After cellular Internet, broadband and access today are the predominant notions in the communications market. And if we relate to cellular Internet as one means of access and one of the future channels of high-speed Internet, then access is the today's main catchword.
And what about access, apart from cellular Internet? There are optic fibres, which, correct to the present, even in developed nations, reach a small percentage of businesses, and no households. There are modems for cables and DSL technological modems on copper wires, and there is wireless access.
As in other fields of communications, in wireless Internet access, too, Israeli companies have a leading presence, which found expression in the CeBIT 2000 exhibition held at the end of February in Hannover, Germany.
There are a few principal fields of wireless access systems: narrow band, medium band and broadband, all of them technologies that transmit from a single point to a number of points, and there is also direct access from point to point.
In the field of narrow band, included in the definition of WLL (Wireless Local Loop), are companies that have developed technologies providing nothing but low-speed voice services that provide a solution in underdeveloped countries lacking infrastructure. In Israel, the most outstanding company in this field in InnoWave, a Tadiran Telecommunications subsidiary that passed to ECI Telecom. Another company that has developed a technology in this field is Teledata, which was sold to US communications company ADC.
In the field of medium band (which still comes under the WLL definition), are most of the Israeli companies that develop wireless access - Floware, BreezeCOM, Marconi Israel, Lucent (Web Access), RADWin and also ECI (via InnoWave), with a new product that is not yet commercial.
The field of broadband is better known as LMDS, and relates to frequencies higher than 10 gigaherz, and speeds of 10 Mbps and more. There are no Israeli companies in this field, but there are two Israeli-owned US companies: Netro, which already markets a commercial product, and Ensemble, which is still in the development stages.
The fourth field, that of direct point-to-point broadband access, includes such companies as Giga Net, Witcom, Helios and Radiotel. These are actually ordinary microwave systems, but on far wider bandwidths than those found in the market hitherto. This article reviews Israeli companies operating in the medium band access market.
InnoWave
InnoWave is the hybrid offspring of two Tadiran divisions: Communications and Telecommunications, formed with a view to utilising military wireless technologies developed by Tadiran Communications for civilian communications purposes.
Over the course of years, the company passed fully to Tadiran Telecommunications, becoming a subsidiary company known as InnoWave. When ECI Telecom acquired Tadiran Telecommunications two years ago, InnoWave was considered one of its principal assets, if not the most significant of them. Today, when ECI's strategy actually dictates exiting most of the technologies acquired with Tadiran Telecommunications, wireless access and cross connect remain as exceptions to the rule.
InnoWave's traditional product is a system called MGW (MultiGain Wireless), and it combines frequency hopping with standard digital interfaces, enabling it to provide highly advanced telephony services. The system enables transmission at a rate of up to 128 Kbps, as well as ISDN services.
ECI announced the new system, WaveGain, as early as the 1998 Telecom exhibition in Tel Aviv, presenting it, for the first time, at the CeBIT 1999 exhibition. An initial pilot test of the system, which operates on Direct Sequence CDMA technology, is already operative in Argentina. In the second and third quarters, the intention is to operate a fair number of pilots, and the outlook is that the product will be commercial by the end of the year.
The new system will provide voice and data on the same radio channel. Voice is handled traditionally, and not as IP or packets, while data are handled by packet switching. A parallel system providing such a combination of communications is that of RADWIN. Floware supplies a line and data using traditional TDM technology (circuit switching). BreezeCOM, Lucent and Marconi only supply packet switching data communications.
As of now, the product works on a frequency of 3.5 gigaherz, but there will also be a product on a frequency of 10.5 gigaherz. There will be no higher frequency for the LMDS field.
ECI general manager Doron Inbar said in this context that the company is planning to acquire an LMDS company. "We are examining several possibilities.... We have reached the conclusion that we need to expedite the matter of wireless access. We have not decided on any restriction on the acquisition budget, but I don't expect we will go beyond $100 million".
RADWin
The newest system announced in the wireless access market is Win Air of RADWin, of the RAD-Bynet group. While the CeBIT exhibition was in progress, the company concluded its first capital-raising exercise in a volume of $13 million at a company value of $28 million after money.
It was at the CeBIT exhibition that RADWin, founded in 1997, and which is managed by Sharon Sher, first introduced its Win Air system. "We want to provide a complete solution. WLL is going to be a gigantic market. Our vision is bandwidth and CDMA. The product is now in the integration stages, en route to field testing in the third quarter".
