Changewave Research: Wireless Broadband Trends for 2005

ChangeWave Research: Wireless Broadband Trends for 2005

ChangeWave Research Report:

Wireless Broadband Trends for 2005

3G & Wi-Fi Show Most Growth - WiMax Holds Big Promise

Overview

Recent Alliance surveys have shown the wireless industry continuing to outperform traditional telecom. During the week of September 30 – October 5, 2004, we conducted an Alliance survey on key wireless broadband trends for 2005 – including Wi-Fi, WiMax, Ultra Wideband and 3G Wireless. A total of 78 Alliance telecom/wireless industry members participated.

(A) Overall Trends

3G Wireless (UMTS/WCDMA/GSM) and Wi-Fi Will Experience Most Spending Growth. Respondents chose 3G Wireless (UMTS / WCDMA / GSM) and Wi-Fi as the wireless broadband technologies that will experience the most spending growth in the US over the next 12 months.

Consumer-Based Market Will Also Experience Most Growth. Thirty-eight percent (38%) of respondents believe the Consumer-Based wireless broadband market will experience the most growth over the next 12 months, while 29% believe the Corporate market will experience the most growth.

Asia Progressing Fastest. Half of our respondents (50%) believe Asia will progress the fastest in adopting wireless broadband technologies. Europe (26%) and the US (14%) trail by wide margins.

(B) Wi-Fi vs. WiMax

A Majority Agree Wi-Fi Will Lead. A majority of respondents (54%) believe “Within the next 2 years, Wi-Fi Networks will become so widely available that Wi-Fi will be the market leader among wireless broadband,” while 26% disagree with this assertion.

But WiMax is a Viable Alternative. Forty-five percent (45%) of respondents believe carriers and data networking companies will be buying WiMax equipment within the next two years – a 4-percentage point increase since our April 2004 survey.

Motorola is the WiMax Winner Among Large Companies. Among the 3 large companies listed, a third of respondents (33%) believeMotorola is best positioned in the WiMax equipment market for 2005. Alcatel (10%) came in a distant second.

Alvarion Has the WiMax Advantage Among Smaller Companies. One-in-four respondents (26%) believe Alvarion is best positioned among smaller companies in the WiMax equipment segment for 2005. Proxim (10%) came in second, followed by Harris (9%).

WiMax Considered a “Last Mile” Solution Among Respondents. Thirty-five percent (35%) of telecom/wireless industry respondents believe the most viable long-term market for WiMax lies as a Last Mile Solution. Another 27% believe it’s as a Mobile Computing Platform for Business/Personal Users.

While FTTP Will Win in Urban Areas. Respondents believe FTTP (31%) will win the battle for the “Last Mile” in urban areas, followed by Cable (24%) and WiMax (15%).

WiMax Will Win in Rural Areas. When it comes to rural areas, respondents believe WiMax (45%) will win the “Last Mile” battle. 3G (13%) and Wi-Fi (8%) came in a distant second and third, respectively.

Market is Big Enough for Both Wi-Fi and WiMax. A total of 49% believe both Wi-Fi and WiMax will continue to increase their market share. In a head-to-head, 13% of respondents believe WiMax will win, 4% believe Wi-Fi will win.

(C) Ultra Wideband

Outlook for Ultra Wideband – Still Too Early. A total of 36% of respondents believe “it is too soon to know whether Ultra Wideband (UWB) will ever emerge as a widely accepted wireless broadband technology”. Another 13% believe “UWB will only be accepted in limited markets (i.e., corporate).”

(D) “3G” Wireless

Capital Budget Constraints Seen As Greatest Barrier to 3G Expansion. Thirty-seven percent (37%) of respondents see “Capital Budget Constraints Facing Telecom Carriers” as the primary obstacle to the growth of 3G Wireless in the U.S. – nearly the same as in our November 2003 survey.

The 3G Technologies Battle. Two-in-five respondents (41%) believe UMTS/ WCDMA/GSM is the 3G wireless technology that will have the most market share in the U.S. in the next 2 years. On the other hand, 29% believe EV-DO / CDMA2000 1x is the technology that will win out.

