Comment Ericsson was never going to welcome WiMAX, given its potential cannibalisation of the Swedish giant's strongest market, UMTS/HSPA, but it was mellowing towards the technology last year as it sought to diversify its customer base and be less dependent on cellcos, moving towards multi-network convergence and managed services for its growth.
However, now it has cancelled its WiMAX R&D projects and says it will focus on bringing LTE to market as early as possible - to satisfy operator calls for a more rapid agenda, and to ensure WiMAX cannot leap into a vacuum left by a long wait for 3.9G.
Since LTE and WiMAX are very similar in technology fundamentals, Ericsson could well afford to support R&D on both and create a converged, all-bases-covered development like Motorola's and Nortel's. So its public rejection of 802.16 smacks of politics and spin, seeking to reduce operator confidence, while raising their hopes of near term LTE, and wrongfoot WiMAX enthusiasts like Motorola.
Ericsson will certainly have huge influence over its core UMTS cellco market, but its stand comes too late to win many other vendors to its side. Moto and Nortel are highly committed to WiMAX, having failed in UMTS; Samsung needs it to support its claim to swing the IPR balance of power eastwards; Nokia, while UMTS is more important to its infrastructure business than WiMAX, is more interested in multi-network devices and driving new markets for high end handsets.
With Alcatel-Lucent generally technologically agnostic, Ericsson is making a firm stand on dominating HSPA and LTE, and keeping its traditional 3G cellco base solid behind its technologies, but it is risking being pigeon holed as a onesystem giant, at a time when it is seeking to expand its range into wireline convergence, IPTV and managed services.
The pre-4G networks are evolving on such similar paths that they will be distinguished by brand and politics, rather than core technologies. But those differences may still be just as divisive and deeply ingrained as though the various factions - WiMAX, LTE and Qualcomm's Ultra Mobile Broadband (UMB) - had chosen entirely different physical designs.
Against this backdrop, the WiMAX community is necessarily on the defensive because its technology lacks the advantage of a heritage in an installed base like UMTS or GSM. So Motorola and Nortel, the companies that failed to get rich on UMTS, are keen to stress the convergence potential between WiMAX and LTE - they say the R&D overlap could be over 85 per cent; while those with most to lose by having a viable alternative to the HSPA/LTE route - Nokia and Ericsson - have been more inclined to stress the differences, and the lack of backwards integration.
So, arguably, Nokia's decision to commit serious resource to WiMAX, at least on the handset side, was the greatest credibility boost for 802.16, more important than the almost inevitable, if powerful, support from Intel's IP-oriented world and the 3G also-rans. And this makes Ericsson's decision publicly to reject the WiMAX system a blow to the idea of a converged next generation roadmap leading naturally to 4G. It is hardly surprising that the Swedish giant - dominant in UMTS and GSM, leading the market in commercializing the latest iterations of HSDPA should seek to wipe any challenger off the wireless map.
But it is still a blow - last year, it seemed that Ericsson was mellowing towards WiMAX, not exactly putting it at the heart of its strategy, but at least acknowledging it could have a place in major integration and services projects in future. Now it is very blatantly voicing the view that WiMAX is irrelevant to large operators - a tool for a few challenging ISPs with limited spectrum and a possible DSL extension network for rural areas, (a market where Ericsson will continue to sell 802.16 systems, which it badges from Airspan).
Ericsson cancels WiMAX activities
Last week, Ericsson confirmed reports that it had closed down development and manufacturing of WiMAX products, although it remains a member of the WiMAX Forum, will support the technology where required in integration projects, and will still resell Airspan fixed WiMAX kit.
"WiMAX offers nothing that cannot be offered by 3G-based technologies," said Mikael Persson, manager of W-CDMA strategy and business. "Right now, we don't work on a WiMAX system. We've invested in the basic research, but we don't see the point in taking that final investment to prepare factories, because we don't see the volumes in the market."
He added: "We want to focus our resources where we'll get the most bang for our buck. And right now, there's no bang at all putting it into WiMAX. HSPA is where the market is happening right now."
Is Ericsson putting WiMAX firmly back in its place after the overexcitement generated by a few isolated carrier choices, those heavily Intel-driven? Or is it recklessly excluding itself from a pole position in the multi-network, converged 4G world that will inevitably evolve over the coming decade, with a blind attachment to its own technologies?
Response from other vendors
The answer will partly depend on whether other important vendors and operators take their cue from Ericsson. Despite its massive market share and its ability to set the agenda in its key markets, Ericsson is adjusting to a world of fixed/mobile convergence and all-IP, just like the other anti-WiMAX cheerleader, Qualcomm.
In this scenario, it will have less logical leadership than in 3G, and will have to fight for its position - a battle for which it is assembling powerful weapons, from building up its managed services business to acquiring technologies in fixed networks and IPTV.
