Re: Fixed Broadband Wireless- Everything you wanted to know about MMDS
Thread- I thought this article was one of the best roll-ups on MMDS I've read. So I took the time to format it over for SI. What a pain to format in articles neatly. Anyway, if you want to read a fair appraisal of the state of MMDS, it's all below.
IMO, Sprint/MCI/Worldcom are just as motivated as ATT is/was to stop paying the incumbents their fee to gain direct access to their customers. T was willing to fork out $102 billion to avoid the incumbent charges. I wonder how motivated Sprint&co. will be to do the same?
In the US alone, I believe the LD business is around $100 billion/year. The local business is also around $100 billion/year- with a lot of the local business coming from the LD players access fees. So there is a lot at stake for LD to make this work. -MikeM(From Florida)
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MMDS' Cinderella Story
The wireless industry's saddest stepchild finds a family in broadband access
By Dan Sweeney
Perhaps nothing illustrates the volatility of the market for broadband access than the emergence of MMDS-multichannel multipoint distribution service- as a serious player. With licensees stocks valued at mere pennies per share a year ago, MMDS stood as one of the singular failures of the industry. Today it stands ready to rob significant market share from wireline carriers racing to establish DSL and cable data services.
It's remarkable," observes consultant Will Strauss of Forward Concepts. "MMDS was a dead-end business. Suddenly, it looks a lot more attractive."
The enhanced valuation of MMDS spectrum can be partly attributed to Sprint's and MCI WorldCom's decisions to purchase most of the major MMDS operators and then convert existing plant to delivery of broadband data services (rather than continuing the analog television programming popular with almost all MMDS licensees to date).
While several operators had offered broadband MMDS service and one, SpeedChoice, actually attracted several thousand subscribers, the industry was poorly positioned to undertake plant conversion and adopt a new business model, dejected by weak returns on initial investment and a plain lack of experience in data communications. The fact that the systems remained strictly one-way by FCC mandate and thus required a telephone return for data applications did not increase their attractiveness. Nor did the simple lack of equipment for transmitting data at MMDS frequencies.
Now with MCI WorldCom about to acquire systems in almost all of the 50 top markets and having appointed John Stupka (formerly of Skytel) to head the wireless operation, it has the means to establish the significant presence in the local loop. The economic justification and economic resources for a buildout are no longer in question. And the fact that the FCC now permits two-way transmissions doesn?t hurt.
But how good is the business case? Can MMDS compete cost-effectively with hybrid-fiber cable, fiber rings, DSL and LMDS? Where will it compete in primary or secondary metropolitan markets, in business or residential markets, or both? Is it scalable, and can it deliver quality of service (QoS), privacy, multimedia capability and reliability?
What It Didn't Have
MMDS spectrum was allocated in the late 1980s for the purpose of television distribution and was conceived by FCC officials as means for introducing competition into the cable television (CATV) market. While individual operators have established profitable networks in some markets, fortunes have been disheartening.
"A lot of the companies have gone through bankruptcy," reports John Mansell, analyst with Kagan & Associates. "They just couldn't remain competitive. MMDS analog networks only provide 32 television channels. They're disadvantaged compared to both 750 MHz cable systems and the more recent satellite systems."
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We'd put the cost of HFC at about $2,000 per subscriber and just a little over $1,000 for MMDS. - Rick Miskiman, Newbridge Networks
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Another analyst (who prefers not to be identified) tells us that "the inside joke in the industry for years is that MMDS is the television service for trailer trash. Lots of churn, no customer loyalty, no value given to the service itself- it's not the kind of image that attracts investors."
MMDS systems have also been limited in their ability to transmit to customers within their assigned markets. MMDS transmissions at permissible power levels (at least those using analog modulation) have difficulty penetrating walls even at short range and must have what amounts to line of sight to every subscriber terminal. (Clarity Systems, now owned by Cisco, has a new RF technology that purportedly allows non-line-of-sight transmissions in the area of the spectrum occupied by MMDS.)
At a time when the direct broadcast satellite industry has embraced digital delivery systems and major CATV MSOs are rapidly converting, MMDS operators, with rare exceptions, continue to use analog transmitters which restrict the number of channels the system can provide and which do not ensure consistent picture quality.
Furthermore, MMDS equipment is not standards based, nor is it yet manufactured in the quantities that would afford great economies of scale. Base stations and subscriber terminals could be expensive, a situation made worse by the fact that few vendors serve the market (although the activities of MCI WorldCom and Sprint have encouraged many manufacturers to initiate MMDS equipment development). Until recently, nobody was making carrier-class equipment for MMDS operators, mostly because the operators weren't perceived as serious common carriers; ironically, MMDS operators were likely to be perceived in that light because they didn't use carrier-grade equipment!
