Wednesday, September 5, 2007

How WiMAX can disrupt the cellco cartel

I'm now working on our Broadband Communities newsletter, which has lots of stuff on WiMax and muni wi-fi this week. Go to if you're not a subscriber (it's free).
In the meantime, I thought I'd resurrect this column on how WiMax can make its mark.

How WiMAX can disrupt the cellco cartel
The time to prove the demand for WiMAX among users is at hand. While the hype machine has been active for some years, it’s only now in 2007 that we’re really going to see any activity in terms of commercial networks, particularly of the mobile WiMAX variety.

And they’ve got a lot of catching up to do with HSDPA, which has enjoyed a steady stream of rollouts around the world. The question is, how many users of a HSDPA network, or a handset that’s capable of using it, are actually making use of mobile Internet capabilities? I suspect not too many.

In fact, in a presentation at the WiMAX Strategies Asia forum recently, Motorola head of technology for South and East Asia, Dr Ray Owen, noted that last year worldwide ARPU for mobile cellular data actually dropped, and is tipped to rise only slightly this year. That would suggest that other than SMS messages and ringtones – the bread and butter of data ARPUs – subscribers aren’t buying this mobile Internet thing.

And with good reason: it’s overpriced and often hobbled.

Everyone has known for years that roaming fees for mobile voice are excessive. Roaming fees for mobile data are nothing short of extortion. Even among business people who travel regularly, many are forgoing the mobile data features of their phones because of high data roaming charges. For independents (ie, those of us who pay our own bills), the shock of the bill on your return is not worth the pain.

And the latest news is that operators such as Vodafone and Orange in the UK have been disabling the Skype and other built-in VoIP capabilities in the new Nokia N95 phones. That way they can lock users into their higher prices when making international calls or when roaming abroad.

Skype has also made a submission to the US Federal Communications Commission (FCC) on the same issue. In its “wireless net neutrality” proposal it called for users to be able to use Internet communications software and attach their own devices to any wireless network. Many commentators have pointed out similarities to the 1968 “Carterphone” decision, where AT&T was forced to allow users to connect third-party devices to their fixed line. (The decision was named after Tom Carter, who had a device for patching phone calls into two-way radio gear)

The mobile phone operators also want to lock you into their own walled garden of content as well. Last year Google hit out at such practices, accusing them of blocking access to Internet content and services including Google. “They’re inserting themselves in between you and an application that you want. I think that has scary, scary implications,” Chris Sacca, a Google senior exec, was quoted as saying.

So how does all of this help the WiMAX camp? It allows them to pitch their services as a “pure IP” play from day one. No walled gardens of content, no hobbled applications or disabled features, just pure and unadulterated access to “the” Internet. Wanna make voice calls, either international or local – go ahead, it’s just another application available on the Internet. Given that there’s already a WiMAX roaming forum being set up, it could seriously eat into cellco roaming fees the way Wi-Fi already is today.

One WiMAX operator at the WiMAX Strategies Asia forum is doing just that, even while offering its own VoIP services. “I don’t have a problem if my subscribers don’t use my voice but use Skype,” said Peter Ziegelwanger, managing director of Austria’s WiMAX Telecom. “What I can do is promise quality with my VoIP service,” he added.

Of course the mobile operators could also hit back with similar deals themselves. In a small way, this has already started to happen. Hutchison has launched its “X-series” of services that includes mobile Skype and other popular Internet services for its 3 mobile brand around the world, including in Hong Kong and more recently Australia. And users also get a flat monthly fee for mobile Internet as well.

Speaking to BroadBand Communities’ sister publication Communications Day, Hutchison Whampoa Group finance director Frank Sixt claimed that 3 was the first mobile operator in the world to tear down the walled garden. “Up until now network operators have treated network capacity as their most expensive asset. Historically it was and they rationed it and sold it at the highest possible price,” he said. “3 is the first mobile operator in the world to change the mobile media business model.”

To date, the rest of the mobile operator community has not followed suit. Which leaves a clear opening for WiMAX operators to offer – and more importantly market – what could be an important differentiator. That is, a “pure IP” service that is not hobbled or outrageously expensive, either at home or when on the road. – Geoff Long

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