Bottom Line: The current survey findings show wireless broadband technologies – and particularly 3G Wireless (UMTS/WCDMA/GSM) and Wi-Fi – gaining momentum in the fight for broader market acceptance. While Wi-Fi appears best-positioned to lead over the next two years, WiMax is seen as a very viable alternative for the long-term. Not surprisingly, respondents believe Asia will progress the fastest in adopting wireless broadband technologies, and the Consumer-Based wireless broadband market will experience the most growth over the next 12 months.

Motorola is seen as the large company best positioned to benefit from the success of WiMax, while Alvarion leads among smaller companies.

The ChangeWave Alliance is a group of 4,900 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™

Table of Contents

Summary of Key Findings...... 4

The Findings...... 5

(A) Overall Trends...... 5

(B) Wi-Fi vs. WiMax...... 7

(D) “3G” Wireless...... 12

ChangeWave Research Methodology...... 23

About ChangeWave Research...... 24

I. Summary of Key Findings

Introduction

The report focuses on 4 areas:

(A) Overall Trends

(B) Wi-FI vs. Wi-Max

(D) “3G” Wireless

II. The Findings

Total Telecom/Wireless Industry Respondents (n = 78)

(A) Overall Trends

(1) Question Asked: Based on your own knowledge and what you are seeing in the wireless broadband industry, which of the following do you think will attract the most growth in spending in the U.S. over the next 12 months? (Please Choose No More Than Two)

3G Wireless (UMTS / WCDMA / GSM) / 36%
Wi-Fi / 33%
3G Wireless (EV-DO / CDMA2000 1x) / 31%
WiMax (Worldwide Interoperability for Microwave Access) / 24%
Ultra Wideband (UWB) / 4%
Don't Know / 19%
Other / 0%

(1A) Question Asked: And which of the following do you think will attract the least growth in spending in the U.S. over the next 12 months? (Please Choose No More Than Two)

Ultra Wideband (UWB) / 41%
3G Wireless (EV-DO / CDMA2000 1x) / 13%
3G Wireless (UMTS / WCDMA / GSM) / 12%
WiMax (Worldwide Interoperability for Microwave Access) / 9%
Wi-Fi / 9%
Don't Know / 35%
Other / 1%

Net Difference Score

Most Spending / Least Spending / Net Difference
3G Wireless (UMTS / WCDMA / GSM) / 36% / 12% / +24
Wi-Fi / 33% / 9% / +24
3G Wireless (EV-DO / CDMA2000 1x) / 31% / 13% / +18
WiMax (Worldwide Interoperability for Microwave Access) / 24% / 9% / +15
Ultra Wideband (UWB) / 4% / 41% / -37

3G Wireless (UMTS / WCDMA / GSM) and Wi-Fi Will Experience the Most Spending Growth. Respondents chose 3G Wireless (UMTS / WCDMA / GSM) and Wi-Fi as the wireless broadband technologies that will experience the most spending growth in the US over the next 12 months. (Net Difference Score = +24). Ultra Wideband (Net Difference Score = -37) came in last.

(1B) Question Asked: Why?

Among those who believe 3G Wireless (UMTS / WCDMA / GSM) will attract the most spending, Alliance member GEO8220 writes, "… UMTS operators have committed to heavy investments and with the technology bugs almost solved and attractive new terminals being introduced, it will drive the growth." EE6958 adds, "GSM is essentially [the] universal global standard."

Among those who believe Wi-Fi will attract the most spending, Alliance member LRE9526 writes, "[Wi-Fi] has the lowest cost point, is readily available, and the standards have been in place." ISO8098 adds, "Wi-Fi is being deployed in city and community-wide networks by WISPs, municipalities and utilities…"

A sample of the open-ended responses to this question can be found in Appendix B on page 18.

(2) Question Asked: Of the following Wireless Broadband markets in the U.S., which one will experience the most growth over the next 12 months?

Consumer-Based / 38%
Corporate / 29%
Small Business / 15%
Government/Institutional / 6%
Don't Know/No Answer / 10%
Other / 1%

Consumer-Based Market Will Also Experience the Most Growth. Thirty-eight percent (38%) of respondents believe the Consumer-Based wireless broadband market will experience the most growth over the next 12 months, 29% believe the Corporate market will experience the most growth.

