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LMDS and MMDS: Fixed Wireless Options in Telecom Networks

1999-2004

a market research report

Report Excerpt

Market Segmentation

Table of Contents

Press Release

Pricing Information

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Today a newly accepted definition for wireless is emerging––it’s not just for mobile phones and satellite TV anymore. With MCI WorldCom/Sprint’s major purchases of fixed wireless MMDS operators, and the emergence of wireless CLECs like Teligent and WinStar, service providers and customers alike are beginning to think of wireless as the primary method of providing all the voice, broadband data, and video services that one could ever want, straight to a home or a business.

LMDS and MMDS, with digital two-way capability, give long distance carriers a relatively cheap entrée into the local market, with multiple operating benefits––in many regions, they will not need to negotiate with the incumbent telco. They will not need to co-locate DSL equipment in an operator’s central office, nor will they need to upgrade existing one-way cable plants to provide two-way functionality. LMDS and MMDS have huge chunks of under-utilized spectrum ready to go, more than enough to satisfy pent-up demand for high-speed Internet access.

However, broadband wireless must jump some hurdles. MMDS has an unprofitable 20-year run as an analog wireless TV service, and LMDS extends only two to three miles from each transmitter, requiring large numbers of antennas. Also, convincing customers that wireless is as reliable as wireline may be tough. One ill-timed service outage could hobble the industry irreparably.

LMDS, MMDS: Fixed Wireless Options in Telecom Networks identifies the possible windfalls and pitfalls of broadband wireless, reviewing the technologies, major players, vendor strategies, revenue forecasts, and access line growth. The report also provides revenue projections of competing broadband technologies––DSL and cable modems––and quantifies consumer and business demand for high-speed access. Insight offers recommendations for bundling wireless services and targeting potential customers.


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    Report Excerpt

    Wireless Broadband

    For those telecommunications executives involved in the day-to-day tasks of selling and deploying ordinary telephone service, it can be difficult to step back and appreciate just how momentous the changes are that are occurring in this industry. We truly stand at the edge of a new world, a world in which the Internet will be used to facilitate e-commerce transactions, provide entertainment, video-conferencing, and a number of hitherto undreamed-of applications.

    After years of hearing about the holy grail of convergence--the blending of television, personal computers and phones into one device, and the blending of voice, data and video onto one network--the Internet is finally pushing these changes with breathtaking rapidity.

    It is now appropriate to point out one other important trend of convergence: the seamless blending of the wireline and wireless networks. In the past, customers grew accustomed to “wireless” meaning either their convenient but sometimes unreliable mobile phones, or maybe even a direct broadcast satellite connection for advanced TV service. On the other hand, customers expected that their phone and Internet service to their home and business would always be provided by wires. It was just what people were accustomed to.

    Today, a newly accepted definition for wireless is emerging. With Sprint and MCI WorldCom’s major purchases of fixed wireless operators in the multichannel multipoint distribution system (MMDS) band, and the emergence of Wall Street-sweetheart startups like Teligent and WinStar, service providers and customers alike are beginning to think of wireless as the primary method of providing all the voice, broadband data, and video services that one could ever want, straight to a home or a business.


    The Access Problem

    For years, there have been a number of technical and business problems preventing a widespread penetration of broadband connections between customers’ premises and the service providers. Either it was too complicated or too expensive, and the benefits of deploying new networks combining just voice and video services seemed too low. With the rapid infusion of the Internet into our lives, the need for broadband capabilities has never been so pressing.

    Communications carriers can select from an ample number of broadband, two-way wireline access architectures:

    • Integrated services digital network (ISDN);
    • Fiber-to-the-home (FTTH);
    • Fiber-to-the-curb (FTTC);
    • Hybrid fiber coax (HFC) with cable modems; and
    • Digital subscriber line (xDSL).

    There are even further options available in the wireless realm, including:

    • Wideband personal satellite communications systems;
    • The high frequency fixed wireless systems dubbed local multipoint distribution system (LMDS), digital electronic messaging service (DEMS), and 38 GHz; and
    • The lower frequency MMDS systems.

    Each wireline and wireless method has its advantages and disadvantages. Yet breakthroughs in radio technology, along with increased industry confidence following the success of personal communications service (PCS) and cellular mobile services, have dramatically improved confidence in radio as a reliable local access technology. In addition, digital technology has greatly improved the signal quality of broadband wireless systems, and permits operators to greatly increase the amount of data that can be sent across a particular amount of spectrum.


