Even more on LMDS....
Posted: 2:00 p.m. EST, 2/10/98
Is local multipoint distribution service a wireless
wonder or a broadband bust?
By George Leopold and Brian Santo
WASHINGTON -- Two-way multichannel data, video and telephony for everybody, no
strings-or wires or cables-attached. In a nutshell, that's what local multipoint distribution
service (LMDS) systems are supposed to represent. The United States will be well along
the road to this vision of broadband heaven when the Federal Communications
Commission next Wednesday auctions off over 1,000 MHz of the airwaves set aside
specifically for LMDS services.
There is no shortage of broadband and two-way technologies: ISDN, xDSL, cable
modems, satellite systems and multichannel multipoint distributions services. Given the
limited impact of any of these thus far, what accounts for the growing enthusiasm for
LMDS?
LMDS will occupy one of the broadest expanses of spectrum devoted to any one service, a
bandwidth of 1.3 GHz surrounding the 28-GHz band, also known as the Ka-band. Baud
rates will be in excess of 1 Gbit/second downstream, 200 Mbits/s upstream. Proponents
believe it will be easily deployable, especially with no wires or cables to be laid or
maintained. The economics of the business seem favorable.
On the other hand, people are desperate for some broadband scheme, any broadband
scheme, to work, and LMDS is merely the most recent to be considered a viable option.
Because it operates at millimeter-wavelengths, LMDS requires that customers have
line-of-sight to a transmitter. Customers will also need to install a lot of
subsystems-transceivers, interfaces, nodes.
Furthermore, obstructions as small as the foliage on trees can impede signals, as can rain-a
phenomenon called "rain fade." The economic models are based on limited actual data and a
lot of projecting, and only with time will anyone know if the projections were extended into
a fictional domain.
And just because the government expects a windfall from the auction doesn't guarantee
anyone else a profit. It isn't very inspiring that FCC auction rules give LMDS licensees 10
whole years before they have to actually set up an operational LMDS system.
Adding to the auction uncertainty, several bidders in previous wireless auctions have
defaulted, calling into question the integrity of the auction process. The FCC was forced to
move back the LMDS auction from December to February 18th in order to give potential
bidders more time to line up financial backing. Agency officials will be holding their breath
next week hoping the LMDS auction generates the level of interest seen in previous
auctions.
The FCC accepted 145 of 210 bidder applications in January (55 applications were
considered incomplete, others were granted extensions). Among the heavy-hitters expected
to bid on LMDS licenses are cable giant Comcast (in which Microsoft owns a stake) and
RBOC U S West.
"I am encouraged that we have received over 200 applications to participate in the upcoming
LMDS auctions," FCC Chairman William Kennard said at the end of January. Kennard
predicted that the winning bidders will "provide video and other broadband services."
Industry observers said potential bidders may have learned from previous auctions that they
must ignore the hype and proceed with caution.
"People have learned that they really need to do a better job of putting together a business
plan for LMDS," said Doug Gray, a product-line manager with Hewlett-Packard Co.'s
LMDS operation (Cupertino, Calif.), which has worked with some bidders.
"My expectation is that we won't see the numbers running off into the stratosphere."
Despite all the causes for optimism, any prediction of ultimate success for LMDS seems
premature. The prospects for the technology are contingent on too many unknowns.
According to one analyst, even if LMDS is technologically and economically viable,
success might still be scattered depending on local conditions.
"LMDS growth depends on the competing technologies in the area," said Laurence
Swasey, an analyst with Allied Business Intelligence (Oyster Bay, N.Y.). "Businesses
looking to transfer data, video and other bits of information may look to utilize LMDS if
there are no other high-speed carriage options available.
"A lot of its success depends upon pricing and performance when compared with existing
technologies and other emergent technologies, such as cable modems up to 128.8, other
services such as satellite systems, and the wireless local loop for data schemes that are still
in the future as well," Swasey added.
'False starts' at first
Companies that intend to compete in the market are hesitant to promise too much too fast.
The big picture "will not be clear until 1999," said Richard Sfeir, director of marketing for
CommQuest Technologies Inc. (Encinitas, Calif.). "Realistically, 1998 is a year of
definition and positioning and there will be many false starts. But next year we will get a
much better picture of what LMDS is and what it's useful for."
Despite that prediction, CommQuest, a small developer of satellite and cellular chip sets, is
already defining LMDS products with one partner, whose experience in antenna arrays
would be paired with CommQuest's expertise in baseband and RF components.
