"We have nothing against WiMAX, but I have to say that it has no business model. This at least is Ericsson's conclusion about the matter. Therefore we're not investing in this area at all. What is supposed to work on WiMAX already works on cellular 3G. All the time we are managing to expand the bandwidth on the basis of existing infrastructures. So there's no reason to switch to WiMAX if we have simpler solutions that already exist. It's not a big thing to develop WiMAX, really not a story, but if we can't see any business viability, there's no reason to get into unnecessary investments." Such forthright words against a technology that many in the telecommunications industry think is the future of mobile are fairly rare, but Bert Nordberg, executive vice president at Swedish company Ericsson, has no qualms about saying them openly.
Nordberg came to Israel the other week to participate in a special event mounted by Ericsson's local branch to mark ten years of activity here in the Levant. Ten years is certainly cause for celebration, but one can assume that the fact that several projects and tenders are in the offing, chief among them Pele-Phone's tender for setting up a new cellular network, a tender in which Ericsson is competing, played no small part in the company's decision to put on a show of strength.
It's no coincidence that Nordberg attacks WiMAX, a topic that will be discussed at the Globes Telecommunications and Internet Conference on June 19, since Ericsson is among the few equipment companies that have rejected development of the technology, despite the market trend. And when a wireless equipment giant like Ericsson kills off a certain technology, that is definitely of great significance.
"They talk about WiMAX (broadband wireless communications, mainly intended for new contenders to compete with existing technologies, G.H.) having 30 million customers in 2010," says Nordberg. "But by that time, cellular broadband will have 500 million subscribers. These are completely different orders of size. If we have learned anything from the history of technology adoption in the telecommunications market, it is that standardization has huge power, and cellular is the standard. For covering specific locations, defined regions, it may be a good solution, but no more than that."
Globes: But there are giants pushing this technology. Are they going to fail?
"It’s true that there are those that are pushing WiMAX chips for portable computers, such as Intel, in order to generate momentum, or others that are developing the wireless infrastructures. We, on the other hand, produce a computer chip that enables broadband cellular communications. We believe that this will be a standard communications method for computers, just as you find WiFi on every portable computer today. In the long run, WiFi will be replaced by WiMAX, but it will be in parallel to cellular connection capability."
And what about WiMAX in Israel?
"In Israel it's even more obvious. There is more than 100% penetration here of cellular, and the infrastructures are among the most advanced in the world in landline, too. Therefore, all the more so do I not see a situation in which a WiMAX network will be set up in Israel. To produce coverage sufficient to compete with cellular, you need to set up a lot of WiMAX antennas, and that is difficult and complicated in every respect. All the same, there is no doubt that the government, and other governments around the world that want to boost competition, are putting out to tender licenses to use WiMAX frequencies, but that doesn't guarantee success."
"No lack of interest"
In Israel, Ericsson is active on many fronts. Naturally, it is strong in the cellular market, but only with Cellcom and Partner. "We supply GSM infrastructures in Israel and work with all the operators. We closed the CDMA activity because we found that, from the point of view of economies of scale, there is no return on the huge investment in research and development of these networks, such as the network Pele-Phone operates today. The reason is that the investment in any network, whatever the technology, is similar, and on the other side there aren't many buyers for CDMA networks. So we decided to get out of that business. On the other hand, 200 countries have already adopted GSM, and standardization is extremely powerful. In Israel we are in the two GSM networks at Jawwal, the Palestinian cellular operator."
But no equipment company can live on its past, and indeed the near future holds out for Ericsson, as well as for its competitors, quite a few opportunities to deepen their penetration. Mats Bosrup, president of Ericsson Israel, adds that, "About a year ago, I looked at all the opportunities in the Israeli market, and on the surface, what I saw wasn't exactly encouraging. There was a situation of about a one-third market share for each company, and the market was saturated. Pele-Phone declared that it wished to remain with CDMA. But since then, everything has changed. Pele-Phone has announced that it is going for third generation with WCDMA, the standard technology. At the same time, Partner and Cellcom are entering the world of fixed-line communications, where we have a great deal to offer, and a new network, Watania, is being set up in the Palestinian Authority, and we are in negotiations with them. We are also competing in a Bezeq tender for NGN. In short, there's no lack of interest."
"The future lies in broadband"
The telecommunications equipment market has undergone massive consolidation recently. Mergers such as those of Nokia with Siemens and Alcatel with Lucent completely changed the competitive scene. Despite this, Ericsson remains the largest company in the field, even if the gap between the companies has shrunk considerably. An interesting cluster has been created of three companies that have each set market leadership as its goal. One of them, Ericsson, has to maintain its status, while the other two try to cut it back and take the lead. Without doubt, there are some very interesting battles ahead in the telecommunications equipment market, and perhaps further erosion of prices. Other companies, with smaller activity in this industry, are Nortel, Cisco, and China's Huawei, which has already begun collaborating with Motorola in cellular.
Do you cooperate with the Sony-Ericsson joint venture, that produces end-user equipment?
"You have to understand that the handset market has a turnover seven times that of the infrastructure market, hence its great dominance. We of course have a connection with Sony-Ericsson, and together we place an emphasis on advanced applications, such as in multimedia. We supply the chipset for Sony-Ericsson's mobile handsets, and that's a big advantage."
Do you believe that cellular can also compete in home broadband networks, whether wireless or wired?
"At my home in Sweden, I myself have broadband with bandwidth of 10 mega, which provides me with IPTV, telephone, and the Internet connection. Without doubt, that is where the communications world is going. But there's a point here that often seems to be forgotten. The mobile cellular infrastructure can provide bandwidth of 7.2 mega, outside the home, but also inside it. Pricing models for unlimited use of the cellular band already exist in the world, and it is turning into genuine competition for the fixed-line infrastructure. It is certainly preferable in places where a new landline infrastructure needs to be deployed, because it's much cheaper as far as setting up a network is concerned. In my view, landline connections will remain for the family, and the mobile connection will become more personal, even within the home."
So you're switching from the world of voice to the world of pure data?
"I certainly think that the opportunities in our industry are in data communications and not in voice. We see how the number of personal computers is growing and that will be the source of our growth."
What's new in the Pele-Phone tender?
"There'll be a tough battle at Pele-Phone. This is an operator setting up an HSPA network from scratch, which is a challenge that stimulates everyone's ambition. From the point of view of the other side, although the network will be new, Pele-Phone already operates a third generation network using another technology. It has considerable experience in advanced services, which it will want to offer swiftly and without hitches on the new network as well, in fact from day one, and there lies the great challenge."
From your experience around the world, do you see in the number portability law that is supposed to come into force here on a practical level towards the end of the year an opportunity for change in the level of competition in the cellular market?
"Portability will undoubtedly make the Israeli market much more interesting. There will be movement of subscribers between the companies, just as happened in Western Europe when this regulation was introduced. But experience shows that most transfers happen in the first year of portability, or even less, and after that things calm down. In any event, prices fall because of portability, even dramatically."|
Published by Globes [online], Israel business news - www.globes.co.il - on June 18, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007