interrupted line of sight.

REDtone had yet to choose its suppliers for commercial WiMAX rollout at the time WiMAX Vision went to press, although Zainal says he is in discussion with all the Tier One players.

Perhaps surprisingly, they don’t include any Korean vendors, even though Korea Telecom’s WiBRO service to which they supply gear to operates in the same 2.3GHz band. “We use 5MHz and 10MHz channels and the WiBRO standard uses 8.75MHz channels, ” says Zainal. “The Korean vendors don’t appear flexible in changing that.”

Moving forward, Zainal does not rule out making a greater marketing push into the consumer broadband market with a WiMAX-based service, although (like the business customer segment REDtone serves) it won’t have mobility attached to it. “HSPA is probably a better option than WiMAX for doing that because of the cheaper equipment,” he says. ‘And anyway, do you really need mobility for high-speed data?”

To sum up the challenge facing REDtone in Malaysia, and probably most operators around the world, Zainal highlights two letters that come up time and time again when talking to customers: ‘c’ and ‘g’. “Customers want the service to both cheap and good,” he says.

From the WiMAX trials carried out so far it seems that REDtone can deliver on the ‘g’. If it is to succeed on the ‘c’?and still achieve attractive margins to please its shareholders?then Zainal, by his own admission, must drive a better bargain with his WiMAX suppliers.