Sher: "What is unique about RADWin's system is that it uses third generation cellular technology (WCDMA). This is an advantage considering the fact that WLL network deployment today is to all intents and purposes cellular deployment. The difference is that in cellular telephony, the telephone is a portable one, and here it is fixed".
Sher said the new system is intended for developed countries and for new generation telecom companies, and is particularly well suited to small and medium-size businesses and large apartment buildings.
Zohar Zisapel, RADWin entrepreneur and one of its owners, explains his concept as regards the company's uniqueness. "We recently developed the technology and looked at what was needed and we can do what no one else can do. It's one thing to hook up the Internet on pure IP and another to transmit speech via IP or as standard telephony speech. We can also transmit ISDN. We thought about what services an operator should be able to provide the customer. No other system is able to do this".
BreezeCOM
Israel's leading wireless access company today, at least in terms of sales and value, is BreezeCOM. In 1999, the company's sales amounted to $45 million, far in excess of the sales of its Israeli competitors, some of which, in fact, are not yet selling. BreezeCOM was also issued last month on the Nasdaq, raising $100 million. As of now, following the recent heavy downslides on the Nasdaq, company value stands at $475 million, after having previously reached $900 million.
The company, which was a subsidiary of LANNET, was originally founded as a wireless LAN company, developing wireless products for intra-organisational communications and communications between buildings. At the beginning of 1998, the company made a strategic change of direction, and started developing communications systems for wireless access (WLL).
AT the recent CeBIT exhibition, BreezeCOM announced a new wireless access product on a frequency of 3.5 gigaherz, requiring a license. The product has been commercial since the beginning of January, and has already been supplied to IceCom of Iceland. The system works at a high rate of three Mbps. BreezeCOM already has a 2.4 gigaherz frequency wireless access product, which does not require a license, and which is reaping great success.
Most European countries have developed the possibility of providing communications services via wireless access on a frequency of 2.4 gigaherz that does not require a license. Accordingly, no money need be invested in acquisition. BreezeCOM predicted that small Internet providers would continue to work on this frequency, but would try to enter into frequency fields enabling higher-speed Internet access. Large Internet providers and new telecom companies competing in markets that are being opened up to competition, on the other hand, will bid in tenders for frequencies, the use of which requires a license, such as 3.5 gigaherz. That is why there is beginning to appear on the horizon a new BreezeCOM product, enabling wireless access in frequency ranges of 2.5-2.7 gigaherz (the technology in this range is called MMDS).
BreezeCOM has signed OEM (outside equipment manufacture) agreements with major communications manufacturers Ericsson of Sweden and Alcatel of France. The two agreements were signed in recent months, and each of the companies paid BreezeCOM an advance of $1 million on account of future sales.
General manager Michael Rothenberg speaks of the company's development. "We started to use our equipment for communications between buildings. We install the devices for companies with a number of buildings. In this field, we have reached 43% of the world market, and we are still selling the equipment. In effect, more than half our turnover is still wireless LAN. The product became popular with ISP companies that provided customers with Internet via wireless communications. ISPs in the United States purchase equipment for use in 2.4 gigaherz without a license. By purchasing the equipment from BreezeCOM , they achieve a situation in which customers pay them for the communications, instead of paying the telephony companies".
In Israel this arrangement was forbidden by the Ministry of Communications. One company, ActiviNet, which tried it without approval (using BreezeCOM) equipment), went bankrupt after the Ministry of Communications instructed it to dismantle the equipment. Those who suffered most were the customers, and none more so than Bezeq, which remains with a debt of millions of shekels. BreezeCOM came out fine.
Rothenberg "I sold to ActiviNet for cash only. I was afraid it would fall. I have to say that this company was two years ahead of its time. In the rest of the world, it is happening this year".
"Globes": When will you start showing a profit?
"In 1999, we invested $9 million in development and $5 million in marketing. As long as I can grow I don't want to profit. I am now preparing the products I will be selling in two years time, and I don't want to tell you how much I want to reach in two years time. 2001 frightens me. Alcatel and Ericsson will bombard me then with orders. Each one wants a development unique to itself".
The communications world is falling greedily upon WLL: Ericsson and Alcatel are selling BreezeCOM products. Siemens and SAGEM are selling Floware. Lucent has acquired Web Access, Marconi purchased RDC, Nortel made an unsuccessful acquisition and is now developing a product line of its own, and Cisco is going strongly into wireless - it acquired LMDS company Clarity Wireless, which transmits its technology over MMDS. Cisco also recently acquired Aironet Wireless - a direct competitor of BreezeCOM - for $799 million.
