WiMAX unlikely to succeed

Gartner Group's Ken Delaney: Existing technology works fine.

I dont believe what WiMAX proponents say. I want to see it with my own eyes. WiMAX has quite a few difficulties with its technology, regulation, and business model. WiMAX technology has to compete with WiFi technology, which already exists and works very well. I dont think that WiMAX has much chance of success, Gartner Group VP mobile computing Kenneth (Ken) Delaney told "Globes" yesterday. Delaney is aware of the enormous pressure that chip giant Intel (Nasdaq: INTC) is exerting to promote WiMAX. He therefore predicts that WiMAX will eventually catch on as a stationary alternative to wireline infrastructure, but he says that even then, it will happen only in niches, in places lacking wireline infrastructure, or in places where WiMAX is the way to compete with wireline. Delaney does not believe that WiMAX poses a threat to wireless, or that it can provide a solution for coverage of large areas.

The spread of WiFi is organic, and resembles the way the Internet spread. Each person buys a wireless access point and, very quickly, entire areas have Internet access. Everywhere you go in urban areas, you can turn on the computer and hook up to the Internet, so what reason is there to switch to WiMAX? I dont get it, Delaney says, and adds, Today, its cheaper, faster, and more reliable to cover any area, no matter how big, with WiFi. The amount of equipment that WiMAX equipment manufacturers are talking about is completely wrong. In practice, you need much more to supply a genuine demand from consumers, and the cost is therefore much higher than what theyre talking about.

There are two versions of WiMAX: the stationary version, which is called 802.16d or 802.16-2004, and the mobile version, which is called 802.16e. Delaney regards that latter as more questionable, and does not believe it will achieve commercial success. Another serious problem with WiMAX is that is uses frequencies that require a license, which means that not everybody can set up a WiMAX network; only communications operators can do it. It is still not clear how strong a motive they have to set up such a network.

Delaney was in Israel to take part in Gartners annual conference, which took place yesterday in the Tel Aviv Hilton Hotel. Delaney, a big fan of gadgets, walks around with a variety of wireless devices, which he uses to demonstrate what he thinks are the advantages and disadvantages of each of them.

Regarding the possibility that voice over Internet protocol (VoIP) will make inroads in the wireless industry, thereby jeopardizing wireless companies business model, Delaney says, Its now possible to operate VoIP applications on wireless networks, but the price of data communications is very high. Talking on a VoIP phone and paying for the amount of information transmitted is much more expensive than an ordinary call, so theres no business model for it. Delaney expects the unsuccessful relations between VoIP and wireless change only with the switch to 4G networks, in which the entire network will be IP-based, voice will be transmitted just like any other application, and will be priced accordingly. I predict that this will happen only in 2012. We still havent digested 3G, so it will be a very slow process, he says.

In an important announcement, Research in Motion Ltd. (RIM) (Nasdaq: RIMM; TSX: RIM), which makes the BlackBerry device, said it would use Intels processors in its devices that use enhanced data rates for GSM evolution (EDGE) technology. EDGE provides high data communications speed on a global system for mobiles (GSM) network. The BlackBerry uses Intels Hermon processor, which was developed in Israel. Delaney thinks that this is a significant development, because, up until now, Texas Instruments (NYSE: TXN) has dominated the mobile handset market. It now appears that the sector is about to become far more competitive. Intels processor is expected to excel in processing power and economical battery use.

In general, Delany is a great admirer of RIM: both its hardware (a wireless handset that provides convenient access to e-mail) and its software for managing e-mail through use of the push system. If RIM plays its cards right and takes bold measures, it can become the next Nokia. They have to start developing new fields for more consumer-oriented devices still for businessmen, but those who want a phone first, and only afterwards a device for e-mail. Taking risks is the difference between companies that become big successes and those that disappear, like Palm. In my opinion, BlackBerry should take the risk now, because it has a window of opportunity that it might miss. RIM is a company driven by engineering, because thats where they came from, and what theyre good at. Thats why they are liable to miss the trend and their current strategic opportunity, Delaney explains.

Delaney predicts a great future for wireless e-mail devices that support push software. At the moment, he says, there are only two companies providing such applications: RIM and Good Technology. There are others that say they do it, but its not really so, he adds. There are now 8.5 million wireless e-mail subscribers, and Delaney claims that, within 7-10 years, every wireless device will support e-mail, and the potential is enormous for companies operating in the sector. Motorola is also getting into the field with its Q device, which will be launched soon. This device operates the mobile version of the Window operating system, which many people want and like. Microsofts problem is that they are not known in secure systems. I like Q, but BlackBerry is very strong, and it will be strong for a long time. Meanwhile, I cant visualize anybody managing to challenge its dominance, Delaney concludes.

Published by Globes [online] - www.globes.co.il - on September 28, 2005

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