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Seizing Opportunity

The biggest opportunity for unlicensed fixed wireless operators will remain in the second- and third-tier markets -- at least for now.The maturing of fixed wireless technology and the continuing consu...


April 1, 2002  


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The biggest opportunity for unlicensed fixed wireless operators will remain in the second- and third-tier markets — at least for now.

The maturing of fixed wireless technology and the continuing consumer demand for high-speed access will prompt service providers to utilize various wireless spectrums to deliver broadband services in non-metro markets.

The biggest opportunity for unlicensed operators will remain in the second- and third-tier markets. These providers must effectively and efficiently capitalize on this opportunity before satellite services make inroads into the non-metro markets with improved bandwidth speeds and lower customer premises equipment (CPE) costs.

LICENSED VS UNLICENSED

The biggest driver behind interest in unlicensed bands remains their ability to offer low-cost market entry into the consumer broadband access arena. Unlike the licensed bands such as MMDS, where service providers must make considerable investments in spectrum acquisition before networks can be deployed, unlicensed bands enable smaller providers to cost-effectively enter the market and efficiently roll out their networks.

The decline in capital funding opportunities over the last year has further expanded interest in unlicensed bands as rural Internet service providers (ISPs) endeavour to offer broadband access to their customers. The unlicensed fixed wireless operators have also been termed ‘wireless Internet service providers’ (WISPs), as they utilize various wireless spectrums to deliver broadband to both consumer and business end users.

MARKET TARGETS

A key theme among operators is targeting geographic markets where consumers do not have access to cable modem or DSL services. This allows them to avoid price competition and, at the same time, push a product that has up-front CPE and installation costs that are still much higher than cable modem and DSL initial costs. A critical market selection criterion is the presence of other unlicensed fixed wireless operators in a given market, as that would increase the degree of network interference and the overall service reliability.

Some of the key challenges facing unlicensed operators include:

Competition from other providers. As spectrums are unlicensed, existing providers constantly face the threat of new providers entering the market and using similar spectrum for their products and services.

Line-of-sight (LOS) issues continue to limit target market. With the first generation of wireless network equipment, LOS must be established between the tower antenna and the end-user rooftop radio. LOS severely limits the effective market coverage of WISPs; hence, more towers must be deployed to expand service reach and reliability.

LOS issues also require that service providers deploy a truck roll for installation of CPE (i.e., the antenna [in single-family units]). If the antenna is not installed properly, the end user will be unable to receive reliable service.

WHO’S COMPETING

Unlicensed fixed wireless operators do not directly compete with cable modem and DSL services, as the majority of deployments have been in markets that lack wireline-based broadband availability. More practically, unlicensed fixed wireless competes directly with satellite-based broadband access, as both technologies target the non-metro markets.

However, satellite services still require an up-front expense (of over $1000) in the form of CPE and installation. Furthermore, satellite services have download speeds that are limited to 512 Kbps at best. In contrast, the initial customer spending on unlicensed fixed wireless service remains $400 to $600 on average, and the monthly service charge is $50.

While the road ahead is long and rough for the WISPs, these providers will continue to bring faster connectivity to consumers who would otherwise have to wait indefinitely for wireline broadband or pay higher prices for satellite-based access.

The biggest opportunity for these providers will remain in the non-metro markets, at least over the next two years. In the absence of a regulatory framework, whereby the DSL and cable providers are given incentives to deploy broadband access in rural markets, it is unlikely that they will significantly expand their reach beyond ‘tier one’ markets.

Jeremy R. Depow (who shares this column with the Yankee Group’s Iain Grant) is a Senior Analyst with the Yankee Group in Canada, a technology-consulting firm in Brockville, ON. In this position, Mr. Depow is responsible for primary research and analysis of new telecom technologies and market developments.


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