    LMDS

    Historically speaking, the radio industry has long been ruled by skeptics who believed that there would always be an acute spectrum shortage, and thus little room for broadband spectrum allocation. However, most failed to see that the migration to digital radio and higher frequencies would eventually cause a spontaneous spectrum glut. This is what has happened today. LMDS is just one of several new allocations that will help make obsolete the old paradigm that claims, “Radio is only good for narrowband services.”

    LMDS occupies the largest chunk of spectrum ever devoted to any one service. Located in sections of the 27.5 to 31.3 GHz band, LMDS can consist a bandwidth of up to 1.3 GHz. This is in stark contrast to cellular, which consists of 25 MHz, or PCS, which consists of 30 MHz.

    Via the transmission of microwave signals, LMDS networks can provide two-way broadband services including:

    • Video;
    • High-speed Internet access; and
    • Telephony services.

    A LMDS network can be composed of a series of cells that each deliver point-to-multipoint services to subscribers. Each transmitter in a cell serves a relatively small area, about two to three miles in diameter. This small cell size means that the LMDS network requires a large number of antennas. As cellular and PCS industry experience has shown, this can be troublesome, since there are only so many places where antennas and hub equipment can be installed.

    Many vendors have developed a full portfolio of equipment for the LMDS band and are actively marketing it to service providers. Since there are no standards, vendors approach the market in very different ways. For example, while some vendors promote time division duplexing (TDD) as the best frequency sharing scheme, others prefer frequency division duplexing (FDD). The lack of standards for equipment has been one of the worst problems in terms of ensuring interoperability and keeping costs down. We expect third generation (3G) wireless system standards will be one influence on the development of standards for LMDS.

    Even though high-frequency fixed wireless has had a limited impact on the telecommunications market thus far, INSIGHT expects the total revenue from data services over LMDS alone in the US to be $676.8 million by 2004.


    MMDS

    The MMDS frequencies, located in the 2.1 GHz to 2.7 GHz band, are another option to deliver broadband wireless services. The MMDS frequencies have traditionally been used to provide a one-way, analog wireless cable TV broadcast service. As such, the MMDS industry has been more widely known as the “wireless cable” industry.

    The history of the wireless cable industry has been rife with failure. The smaller operators have, for the most part, been unable to generate a profitable business using the frequencies for the transmission of analog video. Several regional Bell operating companies (RBOCs) boldly claimed that MMDS would be their avenue to effectively compete with the cable TV operators, only to sell their MMDS properties off and retreat back into their telephony shell. Only BellSouth remains a significant provider of MMDS video service alongside its landline cable service (though several RBOCs have since built semi-successful landline cable TV services). The US markets for residential video are crowded by broadcast TV, direct broadcast satellite (DBS) and cable, and the limited channel capacity of analog MMDS simply could not compete.

    Yet all of a sudden, MMDS frequencies have become the hot properties of 1999. Why is this portion of the spectrum just now catching the attention of the telecommunications industry? The answer: MMDS is seen as a viable broadband service delivery option. The Internet has changed everything. MMDS providers are establishing Internet-focused subsidiaries, feverishly upgrading their existing networks with digital compression capabilities, and moving rapidly to install a return channel to create interactive capability. Unlike their counterparts operating in the LMDS band who mainly target businesses in metro areas, the MMDS providers mostly want to tap the pent-up demand for broadband digital data and TV directly into the home.

    Advantages of using MMDS include:

    • It has chunks of under-utilized spectrum that will, once completely digital, become increasingly valuable and flexible.
    • System implementation, which is little more than putting an installed transmitter on a high tower and a small receiving antenna on the customer’s balcony or roof, is quick and inexpensive.
    • Moreover, since MMDS services have been around for 20 years, there is a wealth of experience--at least in respect to the one-way distribution technology.