On the subscriber side, operators experimenting with broadband generally jury-rigged subscriber units by attaching a radio transceiver and a dish antenna to a cable modem.
Finally, and this is important, MMDS operators simply lacked the money for ambitious new business ventures. While a number of MMDS firms, such as American Telecasting, Wireless One, Heartland Wireless and People's TV, were of respectable size and had large overall subscriber bases thanks to presence in multiple markets, few were profitable. Some, such as People?s Choice and CAI, managed to establish data services despite the obstacles, but in almost every case the data business was a limited offering, utilizing a mere 6 MHz of bandwidth ? that is, a single analog channel.
MMDS GAINS 70% SHARE BY 2005
The arrival of broadband technologies to the neighborhood has been delayed by problematic rollouts, which raises the potential for wireless broadband solutions.
Service providers preparing to deploy broadband access systems find themselves turning to wireless technologies, including:
-Local multipoint distribution service (LMDS);
-Multichannel multipoint distribution service (MMDS); and
-Personal communications services (PCS) operating in the various ISM bands (900 MHz and 2.4, 5.1 and 5.8 GHz).
These technologies are expected to gain more than 9 million broadband subscribers by 2005, according to a report released this month by Allied Business Intelligence.
MMDS, including the 3.4 GHz to 3.7 GHz worldwide standard for fixed wireless access, is expected to lead the market with a 70% share in 2005, largely in the residential and SOHO areas, say ABI researchers. LMDS, meanwhile, will make inroads into the market for high-value customers, accounting for 60% of subscriber revenues in 2005.
What It Has Now
What, then, does MMDS have to persuade two of the nation's premier carriers to spend tens of millions of dollars acquiring properties ordinary investors have long disdained?
"It's got approximately 200 megahertz of spectrum," says consultant Lauristan Hardin.
LMDS operators and 38 GHz licensees command a gigahertz of spectrum, while Teligent's 24 GHz wireless broadband networks have 200 MHz at their disposal. Interestingly, an Internet service provider using unlicensed spectrum in both the 5 GHz and 2.4 GHz bands could occupy a total of 300 megahertz, albeit in unprotected bandwidth.
Then there are the cost advantages. "MMDS is by far the least expensive method of delivery of broadband at present," says Jim Yard, vice president of new technology at SpeedChoice, perhaps the largest provider of MMDS broadband service on the local level (and recently acquired by Sprint).
"Look at the comparative infrastructure costs," says Yard. "The studies I've seen put the cost of laying cable at around $400 per residence, and that's just the cable, not the modems, the two-way amplifiers or the servers at the headend. The basic cost per subscriber for MMDS simply to deliver service is about a tenth of that. You don?t need a bunch of DSLAMs like DSL; you don't need to dig up the street; and the base station can serve a cell with a 30-mile radius as opposed to a few kilometers for an LMDS base station.
"Now, it's true we don't have standards-based equipment yet," adds Yard, "but there are a lot of manufacturers making specialized broadband equipment for MMDS, and the prices for the subscriber terminals aren't that much more than DOCSIS -based cable modems."
While few would dispute that dispensing a cable infrastructure eliminates a big network cost factor, no other operator contacted by Wireless Americas confirmed Yard's order of magnitude.
Rick Miskiman, vice president of strategic customer development at Newbridge Networks, sees a much lower cost discrepancy between MMDS and its wireline competitors. "We'd put the cost of HFC cable at about $2,000 per subscriber and just a little over $1,000 for MMDS. But," he says, "cost estimates ultimately depend on the concentration of users. MMDS is very effective when low subscriber densities are involved. But for a large office building with hundreds of subscribers, fiber is still the cheapest solution."
Ed Champy, executive vice president of Spike Technology, a manufacturer of MMDS transceivers, provides a different slant. "I think Yard's cost projections reflect the fact that Sprint put out a request for proposal for a million units. That makes it worth someone's while to develop a one-chip solution. But we're not there yet."
What are MMDS's infrastructure costs relative to LMDS? "MMDS has the better cost structure," declares Chris Fuertas, analyst with Allied Business Intelligence ). "It?s simply a matter of reach, you can reach many more subscribers from a single base station in an MMDS network than in an LMDS system."
Sprint's Russ Robinson cites another cost advantage: "It's very easy for us to collocate MMDS transceivers at the cell sites where we have PCS equipment in place. The cell radius would be pretty similar in both cases in a fully built-out network."
MMDS may be disadvantaged due to its lack of aggregate spectrum, compared to CATV or DSL in which each line has reserved bandwidth in excess of a megahertz, but Yard argues otherwise. "The systems are highly scalable," he maintains. "Using sectorized antennas gives you a lot of channel reuse, and you can always split cells and set up more base stations as the number of subscribers grows."
