Waiting for Wireless Local Loop
What is delaying wireless local loop? Despite garnering huge demand around the world, the technology has yet to be deployed on a large scale. This will eventually change, but it will be the next century that defines WLL, not this one.
Laurence Swasey
--------------------------------------------------------------------------------
Increasingly, wireline minutes are being replaced by wireless minutes, especially in regions where wireline is in short supply. For many in the industry, the next logical step is the dominance of wireless local loop (WLL) systems. But for WLL, like many new technologies, the hype curve outpaces the deployment. With technological and market obstacles still to be overcome, WLL ubiquity appears to be some way off.
Currently the WLL market is driven by the increasing demand for telephony services in general, especially in the world's developing countries. WLL provides significant advantages when compared with wireline, the primary benefits being speed and ease of installation. However, lack of like frequency allocations and WLL system standards, together with broader capital considerations, act as a brake on the WLL market.
WLL networks are deployed by operators in response to five main market needs. Arising individually, or in combination, these needs are:
to add capacity within a wireline system at minimal cost;
to circumvent an antiquated or inefficient wireline network;
to extend the geographic reach of a wireline system at minimal cost;
to respond to new competition threatening an operator's territory;
to provide local access for a long-distance carrier or other new (and sometimes only) local competitor.
Economic growth and deregulation drive these market needs. The economic vitality of a country or region is in large measure dependent on an efficient telecom system. Many nations have discovered this fact during the past decade, which is why the market is primed for inexpensive, quality telecom equipment.
Deregulation is fueling growth in communications throughout the world. While stimulating growth of new services in the developed world, deregulation has also stimulated competition there. In developing countries, it has loosened the grip of government monopolies so that basic telecom services can be deployed on a wider scale.
Wireless technologies are being considered as a means of access to the local loop. Typically, WLL systems are deployed as a stopgap measure while fixed infrastructure is put into place. But some operators are looking at wireless technologies as a means of competing directly with existing local service providers.
Dedicated Technologies
There are more than two dozen WLL solutions on the market today, many offered by traditional telecom companies. It is impossible to predict a winner from among them because the market has only just begun to evolve. Moreover, WLL progress has suffered from the recent economic setback in the Asia-Pacific region, forecast to have accounted for a large portion of the global WLL market.
However, there have been early successes. In Europe, digital enhanced cordless telecom (DECT) has been utilized. DECT offers a good solution for high-density areas. Another early favorite has been technology based on the code division multiple access (CDMA) air interface. CDMA-based WLL systems, like those offered by Lucent and Qualcomm, have been used in many small WLL trials around the world.
For the semi-rural market in the United States, 21st Century Telesis has moved forward with its plans to deploy the personal access communications system technology developed by Hughes and Bellcore. The company believes that the technology will offer users a second line for data and voice, and compete with local carriers.
Meanwhile, ArrayComm has used its smart antenna technology to extend personal-handiphone system (PHS) capabilities in Japan. The company recently entered WLL competition in China with a 1200-line pilot program.
Many WLL systems could prove profitable. Vendors are likely to find success if they approach a niche application and address one of the many diverse needs that the WLL market can serve. The consumer will create specific applications based on the combination of voice, data, mobility, and price points. It is too early to pick winners and losers in this area as the market has yet to go through many evolutionary stages.
Cellular/PCS
In many countries, people subscribe to cellular services while waiting to receive wireline phone service in their homes and businesses. Waiting periods in some markets can be as long as 10 years, giving mobile operators substantial opportunity to capture local loop subscribers. In some countries, mobile operators make use of excess capacity within their networks to provide fixed service. Where wireline services are poor and prices are high due to government- or quasi-government-controlled wireline monopolies, this approach can make sense. However, the quality advantage afforded by wireless in these places is often eventually degraded as calls are forced to enter the wireline network. Competition from wireline services eventually mandates WLL upgrades.
Personal communication service (PCS) systems are also beginning to be installed throughout the world, promoted as a superior alternative to cellular for wireless communication. Many of the WLL air interfaces being offered are also solutions for PCS. Drawing on studies showing that wireless minutes are increasingly replacing wireline minutes, many PCS carriers, especially those in the United States, claim that PCS systems are taking on the role of quasi-WLL systems.
However, PCS systems are not designed to carry local traffic. Their call block rates are typically about 3 percent to 20 percent, whereas the norm for WLL is about 0.5 percent to 1 percent.
Meanwhile, the survey results that PCS carriers rely upon are, at best, questionable. The average subscriber may use a PCS phone at home, but this does not necessarily represent a substitute for a second phone line. Subscribers are more likely to use the wireless handset simply because the wireline handset is in use. More often than not, the wireless subscriber has made the wireline handset a first choice, the wireless handset the second.