(3) Question Asked: Based on your own knowledge and what you are seeing in the wireless broadband industry, which region - Asia, Europe, or the United States - has the best technologies and standards and will progress the fastest in adopting wireless broadband technologies?

Asia / 50%
Europe / 26%
United States / 14%
Don't Know / 9%
No Answer / 1%

Asia Progressing Fastest. Half of our respondents (50%) believe Asia will progress the fastest in adopting wireless broadband technologies. Europe (26%) and the US (14%) trail by wide margins.

(B) Wi-Fi vs. WiMax

(4) Question Asked: The next generation of Wi-Fi (802.11n) is currently being debated between two competitive industry groups with different standards known as WWISE vs. TGnSync. Which of these two Wi-Fi standards do you believe will eventually win out?

WWISE / 6%
TGnSync / 4%
Both / 5%
Neither / 5%
It Doesn't Matter / 12%
Don't Know / 65%
No Answer / 3%
Other / 3%

Too Soon To Tell. When asked to choose whether WWISE or TGnSync will win out as the Wi-Fi industry standard, only 6% of respondents chose WWISE, and 4% chose TGnSync, indicating it is clearly too early to tell which industry standard will win.

(4A) Question Asked: Do you agree or disagree with the following statement: Within the next 2 years, Wi-Fi Networks will become so widely available that Wi-Fi will be the market leader among wireless broadband technologies?

Strongly Agree / 9%
Somewhat Agree / 45%
Somewhat Disagree / 22%
Strongly Disagree / 4%
Don't Know/No Answer / 21%

A Majority Agree Wi-Fi Will Lead. A majority of respondents (54%) believe “Within the next 2 years, Wi-Fi Networks will become so widely available that Wi-Fi will be the market leader among wireless broadband,” while 26% disagree with this assertion.

(5) Question Asked: Intel has put its weight behind WiMax - a powerful wireless technology based on the 802.16 standard that is emerging as a wireless alternative for carriers, businesses and consumers. Which of the following statements best reflects your own views about WiMax?

Current
Survey
Oct. ‘04 / Previous
Survey
Apr. ‘04
Within the next 12 months, carriers and data networking companies will be buying WiMax equipment / 12% / 6%
Within the next 1-2 years, carriers and data networking companies will be buying WiMax equipment / 33% / 35%
It is too soon to know whether WiMax will emerge as a viable alternative to 3G and other forms of wireless data networking / 32% / 44%
WiMax will never emerge as a viable alternative to 3G and other forms of wireless data networking / 3% / 1%
Don't Know/No Answer / 20% / 14%

But WiMax is a Viable Alternative. Forty-five percent (45%) of respondents believe carriers and data networking companies will be buying WiMax equipment within the next two years. This is a 4-percentage point increase since our April 2004 survey.

We note that the percentage who believes this will occur in the next 12 months has doubled since our previous survey, jumping from 6% to 12% currently.

(5A) Question Asked: Looking at the Broadband Wireless Access market, which of these three major companies do you believe is best positioned in the WiMax equipment segment for 2005?

Motorola Inc. (MOT) / 33%
Alcatel SA (ALA) / 10%
Siemens AG (SI) / 6%
Don't Know/No Answer / 50%
Other / 1%

Motorola is the WiMax Winner Among Large Companies. Among the 3 large companies we listed, a third of respondents (33%) believeMotorola is best positioned in the WiMax equipment market for 2005. Alcatel (10%) came in a distant second.

(5B) Question Asked: And looking at the Broadband Wireless Access market, which of these smaller companies do you believe is best positioned in the WiMax equipment segment for 2005? (Please Choose No More Than Two)

Alvarion Ltd. (ALVR) / 26%
Proxim Corp. (PROX) / 10%
Harris Corp. (HRS) / 9%
WaveRider Communications Inc. (WAVC) / 6%
Wi-LAN Inc. (WIN) / 4%
Airspan Networks (AIRN) / 3%
SR Telecom Inc. (Toronto: SRX) / 3%
P-Com Inc. (PCOM) / 1%
Ceragon Networks Ltd. (CRNT) / 0%
Don't Know / 53%
Other / 1%

Alvarion Has the WiMax Advantage Among Smaller Companies. One-in-four respondents (26%) believe Alvarion is best positioned among smaller companies in the WiMax equipment segment for 2005. Proxim (10%) came in second, followed by Harris (9%).

