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Summary:

For past few weeks we have been hearing a lot about Wi-Fi + VoIP = New Handsets. Apart from the sporadic information on Vonage handsets, and some devices developed by Pulver gang, the information has been sketchy. Texas Instruments, which has 80 percent of the VoIP […]

For past few weeks we have been hearing a lot about Wi-Fi + VoIP = New Handsets. Apart from the sporadic information on Vonage handsets, and some devices developed by Pulver gang, the information has been sketchy. Texas Instruments, which has 80 percent of the VoIP related silicon market is a good source for getting an overall picture of the market, so I chatted with them. Here is what they told me:

* Expect about a dozen different handsets by end of 2004.
* The handsets will resemble cell phones, and will feature three core chips, including TI’s OMAP processor based silicon that combines VoIP and WiFi functions.

“We are leveraging the OMAP chipset which we use for WiFi for the VoIP phones,” a TI spokesman said. The company was reticent about providing names of companies which are building these handsets. TI had bought a company called Telogy about four years ago and since then has developed “system on a chip” for VoIP/WiFi applications. The product has entered second generation. The footprint is smaller, the number of total chips required to build a handset has gone down from about six to one. This means, building the handsets is going to be cheap and easy.

TI has developed a spec design which it is selling to wholesale manufacturers in Asia who in turn are building devices for the usual suspects such as LinkSys. I am guessing that everyone from Belkin to D-Link to NetGear would be selling these handsets in coming months. I think the handset I am looking forward to is the one by Motorola that combines VoIP, WiFi with the more traditional GSM chips. An integrated Cell+VoIP phone, priceless. For everything else, there is Nokia.

  1. Charlie Sierra Sunday, May 2, 2004

    The cell carriers are not interested in VoIP/WiFi cellphones because the economics are so damaging.

    (This is also why bluetooth has seen almost no push. Its not good for the carriers, and damn the subscribers.)

    The entire cellular industry is predicated on the assumption of peak minutes, ie. daytime access for 5 days a week.

    VoIP over WiFi, will eventually decimate ARPU, expecially MOP (minutes over plan). Thus even as the cellular business has been built on wireless MOUs being substituted for wired, they can’t afford to be co-opted themselves.

    PS. Nice article on the collapse of GSM infrastructure pricing, its just too bad that CDMA pricing hasn’t fallen as quickly. Given the current environment of decreasing $/MOU and competiting technologies, the equipment guys have got to take a big one for the team, or else.

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  2. I’ve been thinking a lot about the impact of WiMax – particularly the mobile version and versions put forward by companies like Flarion – and the impact they could have on cell networks. It’s no wonder, then, that cell phone companies such as Nextel have been setting up these networks – no doubt seeing that they need to control them. After all, the mobile versions could jump start “local” cell phones that would be far cheaper than current phones and might be ideal for geo-constrained people like teenagers. Here’s the question I have though: VOIP is cost constrained by needing to interact with the traditional phone networks. Will the cell phones networks, then, become the next gatekeeper with the companies adding fees to reach users on those networks? Curious what people think…

    Damian

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  3. Charlie Sierra Sunday, May 2, 2004

    Worrying about mobile WiMax makes about as much sense as worrying about being abducted by aliens.

    802.16e, is 1) being developed by folks unskilled in mobility, and 2) so far behind schedule that its darn near irrelevant. They won’t be commerical until 2008-09 (if then) and by then the game is OVER.

    So once and for all, Mobile WiMax is pure VAPOR-WARE.

    OTOH, Flarion rocks, it was designed from the get-go to be mobile, etc. They just need to find a courageous asian handset mfg to signon.

    The next big innovation with wireless companies will be when they dump their silly billing systems. The cost of providing the dialtone is roughly equal to the billing and CC costs for large carriers. And billing screwups are a large driver of the CC costs.

    WiMax would be more interesing if the RBOC’s owned much MMDS spectrum, etc. When you start hearing about 1900mhz WiMAX equipment then it might get interesting but not until then.