The pair is working on an LMDS system that will use Spatial Division Multiple Access
technology. The combination of antenna arrays and SDMA will create an LMDS system
that uses the smallest possible end-user antennas, Sfeir said.
First products based on the cooperation could become available before the end of the year.
The company is also developing LMDS products independent of this partnership.
With so much wireless, millimeter-wave and microwave work going on, it's a fairly simple
thing for many companies to adapt existing technology to LMDS applications. Maxim
Semiconductor saw the opportunity to do just that. The company has downconverters for
satellite broadcast systems; it used that technology to create the Max 2102, a zero-IF direct
downconverter that can be used in LMDS systems. This single part replaces several others,
according to Eric Munro, business manager at Maxim.
"LMDS systems broadcast at 28 GHz; in the antenna, you have to downconvert that to 2
GHz. In a traditional system, that 2 GHz is downconverted to 900 MHz, then
downconverted again to zero. Ours takes the 2 GHz and brings it right down to zero,"
Munro said. "Our part lets set-top-box manufacturers put it right on the board."
The company is now creating a reference design for set-top boxes using the Max 2102.
"There are a lot of opportunities to integrate devices," said Tom Cordner, manager of
TriQuint Semiconductor's Texas Division (Dallas). He said four to six devices can be
integrated, but beyond that performance drops off and manufacturing costs grow.
The TriQuint unit, previously part of Texas Instruments Inc. and, briefly, defense giant
Raytheon Co., has developed about 15 MMIC devices with possible application to LMDS.
Cordner predicted the integration of high-frequency devices will evolve as the number of
LMDS installations grow.
LMDS service customers will need a roof-mounted transceiver, an up/down frequency
converter, a network-interface unit, a television set-top box, an Ethernet connection if they
want to link in multiple devices, and perhaps also a telephone interface if the local LMDS
provider offers telephony as a service. Presumably, some of these systems can be
combined, but not all.
Because of the relative weakness of LMDS signals, transmission areas will be divided into
fairly small cells. Some cells will have a radius of only 2 miles; that is likely to be the case
especially in dense urban areas where there are more obstructions. Small cells will also be
necessary in highly wooded areas and locales with high rainfall.
In more wide-open spaces with fewer obstructions, the maximum radius may be about 7
miles. Either way, each LMDS system will require a large number of antennas. This could
become troublesome as more and more wireless services are deployed, because there are
only so many places where antennas and hub equipment can be installed.
Those gearing up to play in the LMDS market acknowledge that transmitting signals with
such tiny wavelengths has its drawbacks, but all seem confident that these problems can be
surmounted.
Hewlett-Packard calculates that some cells with multiple obstructions might require a 4X
overlap of cell areas to get blanket coverage.
Solutions to get around "rain fade" are also in hand. Microwaves, instead of continuing to
travel when it rains, interact with raindrops-they actually heat the water. This has led
engineers to permanently ratchet up the power for some transmitters to compensate.
Another design calls for antennas with sensors that detect rain; when it does rain, power is
boosted until the downpour stops.
Subscribers of the one commercial LMDS system operating in the United
States-CellularVision's in the Brighton Beach neighborhood of New York City-have
reported on various Usenet groups that their service comes in well, even during adverse
weather conditions.
After the LMDS spectrum auction, CellularVision may still be the only service provider
catering to residential customers. Hewlett-Packard's Gray said LMDS licensees will
initially target small and medium-size business in areas with few propagation problems or
restrictions on antenna heights.
These "LMDS-friendly" areas will also help hold down initial deployment costs. The key
question is when service providers will tap the risky yet potentially lucrative residential
market where network-design issues become much tougher, Gray said.
The volume that residential LMDS services would bring could help drive down device and
system costs and firm up wireless standards that have so far failed to gain wide acceptance.
The Digital Audio-Visual Council, based in Geneva, took one of the first shots at wireless
standards for LMDS, but they are widely seen in the industry as premature.
"We won't have industry-wide standards until we get to deployment" at the end of 1998
and into 1999, Gray said. In turn, LMDS standards and the volume generated by residential
service will drive down device costs.
During the initial flush of excitement over LMDS, observers predicted that LMDS service
providers would immediately offer subscribers a full plate of communications options:
multichannel video programming, telephony, video communications and two-way data
services. LMDS was going to be an instant and formidable competitor to established
carriers.
LMDS still looks promising for broadband delivery of services like Internet access rather
than a "full-blown cornucopia of services," FCC Commissioner Susan Ness told a
cable-industry conference in December. VIPC, a consulting company, agrees, and that is
one of the basic assumptions underlying its report predicting the economics of an LMDS
network.