(5C) Question Asked: Which of the following do you believe is the most viable long-term market for WiMax?

Last Mile Solution / 35%
Mobile Computing Platform for Business/Personal Users / 27%
Overlay for 3G / 8%
Hot Spots / 8%
Backhaul for Wi-Fi / 5%
Don't Know / 17%
No Answer / 1%
Other / 1%

WiMax Considered a “Last Mile” Solution Among Respondents. Thirty-five percent (35%) of telecom/wireless industry respondents believe the most viable long-term market for WiMax lies as a Last Mile Solution. Another 27% believe it’s as a Mobile Computing Platform for Business/Personal Users.

(5D) Question Asked: Recent Alliance Telecom surveys show increased market penetration for the Fiber Build-Out (FTTP) in the battle for the "Last Mile." Focusing on the 'Last Mile,' which competing technology do you believe will ultimately win the battle in urban areas and in rural areas?

Urban Areas

FTTP / 31%
Cable / 24%
WiMax / 15%
3G / 6%
Wi-Fi / 6%
BPL / 0%
Don't know / 15%
No Answer / 1%
Other / 1%

Rural Areas

WiMax / 45%
3G / 13%
Wi-Fi / 8%
FTTP / 5%
Cable / 4%
BPL / 1%
Don't know / 19%
No Answer / 5%
Other / 0%

While FTTP Will Win in Urban Areas. Respondents believe FTTP (31%) will win the battle for the “Last Mile” in urban areas, followed by Cable (24%) and WiMax (15%).

WiMax Will Win in Rural Areas. When it comes to rural areas, respondents believe WiMax (45%) will win the “Last Mile” battle. 3G (13%) and Wi-Fi (8%) came in a distant second and third, respectively.

(6) Question Asked: Which of the following statements best reflects your own views on the competition between Wi-Fi and WiMax?

WiFi will win out in the battle with WiMax within 2 years / 4%
WiMax will win out in the battle with Wi-Fi within 2 years / 13%
Both Technologies Will Continue Increasing Their Market Share / 49%
Neither Technology Is Going to Survive Long Term / 5%
Don't Know / 27%
No Answer / 3%
Other / 1%

Market Big Enough for Both Wi-Fi and WiMax. A total of 49% believe both Wi-Fi and WiMax will continue to increase their market share. In a head-to-head, 13% of respondents believe WiMax will win, 4% believe Wi-Fi will win.

(7) Question Asked: Which of the following statements best reflects your own views on Ultra Wideband (UWB)?

Within the next 12 months, UWB will be a viable and widely accepted wireless broadband technology / 0%
Within the next 1-2 years, UWB will be a viable and widely accepted wireless broadband technology / 9%
UWB will only be accepted in limited markets (i.e., corporate) / 13%
It is too soon to know whether UWB will ever emerge as a widely accepted wireless broadband technology / 36%
UWB will never emerge as a viable wireless broadband technology / 1%
Don't Know / 38%
No Answer / 3%
Other / 1%

Outlook for Ultra Wideband – Still Too Early. A total of 36% of respondents believe “it is too soon to know whether Ultra Wideband (UWB) will ever emerge as a widely accepted wireless broadband technology”. Another 13% believe “UWB will only be accepted in limited markets (i.e., corporate).”

(7A) Question Asked: Ultra Wideband (UWB) is being debated by an IEEE industry task group charged with selecting one of two competing proposals for Ultra Wideband connectivity - Direct Sequence (DS-UWB) vs. Multiband (MBOA-SIG). Which of these two proposals do you believe will eventually win out?