    Only a complete fool would invest in a WiMax only carrier. Because the truth be told, Sprint PCS only uses about 25% of its PCS spectrum and 0% of its MMDS inventory. After VZW and Cingular+AWE turnoff the AMPS service, they will also have loads of unlit spectrum. These players can and will blow any newcomers out of the market.

    So without a real big market to target, there won’t be a lot of well-funded new ISPs looking to buy equipment, which means WiMAX is exactly what most people think it is, more bullshit from the craven bastards at Intel. Sad to say, but money always did buy loads of press.

    But thats not to discount the one useful feature of WiMAX, extracting ever lower prices from the traditional WAN infrastructure guys, and accelerating the development schedules.

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  4. I wouldn’t say I’m worrying about it – nor am I specifically interested in which mobile wireless technology is deployed or wins (although Flarion is definitely more interesting) – I’m thinking about the overall impact, years from now, when this stuff is available. Given that Flarion is guiding, from my understanding, the development of 802.20, then I think we will see standardization in that area as well.

    As for the big boys blowing away all newcomers – you should look at McCaw (I’m sure you’re watching) and what he’s doing with Flux and his recent acquisitions. He’s setting up for a win in this area – probably thinking that Sprint or Nextel will take him out. He’s probably thinking about 4 to 5 years out – and I would never call him a fool, although I don’t think he’s setting up as only a Wi-Max carrier.

    I think you make an interesting point about billing systems – how would the carriers get around CCs?

    WiMax is interesting to the RBOCs – and so I’m thinking that they’re interested, therefore, in companies such as XO Comm which hold a large amount of LMDS spectrum in the 1150 to 1300MHz range….but then again, I’m not an expert here – could this be used in the same way as MMDS spectrum?

    WiMax does seem to have a market problem – it will be third in line behind cable and DSL in terms of getting into the hands of the everyday consumer. I don’t have any figures to back this up, but my guess is that most people, despite the rise in laptop sales, still have their computer in one place and a large portion have broadband connections already in – so unless there is a big price difference, I can’t see a lot of people switching (particularly on the cable side).

    From my point of view, it’s companies like Nokia that will be interested in this technology because they’d like to not be a slave to the carriers. What if they created a phone, such as Motorola has with the MPx, that can make calls on a Wi-what network? This possibility, to me, is why the incumbent carriers are probably looking to control the area.

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  5. Charlie Sierra Sunday, May 2, 2004

    Ok, a couple of points.

    1) LDMS is not relevant. Its a 28 GHZ microwave band.

    2) McCaw hooked up with an ITFS lease holder, not a spectrum owner. clear-something. ITFS was assigned to Educational Institutions, so I don’t think they can sell it to 3rd parties. The loophole, if my memory serves, is that they can lease it out.

    Some do say he’s a loon, but he always has the option of unloading this new thing on Nextel. So of course he’s a special case.

    3) Both ITFS uses 2.5-2.7 ghz, MDS/MMDS uses some 2.1 and the same 2.5-2.7 ghz band.

    4) Almost a ~decade ago, FCC allowed two-way data on ITFS/MDS.

    5) A couple of years ago FCC allowed some mobility on ITFS/MDS, and has also added a mobility component to MSS (satellites), which the CTIA really hates.

    6) Nokia just dumped their WiMax membership. Not worth the time at this point.

    7) Flarion is the only technology left in the 802.20 working group, this it is the defacto standard. However, the more politically astute stooges on the 802.16 group have polluted the 802.20 voters and will deny any formal 802.20 spec for as long as they can.

    Who ever said engineering is not political? Do I hear a Haliburton?

    8) “WiMax does seem to have a market problem”, yes indeed they do. But the problem is MOBILITY, plus bundling, plus being very late to market, plus no compelling sales pitch.

    Lets remember, the original carrier interest in WiMax was for use as a backhaul component. Swap a one-time expense for the recurring T1 fees.

    The marketing innovation from Mobility will be ‘simultaneous’ services, or some such buzz friendly phrase. Meaning how many devices can you have connected and active on the network at the same time.

    With Cable/DSL is only one connection, with Mobility its one or more.