Then there is the cost consideration. The cost of a second wireline in the United States can be high, but typical use of this line--local use--will soon be less expensive than buying a wireless account.
Broadband Services
Local multipoint distribution service (LMDS) is also capable of delivering local telephone service, high-speed Internet access, multi-channel television, and two-way video services including video-teleconferencing. However, those with spectrum are still trying to realize a business plan, while others are wondering if they had paid too much for the spectrum and whether a niche audience for specific services, such as telemedicine, may be their best bet.
LMDS carriers have a reasonably good chance of developing a WLL market because they do not have to depend on telephony as the staple product and can offer the cherished “bundled services” concept.
Problems with fade in the high-frequency range could result in disturbing annoyances in broadband services, but tests have proven that these frequencies are dependable. LMDS purveyors can now hit the 99.99-percent reliability mark. However, perfect system deployment might take some time to achieve.
Bundled services may be one way to successfully establish wireless local loop. WinStar is one of several operators accumulating subscribers through this route. The problem with this concept, however, is that the operator must choose the appropriate market in which to deploy services or face a challenging deployment.
First Fixed, Then Mobile
The ability of a WLL system to provide mobility is often a secondary consideration. While demand for mobility may not be immediately present, it will become greater once initial demand for basic fixed service has been fulfilled.
Some systems are rolled out as purely fixed systems and the option for mobility can be added as the system begins to generate revenue. At that point, the additional infrastructure needed for hand-off functions can be implemented.
Installation Costs
Cost is the primary reason for deploying WLL. While the average cost of a 5-km wireline local loop ranges from $1000 to $1800 per subscriber, WLL solutions cost one-quarter to one-third as much.
Perhaps the greatest cost advantage of WLL is that an operator can start with a small system that generates demand and, in turn, fund the growth of the system. WLL has sprung up in many countries, deployed in various ways, but one factor is typical: The systems have started out small and expanded rapidly.
Countries hoping to implement WLL as part of their infrastructure are waiting for the price per line to drop. The magic number for price per line is $500 in the United States. Most systems available
today do not approach this number. However, forecasts suggest that, assuming some degree of WLL standardization is achieved and that WLL subscription reaches at least 22 million, prices (not including real estate acquisition) will fall to approximately $530 by 2002. By 2006, prices should drop to approximately $300, provided the deployment rate increases over the present rate, where WLL lines account for 1 percent to 2 percent of all new lines.
In developing nations, the growth rate of WLL will be stymied until the costs drop to $500 or less. Of course, in rural areas of developing countries a single line may serve many people in a community. In many countries price per line is not always an accurate measure of investment worthiness.
Standards Needed
Key factors preventing the rapid growth of WLL include the lack of worldwide frequency allocations and technical standards. Different countries are adopting disparate frequencies and variant technologies for WLL applications.
Lack of standards prevents manufacturers from mass producing equipment. This keeps component and system costs high and inhibits potential WLL operators from entering the marketplace.
Adoption of WLL standards throughout the world will allow companies to mass produce WLL, lowering costs per subscriber line. The rate at which WLL can be installed is so much greater than wireline that operators are able to start generating revenue much sooner after the acquisition of capital commitments.
In most cases, once prices come down, systems can become profitable almost immediately, although it may take 10 years or more to recapture the capital cost of infrastructure at current system costs. A typical system breaks even from an operating standpoint two to three years after implementation.
A major factor determining how fast profitability can be attained is how subscribers are charged for equipment.
Some service providers choose to force the cost onto the user by charging a large installation fee. While this may increase the rate at which the system becomes profitable, it decreases the attractiveness of the service and possibly depresses subscriber counts.
Other operators provide subscriber equipment free of charge in order to start accumulating revenue from the larger number of subscribers who pay for site equipment through a small incremental charge hidden in the rate structure. In a third scenario, service providers charge a small monthly service fee in order to subsidize user equipment costs and increase the speed at which profitability occurs.
Economic performance in developing countries will play a role in determining the success of WLL. Standards will allow mass production and therefore, falling prices, while adoption of WLL in the neediest parts of the world will create even greater economies of scale with increased sales. But price will be the primary determinant. Handset and service affordability are not expected to be reached before 2003 to 2007. After that, the market should take off. n
Laurence Swasey is senior analyst at Allied Business Intelligence Inc. For more information, contact the firm by phone, (516) 624-3113, or e-mail, info@allied world.com.
telecoms-mag.com |