Auction concerns notwithstanding, the economic projections for LMDS are optimistic.
According to VIPC, once a service provider pays for the spectrum, hub and the backbone,
all other costs are variable. Because it's pay as you go, an LMDS network can be built on a
subscriber-by-subscriber basis.
In network parlance, the business is "viable at low take rates." In other words, even in the
most competitive markets, a provider should be able to make money even with a low
percentage of all potential subscribers.
VIPC posited an LMDS deployment in the Santa Clara Valley in California. The primary
uses for the LMDS network in the study were work-at-home and high- speed Internet
access. The company assumed seven business cells and 22 residential cells, each 2.5 x 2.5
miles. It estimated there would be 13,150 homes per cell.
Given those conditions, according to VIPC, the cost to obtain LMDS spectrum is estimated
to be $16 per household covered (a little over $4.6 million for this example). The cost of
the LMDS hub is expected to be $370,000, and interconnection charges are expected to cost
some $10,000 per hub.
VIPC predicts that by the end of the third year LMDS services are offered, 60 percent of
major employers will sign up at a fee of $3,000 per month. Ten percent of homes in the
area would also be expected to sign up by that time, at $150 per month. VIPC assumes that
that fee will be paid by employers. Customer-premise equipment is expected to cost another
$650 per home (for transceiver, up/downconverter and Ethernet adapter).
For the service provider, VIPC calculates that by the third year, revenue will be $42.5
million with a profit (pre-tax) of $21.5 million. By the end of the fifth year, revenue would
be $58 million and profit $32 million.
Is all this overly optimistic? Carlton O'Neal, vice president of sales and marketing at Bosch
Telecom, which purchased Texas Instruments' LMDS operation in mid-1997, doesn't seem
to think so. O'Neal believes that an LMDS service provider can be profitable with just a
sliver of the pie.
"MCI has been hacking away at AT&T in earnest for 20 years. It's got what? Twenty
percent of the market? We have to make money at 5 to 7 percent take rates; we designed our
system around that," O'Neal said.
"The fundamental question is: Is bandwidth demand growing faster than the network
infrastructure build-out? The answer is yes. LMDS still has to beat out all the other
technologies that are similar, but as long as bandwidth demand goes up like a hockey stick,
there'll be enough business for everyone," O'Neal said.
Businesses first
While some companies will certainly make a play at residential customers, HP's Gray,
CommQuest's Sfeir and Bosch's O'Neal all expect LMDS service providers to go after
business customers first. The demand is there, and so are the margins.
Bosch is partnered with US Wavelength, a startup LMDS service provider that intends to
bid for spectrum. "We're going to put up towers and shine them at business parks," O'Neal
said. "That's just us being practical. Business has the volume, the need and the tendency to
early-adopt."
Typically, these will be small to medium-size businesses that can't afford to have the phone
company string private T1 lines for them. "It's mostly true that anyone in the United States
who wants fiber already has it," O'Neal said. "What I see [is that] in the future there will be
a technology quilt. Whatever's available at the right price will be used. Time-to-market will
often be the killer feature."
Posted: 9:00 p.m. EST, 2/10/98
Study bullish on LMDS
By George Leopold
MORRISTOWN, N.J. -- Local multipoint distribution services (LMDS) could compete
with existing transmission services and grow to a $1 billion business over the next decade,
according to an economic study by Bellcore of the new wireless service.
"Under the right conditions, LMDS could be a feasible alternative to wireline
transmission," according to Bellcore, which timed the release of its report to coincide with
next week's auction of LMDS spectrum by the Federal Communications Commission.
Hady Salloum, Bellcore's director of LMDS consulting and the author of the report, said
the wireless technology could be deployed quickly if companies understand the economics
of LMDS.
The study found that the LMDS market in the United States could exceed $1 billion in
service revenues by 2012. One question surrounding LMDS is when providers of the
service will move from data services and high-speed Internet access to riskier, but
potentially more profitable, video services. Early video deployment would push LMDS
revenues past the $1 billion mark much sooner, Salloum said.
"Service combinations are likely to determine [the] profitability of LMDS," the study
found. "While some services are not profitable if offered alone, they may be profitable if
offered in combination with other services." Phone service over LMDS, for example, could
become more profitable if it were bundled with Internet access.
Savings from infrastructure costs could also make LMDS more economical than other
broadband access alternatives, the study said.
The FCC will begin auctioning LMDS licenses on Feb. 18. The Bellcore study predicted
that LMDS could be deployed in a medium-sized city as soon as nine months after the
government auction ends. |
