The wireless wave rolls in

Wireless is the way of the future, proclaimed Intel chief executive Paul Otellini at his company's convention in San Francisco last month. To illustrate the point, he projected a map of the city, circa 2003, on to the screen overhead. A few red dots were superimposed on it to illustrate the number of wireless broadband internet hotspots in existence shortly after Intel launched its wi-fi technology that year. Then, to the amazed gasps of the crowd, Otellini updated the map to show today's hotspots - it was covered in red.

"A few years ago, wi-fi was nowhere. It's pretty fair to say that nowadays, wi-fi is ubiquitous," Otellini said. "We certainly created a new industry. More importantly, we created the new normal."

That "new normal" was the unlocking of demand for wireless, high-speed connectivity to the internet and wi-fi is now as necessary in a computer as a CD/DVD drive or USB port.

Intel is thus pushing the next step in that demand - WiMax or "wi-fi on steroids" as the company describes it. It's a technology surrounded by hype and questions, but it's also potentially a major market shaker - when one of the most powerful men in technology makes such a bold proclamation, it would be foolish not to sit up and listen.

So if wireless is indeed the future, where does that leave the wired? In New Zealand, such questions inevitably lead to Telecom.

The company last month announced a rather large intention to put all its eggs in one basket - a $1.4 billion plan to upgrade its fixed-line network, through which it offers phone and internet services. Clearly for Telecom, the future is still wired.

But is the company setting itself up to be bowled over by the wireless wave? At what point will it be too late change course? Or will all the hype fizzle, leaving wired to rule?

In its basic definition, WiMax provides high-speed broadband internet access over a wireless connection using microwave frequency. Whereas wi-fi transmitters have a top range of 100m or so, WiMax transmitters will stretch that up to 50km, which is effective not only in delivering broadband to homes, but also in creating large wireless hotspots in places such as airports and small towns.

Theoretically, WiMax will boast a shared data range of 50 to 70 megabits per second, which is enough to provide hundreds or even thousands of homes with high-speed access. Much like cellphone transmitters, WiMax emitters sit atop towers or buildings, but unlike many present wireless internet services, they don't require line-of-sight and can thus get around difficult geographies.

WiMax, when its final standard is decided in late 2006, will distinguish itself from other wireless offerings by being inter-operable, which means users will be able to roam between providers' networks around the country or even the world. That differs from proprietary networks, such as the one operated by Woosh Wireless, which can't offer roaming.

Most importantly for internet providers and customers, however, is that a WiMax network would be much cheaper to set up than a fixed network - which makes it appealing for companies looking to take on Telecom, particularly in areas where its lines don't reach.

"It's an order of magnitude cheaper," said Stacy Smith, Intel's chief information officer. "It's going to be quite a bit less expensive to hook people up to a WiMax base station than it is to dig up the streets and run fibre to the home."

Costs associated with setting up a WiMax network include licensing radio frequency, which several experts peg as relatively cheap and plentiful in New Zealand - relevant chunks were auctioned off last year for as little as $150,000.

Base stations are also necessary. Intel estimates that one transmitter could offer up to 90 users internet access at two megabits per second or about eight times faster than most entry-level broadband plans in New Zealand. However, at their price range of between $30,000 and $100,000, the stations are too expensive.

But once the standard is established, competition is expected to take off and prices will plummet. One estimate sees the price of stations halving in the next 18 to 24 months.

The other big cost is receivers, which, for today's end user, comes in the form of a modem. Woosh charges customers $100 for a wireless modem. WiMax, however, will eliminate this cost as Intel starts building receiving chips into laptops, beginning in late 2006. Given that 80 per cent of today's laptops have built-in wi-fi capability, it won't be too long before embedded WiMax receivers are ubiquitous and external modems unnecessary.

So with the costs of delivering coming down, that leaves providers to ponder the possibilities.

In New Zealand, BCL and NZ Wireless have plans to begin WiMax testing in the next few months. For BCL, it's a case of figuring out how to apply it.

"We're in that stage of understanding the opportunity and the fit within the New Zealand telecommunications landscape," said Matt Bostwick, group communications manager for THL, parent of BCL.

Bostwick envisions WiMax's best uses will be in providing broadband access to areas not reached by Telecom's lines and, perhaps, in replacing existing 3G technology in providing data services to mobile phones, which is expensive and clunky.

Chris Aspros, managing director of NZ Wireless, sees a bigger future for WiMax, as it's naturally superior to fixed-line, DSL access.

"You can't take DSL with you. We're going to be moving towards mobility overall anyway - and that's in voice, data and video - over the next 10 years ... it's going to be an all-in-one package that's going to win."

The move to mobility is a major trend that WiMax boosters are banking on. While sales of desktop PCs have been slowing for years, laptops have been going through the roof - they are already officially outselling desktops in the US. Gartner Group analysts expect laptop sales to grow by 26.5 per cent this year, while desktop sales will increase by only 4.6 per cent.

It's a trend that's being mirrored in New Zealand. IDC reports 101,758 laptops were sold in the first half of this year, up 34 per cent from last year. Desktops, meanwhile, sold 167,907 units, down 12 per cent. The shift, IDC says, is being primarily driven by the declining cost of laptops but mobile internet connectivity is becoming a bigger factor.

As such, wireless - and WiMax - have a considerable number of boosters.

"It's a highly relevant technology for New Zealand ... It's going to vie and compete strongly with DSL offerings," said Christopher Loh, telecommunications analyst for IDC. "Wireless players with migration paths in place such as BCL - and even niche-market participants such as Reach Wireless and NZ Wireless/Gasp - are in a strong position to reap potentially substantial gains from the provision of WiMax services. The deployment of such services may threaten or at least influence the existing services of the carriers who are watching closely.

"These small guys - WiMax really gives potential advantages to in terms of rolling out relatively low-cost pops across New Zealand."

Martyn Levy, vice-president of business development for wi-fi software supplier Roam AD, said larger providers such as TelstraClear could go a step further.

"It's going to make it easier for those who have the financial ability to bypass the local [DSL] loop. It's basically a DSL replacement technology. If you've got the [radio] spectrum, you've got the ability to do that."

But other analysts warn against trying to compete with Telecom.

"Even in areas where there's no broadband now but there is the potential for Telecom to move in, you have to be wary because as soon as you start rolling out wireless, they might then follow you and overbuild with fixed line," said Sydney-based telecommunications analyst Paul Budde. "Then your business case is gone."

Telecom, for its part, is thus far only dabbling in wireless through reselling BCL's Extend service and is taking a wait-and-see approach with WiMax. Chief operating officer Simon Moutter said it would be interesting to see the wired-versus-wireless battle play out over the next few years.

"However, when it comes to high-speed services, the economics and the performance benefits of fixed network and broadband will continue to prevail over wireless as far as we can see forward. Markets and customers will move to what works for them on an economic and performance basis. We'll just be wherever customers prefer to be."