    9) Eliminating Billing drops CC bigtime, but doesn’t eliminate it.

    Have you seen the current dog and pony shows from the Big 6 carriers?

    Its a gas, better than broadway. I think they call them tragicomedies. These complete boneheads showup high on buzzwords and proceed with utter nonsense about how wireless can DRAMATICALLY improve worker productivity, etc. Which is true, but not for the reasons they expound, and not with the carriers assistance.

    The carriers are just like the old story about the cobblers kids going barefoot.

    Instead of ‘eating the dogfood’, as they say in the software biz, they just wanna sell it.

    The only winner here is Nextel, but focus has always been their forte.

    Holy shit this is long. I gotta a conference call coming up, so I should at least look over those talking points. seeya.

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  6. Great comments….

    1. Thanks for the LDMS clarification….

    8. Agreed on simultaneous as the marketing pitch. Works with Microsoft’s pitch of synced services everywhere….

    9. I don’t get what you mean by eliminating billing – how could they do that? Or am I just missing what you mean by that?

    Finally, why is Nextel the winner here? I agree that they are the best run company, but I don’t see how you tie that into what we’ve been discussing here…

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  7. Charlie Sierra Sunday, May 2, 2004

    Wow, I better hurry up an post before big bad Om pushes us off the front page. :)

    8) “simultaneous access” will be huge.

    What good does a cablemodem provide for a family when everybody is outside the house.

    9) Billing. So my economy of expression is not clear, eh? Wouldn’t be the first time.

    I don’t mean free, what I do mean is very simple billing, kinda like MetroPCS. Billing is a huge trouble maker, lots of mistakes, lots of misunderstandings, etc.

    I think we’ll see at most 3-4 rate plans and thats it. Nextel and Sprint have both made recent modifications.

    There is a sold 5% of incremental ebitda margin waiting to plucked from the thin air.

    Similarily I think this nonsense of selling $1-$5 content/ringtones/whatever will not be very profitable in the end because its just too much trouble. A CC call costs $2-3 dollars just to start with. One disputed charges eliminates the margin of 10 sales.

    This will just kill the simplified billing experience.

    9) Nextel is a winner, because 1) they own ~50% of the MMDS spectrum after buying it from MCI and Nucentrix, both in Chapter 11, 2) They are focused on specific markets and offer targeted solutions (access+software+CC).

    Once an enterprise adopts some wireless software apps into its daily workflows, their churn goes basically to zero. These apps bring in real dollars not consumer chump change. GPS, Time traking, scheduling, etc.

    If Sprint was smart they would’ve launched their own dating service for $10-20/mo along with the camera phones and made it very female friendly.

    Thus, lots of fine young single women, ARPU = $50 voice + $15 Vision + $20 dating == $85/mo ???, and lots of guys begging to get in line.

    I prefer to think of this in terms of the 4 layer IP protocal stack. The carriers have huge investments in the lowest layers, but nothing in the top, application, layer, which is dominated by Yahoo, AOL, MSN, and Google(???). If a carrier spent just 5-10% of its capex on application that mean something to users it would be impressive.

    Shhh, don’t tell anybody else about this.

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  8. The secret is safe with me….and we are off the homepage…

    Anyway – I’m not a Nextel subscriber, but I hadn’t heard of any specific application (besides push-to-talk). What’s a deployed example?

    Agreed, however, on the fact that the carriers have so far ignored what will turn out to be the juicy part of the business – software. They’ll probably realize this by the time the business is gone – that’s certainly what Microsoft is seeing. Nokia is clearly seeing it. I don’t know if Samsung, LG or Motorola see it or not – but they don’t seem to care.

    But what do you think Nextel is deploying the Flarion network for? Will they eventually push voice through it? Will we see Flarion handsets? Can I ask any more questions?

    Oh, and I like your dating service idea with one modification: like a bar, the girls get a discount to drive rapid adoption. Men, naturally, will have to pay more.

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  9. Rise Of The WiFi Phones

    I know, more jargon. Still, pay attention. You will be buying one of these babies in a year or two … if not necessarily later this year….

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