15K Subs Per Cell Site
Hardin maintains that wireless equipment makers are already looking at more sophisticated techniques for increasing spectral efficiency. "The manufacturers are already experimenting with advanced modulation techniques and adaptive array antennas," he says. "Everyone anticipates that the services will attract subscribers, and that achieving maximum throughput and channel reuse over available bandwidth will become a major consideration over time."
Skeptics object, saying that the MMDS band, located just above 2.5 GHz, is in a fairly crowded part of the radio spectrum and in a region subject to multipath problems. "The MMDS frequencies are interleaved with the ITFS [instructional television fixed services] bands which are assigned to nonprofit institutions," says Miskiman. "It's not clear spectrum, and you can't easily aggregate channels because they're not adjacent to one another.
"Let's face it," continues Miskiman, "the spectrum was assigned for television transmissions and, like everyone else, we thought it had problems when we began looking at it two years ago. But for users with medium bandwidth requirements of less than T1, it's adequate. Our projections indicate that a system can handle 15,000 subscribers from a single cell site. That's easily enough to support a viable broadband business."
Yard says another advantage more than compensates for the limitations of the band. "It's protected spectrum, which is more than you can say for the unlicensed band at 2.4 GHz," he says. "You're farther away from microwave ovens than unlicensed is, and you can transmit at much higher power, up to 30 watts. With digital modulation there should be no problem with penetrating buildings at close range. And as for the multipath, that can be dealt with by advanced modulation techniques like OFDM. It's good spectrum."
Yard claims that four- to five-nines availability is easily achievable over an MMDS air link. "Face it," he says, "we're mostly providing Internet access right now, and what's the availability of the Internet?"
Ed Champy of Spike Technologies cites advantages having to do with network management. "With MMDS, we've been doing point-to-multipoint transmissions for years. The systems work," he says. "The word from the field on point-to-multipoint in the millimeter microwave regions is not so good. I think LMDS represents an awesome opportunity, but right now the MMDS networks represent the proven technology."
Proven perhaps, but hardly established. For deployments to happen, the services must be converted to digital, an undertaking now at its earliest stages and which requires modification of the base station and the provision of digital radio transceivers and modems to the subscribers. A two-way capability also has to be built into the base stations, and this also has scarcely begun, with SpeedChoice in Phoenix being perhaps the only system offering two-way service to date.
"Acquiring a data capability involves a forklift upgrade," declares Champy. "You can use a certain amount of the existing plant, but essentially you have to build a lot of new infrastructure. But you've still got an advantage over cable or telephone lines in the speed which you can deploy."
The Case for the Wireless CLEC
The only real departure from the CATV model has been a fairly aggressive pursuit of business customers- an approach made possible by the fact that MMDS generally has little difficulty in reaching businesses, unlike CATV where new cable must be run to reach business districts.
Few believe that such a restrictive business model will succeed. Almost everyone believes that MCI WorldCom and the few surviving multimarket independents such as Heartland Wireless will utilize their MMDS networks to establish themselves as competitive local exchange carriers (CLECs) and thus provide nationwide, end-to-end connections encompassing wireless CLECs as they establish very extensive, long distance, fiber backbones.
"Sure, we're using fixed wireless to bypass the RBOCs," says Sprint's Robinson, "and, yes, it is complementary to ION."
Wireless Americas was unable to obtain a position statement from MCI WorldCom, but infrastructure manufacturers and industry analysts were almost unanimous in attributing a similar strategy to that company's MMDS juggernaut.
"They're looking to establish wireless CLECs," says Linda Starr, senior research director at Probe Research. "They'll use it as fill-in where they can't put DSL."
Champy supplies an economic rationale, stating that MCI WorldCom is "simply avoiding access fees at the local loop. That's the play."
But what sort of services will be deployed over the MMDS connections? Internet access? Or data services, including LAN extension, virtual private networks (VPNs), multimedia conferencing and, of course, IP telephony?
"All of the above," predicts Hardin. "Voice will not be dominant initially, but it will appear fairly quickly as a value-added service. It won't be just Internet access, that's pretty certain."
Expect MCI WorldCom to concentrate on the SOHO market. "We see MMDS occupying a different space than LMDS for a number of reasons," says Hardin. "MMDS networks are relatively inexpensive to build out and can reach approximately 80% of the population on average, but on the other hand, the networks have finite bandwidth. LMDS networks are very expensive to build out due to the small cell radius and can never reach everyone, but are well-suited to big enterprise customers because of their throughput rates."
These views are echoed by many. "Small businesses and premium consumers who are willing to pay for dependable access comprise the core market for MMDS," says Greg Oslan, president and CEO of Wireless Online, a manufacturer of smart antennas.