Rothenberg: "I find the fact that Cisco is entering the field really alarming. They are buying up whatever technologies they can find, for a great deal of money. They still understand nothing, but with the money they are investing, they will understand perfectly within a year and a half. My solution is one of alliances with their competitors, the major manufacturers, and that explains the agreements with Ericsson and Alcatel".
Are these exclusive agreements?
"There is no exclusivity. They can purchase from another supplier and we can supply to others".
Why were the agreements with Ericsson and Alcatel only signed in the past half year?
"The development of the Internet and wireless Internet caught them with their pants down. They did not believe in these things. Sonora of Finland was the first to make such a purchase, and suddenly all the big manufacturers saw there was a demand for these systems and that they did not have the equipment. That is why Ericsson and Alcatel signed with us. That is why Lucent acquired Web Access. Contacts with Alcatel began in August. It was unbelievable. Suddenly, in August, the holy month when all the French are on vacation, a five-member French delegation comes to Israel. In December, we concluded the agreement".
Web Access (Lucent)
Web Access founder Menashe Ezra is today vice president of Lucent's wireless division. The joint project with Lucent commenced prior to the acquisition. A product called Web Access 3500 was developed for 3.5 gigaherz. Any base station can supply up to 15 Mbps, and the end customer gets from 64 Kbps to 3 Mbps. Here, too, we are only talking about an IP.
Ezra: "We developed a PPP application, a protocol that runs on IP, and facilitates the very highest level of service, like a VPN (virtual private network)".
Why the demand for WLL? Today there is DSL on existing telephony infrastructure.
"There is a difference between DSL and WLL. DSL goes to existing operators with plenty of money. WLL goes to their competitors, which are actually start-ups with no capital, whose problem is to build a business plan vis-a-vis the long-standing telecoms. There have already been instances, in various countries, of such competitors crashing. Voice is not under discussion at all, just data communications".
RADWin has announced a product that provides both voice and data. Isn't that preferable?
"Maybe in Israel there will be a demand for both voice and data, but there are countries that issue licenses only for data communications. RADWin will have a price problem because of the exchange. It cannot compete with Web Access in IP. In this world, you can't have everything. Lucent had a product identical to that of RADWin in WCDMA, both voice and data. It was called Air Loop, and the company decided that the market wasn't big enough for it. It invested a great deal of money in the project and then left it. Lucent thinks that in fixed wireless, the voice world simply isn't attractive enough for it".
How do you divide up the WLL market?
"There is the ISP market, that wants data communications. That means us. There is a market of offices with standard voice infrastructures. That is Floware. And there is a market of offices and small businesses with IP infrastructures, which also want voice communications. That is RADWin".
Floware
Floware was founded in 1996 by general manager Amnon Yacoby. Siemens holds 10% of its shares. Venture capital funds are also invested in it. It has OEM agreements with Siemens and SAGEM of France, which sell its systems.
The company's wireless system is called Walkair, and it supplies all three frequencies that are allocated in Europe: 3.5 gigaherz, 10.5 gigaherz, and 26 gigaherz. The system is based on the TDMA method, and dynamic bandwidth allocation technologies. These permit more efficient utilisation of the existing frequencies and a high capacity.
Floware started selling in the second half of 1999, and revenues amounted to millions of dollars. Amnon Yacoby expects growth in 2000 by a factor of 4-5. One of the problems of the wireless access companies, Yacoby emphasises, is that of funding. The new companies that are laying wireless infrastructure are actually operating start-up companies, with no financing. They expect financing to come from suppliers, and companies like Floware don't have the money. Therefore, Yacoby emphasises, Floware has OEM agreements with Siemens, SAGEM and Hughes. These are companies for which financing is part of their way of life, and they sell Floware's products. In the latest deal declared by Floware, with First Mark of Germany, Siemens also sells the equipment and participates in the financing of the deal.
What do you say about the competitors? RADWin, for example, which claims that it can provide both voice and data?
Yacoby: "It is not effective to work with CDMA. It is based on bandwidth spreading. It is impossible to work at high spectral utilisation. What makes the difference is the capacity you can supply to businesses. RADWin's target public is small businesses and home offices. Floware addresses small and medium-size businesses of a different scale".
One of the big advantages of Floware, Yacoby notes, is the fact that it can provide solutions in three frequency ranges: 5.3, 10.5 and 26 gigaherz. He says that today there are tenders calling for a three-way solution of this kind, and Floware and Marconi/Bosch are the only ones able to supply it.
Published by Israel's Business Arena on 10 April, 2000