Given that, according to Motorola and others, it is relatively trivial - in carrier-class R&D terms - to develop LTE and WiMAX in parallel, Ericsson might have been expected to retain WiMAX in its strategy, in order to cover as many network bases as possible in its multi-technology world. So the exclusion of 802.16 looks like a calculated political gesture, designed to sway the climate of opinion against WiMAX and stack the odds in favor of a 4G where Ericsson's chosen systems are in the lead.
But in the vendor community, who will follow Ericsson's lead? It is diverging radically from its fellow Scandinavian GSM giant Nokia. Nokia is less interested in large carrier convergence and more focused on new markets driven by its key handset business - high end multimedia applications and the enterprise.
In this context, it is embracing all-IP and trying to extend its user base beyond its traditional cellular carriers, something Ericsson risks failing to do if it remains too LTE-centric. Nokia, keen to reduce its dependence on cellcos, is looking aggressively to new models that are based on technologies like Wi-Fi and WiMAX, and is well ahead of Ericsson's handset interest, Sony Ericsson, in dual-mode or multimode devices.
Among the other majors, Motorola and Nortel have to remain committed to WiMAX because they have sidelined or exited UMTS. In the medium term, they have the fallback plan - should WiMAX fail - of their aggressive LTE development plans, and claim the experience of creating 802.16e systems will give them a headstart in this technology and, implicitly, 4G.
But to generate new customers and revenues now, they are highly dependent on WiMAX taking off, at least for one generation - even if that platform eventually becomes subsumed into a broader, and potentially LTE-driven, 4G system. If this scenario plays out, of course, Ericsson will have made a strong gamble, relying on UMTS for its short term revenue streams - a sector where it is already very strong - and then joining the pack at the LTE stage.
But the fact remains that, before LTE is here, there is a large community of service providers that cannot adopt HSPA because they have unsuitable or insufficient spectrum and no cellular heritage, making the appeal of a true IP, modern network that is (almost) available now far higher. Ericsson, despite its activities in wireline IP convergence, seems to be writing off the potential of the new breed of wireless quad play operators.
Alcatel-Lucent is clearly the biggest competitor to Ericsson now, and while it has a clear WiMAX and LTE strategy, it has less strategic commitment than Motorola and Nortel. Alcatel will not see its decisions swayed too strongly by Ericsson, and indeed may step up its activities in WiMAX to fill gaps that the Swedish giant might otherwise have targeted, but despite its vast size, we see Alcatel-Lucent as a tactical market follower in terms of technology choices, rather than a market driver - certainly outside the CDMA market, where Lucent's position puts it in the strongest position to exploit UMB, should that system see the commercial light of day towards the end of the decade.
Ericsson's action represents something of a comeback against the powerful bid by the east Asian companies and governments to reduce their dependence on European wireless royalty payments. This has led Samsung, in particular, to fiercely support technologies like WiMAX in which Ericsson and Nokia (for this battle is not all about Qualcomm patents) have less IPR than in UMTS.
While LTE has not been fully specified, it is logical to suppose the Scandinavians will also use their market weight to gain a significant position in the IPR for that system too. Ericsson is now on the offensive against the Samsung-dominated WiMAX - oddly and non-deliberately making common cause with its antagonist Qualcomm - and may be helped by the current uncertainty of the Chinese majors about their approach to 4G.
In the short term, Huawei and ZTE see WiMAX as an important entry point to wireless infrastructure markets outside their traditional territories, but they are under pressure from their own government to support evolution of a homegrown Chinese 4G family of standards, rather than taking WiMAX or LTE forward.
Whether the threat comes from China or WiMAX, Ericsson acknowledges that the development of LTE needs to be speeded up. "We have to speed up LTE development," conceded Persson. This is something that cellco chiefs have been calling for increasingly loudly - Vodafone CEO Arun Sarin, most publicly, issued veiled threats at the 3GSM conference that, if LTE did not reach the market in good time, operators would have to consider alternatives.
Currently, that alternative does not exist - pre-certified 802.16e systems will come to market this year but many vendors will have to wait to release a second generation, supporting advanced smart antenna techniques, to be able to claim competitive mobility and performance to that of HSPA; and certainly to back up WiMAX' claims to be comparable with LTE, rather than the current generation of 3GPP technologies.
Some advanced solutions exist, such as Navini's RipWave MX, but large carriers need to see a choice of large vendors in the market before committing major dollars. The argument that WiMAX represents a leapfrog, and a headstart towards pre-4G - rather than a rival to HSPA, coming late to the market - is fundamental to 802.16 backers, and Ericsson's lack of conviction, for all its self-interest, will hit the argument hard and may undermine confidence among some interested operators.
And, of course, it will be operator confidence, and the investment decisions they make in 2007-2010 as they upgrade their cellular networks - or move into wireless for the first time - that will really decide the issue.
Copyright © 2007, Wireless Watch
Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.
Rethink Research is currently conducting a major survey of about 400 service providers worldwide, on their views on which pre-4G technologies to invest in, and this will take into account any impact on operator thinking of the Ericsson action. The results will be available in a research report, Operator Plans for 3.9G, to be published in May. Please email Caroline Gabriel for details.