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The Surprise RetreatA week after the close of the first funding window, Research firm Analysys Mason released a report the questioned the ability of North American and European WiMax markets to grow and sustain the interest of continued investments from their partners in the software industry. Terry Norman, senior analyst at Analysys Mason, said his firm especially was alarmed by WiMax investors such as Cisco Systems, Google, Intel and Motorola were writing off billions of dollars in Clearwire, majority-owned by Sprint, as sales had been slower than expected. Norman wrote that the finance drain may stall plans for WiMax network rollouts. “This does not look good for WiMax,” said Norman.
The report also predicted that North American CDMA operators may opt to move with WiMax’s competitor platform, Long Term Evolution (LTE) — an assertion supported by Ericsson’s purchase of Nortel’s interests in CDMA and LTE in North America. “In the developed markets of Europe and the United States, we see some early signs of a difficult future for WiMax. In developed European markets, operators are almost certainly upgrading their 3G technologies to 4G LTE in order to match the rising demand for data,” said Norman. “We expect that [the WiMax operators] will compete head-to-head for the same customer base, and LTE will have a clear advantage in this.” The report coincided with the surprising retreat of WiMax from its expected strong participation in the broadband stimulus’ first window. Verizon, AT&T, Qwest, Comcast and others have indicated they will not file for stimulus money due to a range of factors, including net neutrality stipulations, which restrict funding distribution. Clearwire maintained that it filed for “significant” funding but would not reveal the exact amount or the extent of its solution.
Other WiMax proposals seemed to take on an approach that seemed to defy the application requirements — placing chips on multiple numbers in hopes that one of their investments will hit. These proposals also asked for a noticeably larger amount of funding than sought by satellite players. KeyOn Communications, a wireless broadband provider specializing in connecting rural areas, announced Aug. 27 that it submitted multiple applications requesting a total of $150 million in U.S. broadband stimulus funding, with promises to connect millions of households within three years. KeyOn’s proposal was five times larger than WildBlue’s application. KeyOn said its existing wireless networks, which covers about 2.5 million people, would be expanded to cover as many as 16 states and provide wireless broadband access to as many as 6.5 million people. According to the NTIA and RUS guidelines, each one of those states requires a separate application with no guarantees. “The management, employees, and key consultants of KeyOn have spent the past three months focusing on and refining our plan to submit these applications under the BIP for rural broadband deployment. … I believe we are strongly positioned to extend the reach of broadband to the neediest areas in the country," KeyOn CEO Jonathan Snyder said in a statement.
Despite the tense environment and the less-than-smooth sailing of the government’s stimulus administration, the RUS and NTIA have reported that they are swamped with applications and that competition is healthy. “Over the last several days, the online application system has experienced service delays due to the volume of activity from potential applicants,” the Departments of Commerce and Agriculture said in a joint statement, released Aug. 14. To address the capacity issues, the agencies added additional servers and six more days to the deadline for companies who already started the application process.
But the process itself has its own share of critics. The FCC, which is waiting for NTIA and RUS progress reports under its own pressure to meet a Feb. 17 deadline to submit a national broadband rollout plan outlining the benefits of improved broadband infrastructure for such things as education, employment, and health care as well as the issues related to deployment, adoption and affordability to U.S. Congress and President Obama, held a workshop Sept. 1 with some of the country’s leading economists. The panel only revealed frustration, as economists and capital investment managers warned the FCC that there is insufficient research data to enable the U.S. government to accurately assess what type of national broadband plan would benefit the economy.
University of Georgia economist Chris Forman told FCC moderators that economists are surprised that the process of handing out $7.2 billion in broadband stimulus funding has been unorganized. “It is interesting that the government has conducted none of its own surveys to gauge how residents in unserved rural areas would use broadband to their economic advantage. The government is using data from the private sector [and] in some cases, from university surveys conducted by students,” said Forman. The government “cannot force demand with supply.” Tom Wheeler, managing director at Core Capital Partners, said that too much attention is being focused on bringing broadband to households but not enough on bringing cost-reduced services to enterprises, which he believes will provide the intended economic boost. “We’re looking at the wrong thing. We’re looking at the pipe and how to build that pipe, but we’re not looking at the reason for the pipe, which is what investors like me need to know. What about providing data for enterprises at reasonable prices? Enterprise industries will provide more of a direct impact on the economy and neither the FCC nor NTIA or any government agency has collected data on enterprise prices, prices for virtual private networks or broadband options. Surely, the amount of applications the NTIA should tell them that the amount of providers is robust, but we have no data on pricing,” said Wheeler.
With the broadband stimulus bill application process approaching its halfway point, with two more windows, October to December and April to June, on the horizon, the agencies and companies involved find themselves facing several new questions, without having answered the basic ‘”who, what, where, when and how” that the NTIA and RUS were tasked to determine. With economists and investors throwing ‘why’ into the mix, the concept and definition of the U.S. broadband problem becomes a little broader.
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