Multiband (MBOA-SIG) / 6%
Direct Sequence (DS-UWB) / 4%
Both / 1%
Neither / 4%
Don't Know / 81%
No Answer / 4%
Other / 1%

Uncertainty Prevails. It is too early to tell whether the Multiband or Direct Sequence proposal will win out in the debate for UWB connectivity. Only 6% of respondents chose Multiband (MBOA-SIG), and 4% chose Direct Sequence (DS-UWB).

(D) "3G" Wireless

(8) Question Asked: What would you say is the greatest barrier to rapid deployment of "3G" Wireless in the US?

Telecom/Wireless Industry Respondents Current Survey
Oct. ‘04 / Telecom/Wireless Industry Respondents
Previous Survey
Nov. ‘03
Capital Budget Constraints Facing Telecom Carriers / 37% / 36%
3G Technological Maturity (e.g., reliability of technology and equipment) / 12% / 17%
Current Investment in 2.5G and Other Standards / 10% / NA
Expense of Handsets / 6% / 4%
Expense of Service to Customers / 6% / 18%
General Inertia / 6% / 4%
3G Technological Performance (e.g., ability to carry high quality calls) / 3% / 4%

Capital Budget Constraints Seen As Greatest Barrier to 3G Expansion. Thirty-seven percent (37%) of respondents see “Capital Budget Constraints Facing Telecom Carriers” as the primary obstacle to the growth of 3G Wireless in the US, nearly the same as in our November 2003 survey. 3G Technological Maturity (12%) and Current Investment in 2.5G and Other Standards (10%) also received double-digit mention.

(8A) Question Asked: Looking at the U.S. market, which 3G technology do you believe will have the greater market share in 2 years?

3G Wireless (UMTS / WCDMA / GSM) / 41%
3G Wireless (EV-DO / CDMA2000 1x) / 29%
Don't Know / 27%
No Answer / 3%

The 3G Technologies Battle. Two-in-five respondents (41%) believe UMTS/WCDMA/GSM is the 3G wireless technology that will have the most market share in the U.S. in the next 2 years. On the other hand, 29% believe EV-DO/CDMA2000 1x is the technology that will win.

(8B) Question Asked: Why? Is one of these 3G technologies clearly better than the other?

Sample of AllianceTelecom/Wireless Industry Member Responses:

(a) 3G Wireless (UMTS / WCDMA / GSM) (41%)

HMA6782 writes, "UMTS/WCDMA, as the 3G evolution path of GSM networks, will have the lion's share of the worldwide market in the next two years. …Technically, UMTS/WCDMA offers higher data rates than EV-DO/DV. But the real reason for the dominance of the UMTS/WCDMA standard is that it is the 3G path for GSM networks. Today, GSM networks account for 75% of all the 1.3 Bn cellular subscribers world wide. With that type of installed base, UMTS/CDMA will be the resultant technology as the networks world wide implement 3G data. …"

DPH3631 writes, "GSM/WCDMA is getting more and more popular because the technology advantage, and equipment reliability."

SSC5841 writes, "WCDMA is the natural evolution path of GSM, and GSM currently has the most market share worldwide."

PLA7056 writes, "UMTS/GSM already dominates 3G deployments in Asia and Europe. By choosing other standards US will get isolated and lag behind the rest of the world as has happened for 2G."

ALA9565 writes, "UMTS/WCDMA/GSM adopters have a much greater number of users and can afford effective marketing campaigns."

JAM0983 writes, "… UMTS/WCDMA/GSM is more prolific."

KEE6958 writes, "GSM is preferred choice on Cingular and AT&T Wireless, who are set to merge this fall to become the largest U.S. carrier. Clearly, size matters.”

"PKO4842 writes, "Global standardization."

LEW2203 writes, "AT&T investment and worldwide compatibility."

FLE3444 writes, "I don't think it is based on superior technology, but international standards"

CEV8392 writes, "Widely chosen as 3G standard in the world, so it would be easy to roam between networks in different countries and continents."

WYO0956 writes, "UMTS/WCDMA/GSM is the more prevalent technology worldwide and will also dominate in the U.S. because of its lower capex requirements for deployment and greater handset availability."

(b) 3G Wireless (EV-DO / CDMA2000 1x) (29%)