WiMAX is just a high-speed hype, for now

By Daniel Sorid

SAN FRANCISCO - At virtually every turn, Intel Corp. executives are heaping praise on an emerging long-range wireless technology known as WiMAX, which can blanket entire cities with high-speed Internet access.

Just as Intel helped popularize Wi-Fi, a short-range technology now widely used in airports and in coffee shops, the world's largest chip maker hopes to usher in the "WiMAX era" -- using the technology to displace cable and DSL Internet access and segments of the cellular phone market.

Yet as it heads into turf fiercely protected by the telecommunications and cable industries, WiMAX is likely to gain little traction, at least for several years, analysts said. The demand it does find may come mainly from rural markets outside the United States.

Market research firm iSuppli described a largely lackluster outlook for WiMAX, which it said is surrounded by hype and will likely fail to catch on beyond niche applications. Established broadband access providers see no reason to adopt yet another technology for delivering data at high speeds, the company said.

Industry-wide demand for WiMAX equipment will not top $1 billion until 2007, according to iSuppli's forecast. Divided up among many industry players, that amount might barely register at a company like Intel, which reported $30 billion in revenue last year. By 2009, the market will reach only $2.5 billion, iSuppli predicted.

"These applications will not be large enough to sustain the multitude of silicon suppliers and equipment manufacturers who have expressed interest in developing products for WiMAX," iSuppli said. "The hype surrounding WiMAX ... as a fixed wireless access technology will remain just that -- hype."

Such skepticism has not stopped Intel, Fujitsu Ltd., and Alcatel from investing heavily in WiMAX and promoting it as a logical competitor to DSL and cable Internet access.

In March, Intel and Alcatel announced a "strategic alliance" to develop WiMAX equipment by the second half of next year. The U.S. chip unit of Japan's Fujitsu plans to introduce its own chips for WiMAX early in 2005.

These companies and others envision WiMAX equipment installed outside homes and business, linking up with a base station hosted by fixed-line telecommunications operators. A short-range, Wi-Fi signal, or perhaps an ethernet cable, would bring the Internet to individual PCs in the home.

According to iSuppli, incumbent suppliers of Internet access are deeply invested in their own infrastructure for delivering broadband Internet access via telephone or cable wires, and will be unlikely to spend more for a new wireless technology "that offers no quantum leap in capabilities over their current offerings."

Beyond broadband, WiMAX faces similar challenges. A report from ABI Research on Monday said efforts to position WiMAX as a Wi-Fi killer -- Intel, for instance, plans to support WiMAX in its notebook computer chips in 2006 -- will fail.

"WiMAX enthusiasts sometimes claim that it will 'kill' Wi-Fi. Nothing could be further than the truth," a note from ABI said. High power consumption makes WiMAX an unlikely choice for battery-powered devices like laptop computers and personal organizers.

The best potential for WiMAX, according to iSuppli, may lie in precisely the area least promoted by companies like Intel -- in combined voice, video and data networks that are at best several years away from being developed.

Cellular phone makers have invested more than $100 billion to roll out third-generation cellular networks, which can handle data at speeds suitable for games and video. By the time fourth-generation networks roll out, WiMAX could be the preferred choice.

"With a higher bandwidth capability than existing 3G cellular technologies and reach ... rivaling that of a typical cellular technology cell site, WiMAX has the potential to be adopted by wireless carriers as 4G data-centric technology," according to the iSuppli report.

Even then, the company noted, there are several hurdles to overcome -- including the availability of wireless frequencies licensed by governments, and approval by top-tier wireless carriers.