"There's no reason for the MMDS operators to pursue the ordinary residential customer," says Newbridge Networks' Miskiman. "If you've got finite capacity, why waste it on people who don?t want to pay anything? The cable operators really got themselves into a box with this unlimited, flat rate, undifferentiated service concept. It's better to build in quality of service provisions and charge customers for actual usage."
Sitting on Spectrum
If MMDS positions itself differently than cable, where does it sit in relationship to the millimeter wavelength services? which, until Sprint's and MCI WorldCom's actions, had secured an unassailable position as the fixed point broadband wireless solution of choice?
-"LMDS as a business has been largely speculative up to this point," says Hardin. "I don't think either Sprint or MCI is going to sit on [its] spectrum like the LMDS license-holders are doing. They'll deploy."
-"Maybe in two years," says Bill Frezza of Wireless Computing Associates. "MCI will be preoccupied with the merger for at least a year. They've got more important concerns than the MMDS spectrum."
Champy sees evidence to the contrary. "Look at the requests for proposal going out. I don't think they can afford to wait," he says. "There's too much happening in broadband, and time to market is a crucial consideration. I predict they'll start with a massive rollout and continue at an aggressive clip."
Chris Fuertas of ABI bets MMDS will establish a bigger presence than LMDS. "LMDS is not just happening the way it was projected," he says. "You have to question whether it's really going to happen. What the LMDS licensees seem to be attempting to do is compete in the T1 market, which is a brutal business. I don't think they can sell their services for less than wireline."
However, another ABI analyst, Larry Swasey, sees the two services as synergistic. "I think that the presence of two fixed-point broadband services will make wireless data more credible and will spur the manufacturers to develop equipment more quickly. MMDS will push LMDS to deploy."
Swasey believes the services will coexist in a largely noncompetitive relationship simply because their respective propagation properties are distinct. "LMDS business plans typically call for at least 100 business subscribers per access point," he says. "MMDS looks to be a small and medium business market where each subscriber can have his own access point. I don't see it as a residential market now. I think that DSL will get most of the residential broadband business eventually."
Miskiman adds a geographical dimension to the SOHO/small business equation. "MMDS will be at the edge of the urban core and beyond the edge," he says. "Density will be as important as the type of customer in determining where the networks deploy."
Andrew Krieg, president of the Wireless Cable Association, also sees peaceful coexistence. "MMDS vs. LMDS is still a story being written," he says. "The physical properties of the spectrum assigned to either band are quite different, and they could work in tandem."
"LMDS could be used as a backbone connection with MMDS forming the last mile," says Hardin. "Nobody?s doing that, but it's possible."
The Good, the Bad and the Unlicensed
One service which compares favorably with MMDS on the basis of infrastructure costs and which already is operational in some markets is broadband data over unlicensed frequencies in the 2.4 GHz and 5 GHz bands. From being merely an experiment conducted by a handful of ISPs, unlicensed broadband has become a real industry with upwards of 100 ISPs offering some type of unlicensed Internet access.
While most of the companies involved are tiny ISPs in tertiary markets, a few boast thousands of subscribers and extensive geographical footprints, including Last Mile in Pennsylvania, Global Pacific in Southern California, Nobell Communications in Austin and PSINet in almost a score of Southern cities.
Many analysts contacted for this article consider unlicensed broadband to be a real contender, and a business which has a very low cost of entry compared to any competing service, including MMDS. But will it compete in the same space as MMDS, with a potential to rob significant market share?
"We don't worry about it," insists Yard. "Unlicensed high-speed access is out there, but the fact that the spectrum is not protected means that it is just plain risky to use. With more people using it all the time, the problems with interference continue to grow. Licensed spectrum just makes a lot more sense."
Greg Oslan of Wireless Online sees the two already assuming different places. "Business users will insist on the protected spectrum of MMDS, while unlicensed will gravitate toward residential where they can compete on price," he says. "I wouldn't dismiss unlicensed at all. A lot of investment is going into it."
The Longest Mile
If MMDS enjoys cost advantages over its broadband rivals, not everyone sees the prospects of the service. "This is a difficult market to predict," says Strauss of Forward Concepts. "We were wrong about DSL, which has shown unexpected strength against cable recently, and we didn't see MMDS coming at all. But, having said that, I would add that I think that wireless networks are a temporary measure and that fiber is the ultimate future."
Swasey agrees that "MMDS is not a sure thing. It has a window of four or five years in which to establish itself, primarily in markets which are underserved now. It has to do that, or it won't succeed."
Oslan concurs somewhat. "MMDS does not represent the ultimate access technology, but will serve as the stepping stone to more robust wireless networks."
Whatever MMDS's ultimate prospects, its rise from obscurity to prominence is unprecedented and argues that the wireless industry's saddest orphan may be coming into its birthrate. Whether it succeeds at last or fails anew, we'll probably know the outcome fairly soon. |