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    Market Segmentation

     

    • Service Revenue by Access Technology
      • Cable Modem/HFC
      • DSL
      • 24GHz/38GHz
      • MMDS
      • LMDS

    • LMDS Annual Subscribers and Churn Rate

    • MMDS Annual Subscribers and Churn Rate

    • LMDS Access Lines

    • MMDS Access Lines

    • Total CPE and Service Revenue

    • Penetration of Wireline Broadband Access
      • DSL
      • Cable Modems


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    Table of Contents

     

    Chapter I
    EXECUTIVE SUMMARY

    1.1 Overview
    1.2 The Access Problem
    1.3 LMDS
    1.4 MMDS

    Chapter II
    LMDS APPLICATIONS AND SERVICES

    2.1 Overview
    2.2 The 1998 LMDS Spectrum Auctions
    2.2.1 Players
    2.2.1.1 The Entrepreneurs
    2.2.1.2 Foreign Operators
    2.2.1.3 Power Utilities
    2.2.1.4 The Incumbents
    2.2.1.5 Wireless Operators
    2.2.1.6 The CLECs
    2.2.2 Auction Results
    2.3 The 1999 Auction Results
    2.4 Other High Frequency Bands
    2.4.1 24 GHz (DEMS)
    2.4.2 38 & 39 GHz
    2.5 Services
    2.6 Marketing and Sales Challenges
    2.7 The Business Case

    Chapter III
    FIXED WIRELESS ARCHITECTURE AND LMDS TECHNOLOGY

    3.1 Basic Wireless Concepts
    3.1.1 Mobile Wireless Networks
    3.1.1.1 Cellular
    3.1.1.2 PCS
    3.1.1.3 3G Wireless Systems
    3.1.2 Hybrid Fixed and Mobile Networks & WLL
    3.1.3 Fixed Wireless Networks
    3.1.3.1 Point-to-Point vs. Point-to-Multipoint
    3.1.3.2 Network Elements
    3.1.4 Terminology
    3.1.4.1 Frequencies of Operation
    3.1.4.2 Spectrum Sharing
    3.1.4.3 Modulation
    3.1.4.4 Total Network Capacity
    3.1.4.5 Power
    3.1.4.6 Availability
    3.2 Basic LMDS System
    3.2.1 Backbone Architecture
    3.2.1.1 Fiber Trunks
    3.2.1.2 Point-to-Point Microwave Trunks
    3.2.1.3 Hybrid Backbone Architectures
    3.2.2 Hub Sites and Base Stations
    3.2.3 Subscriber Equipment
    3.3 Network Planning
    3.3.1 Connectivity
    3.3.2 Equipment Interoperability
    3.3.3 Cell Size Selection Criteria
    3.3.4 Intercell Interference
    3.3.5 Sectorization and Cellularization
    3.4 Operations Support Systems Issues
    3.5 The Wireless ATM/IP Debate
    3.5.1 Development of Wireless ATM Systems
    3.5.2 IP

    Chapter IV
    LMDS EQUIPMENT VENDORS

    4.1 Alcatel USA
    4.2 Ensemble Communications, Inc.
    4.3 Lucent Technologies/Netro
    4.4 Newbridge Networks
    4.5 Nortel Networks
    4.6 SpectraPoint Wireless
    4.7 Triton Network Systems, Inc.
    4.8 Other Players
    4.9 Chip Development

    Chapter V
    LMDS, DEMS AND 38 GHZ SERVICE PROVIDERS

    5.1 Advanced Radio Telecom Corp.
    5.2 Nextlink Communications, Inc.
    5.3 Speedus.com, Inc. (CellularVision)
    5.4 Teligent, Inc.
    5.5 WinStar Communications, Inc.

    Chapter VI
    MMDS APPLICATIONS

    6.1 Overview
    6.1.1 Early Days of Distance Learning
    6.1.2 The Emergence of Wireless Cable TV
    6.1.3 Revival of Interest in the Spectrum
    6.2 The MMDS Spectrum
    6.3 The 1996 Auctions
    6.4 The Movement to Two-Way Digital MMDS
    6.5 Digital Services
    6.5.1 Video
    6.5.2 Broadband Internet Access
    6.6 The Unlicensed Frequencies
    6.7 The Business Case

    Chapter VII
    MMDS TECHNOLOGY AND EQUIPMENT

    7.1 Overview
    7.2 MMDS One-Way Video Distribution Architecture
    7.2.1 Head End
    7.2.2 Transmitter
    7.2.3 Receive Site Components
    7.3 Two-Way Networks & Network Planning Problems
    7.3.1 Interference
    7.3.2 Network Extension Methods
    7.3.2.1 Increasing Capacity
    7.3.2.2 Increasing Coverage
    7.4 Specialized MMDS Equipment Vendors
    7.4.1 ADC Telecommunications
    7.4.2 Andrew Corporation
    7.4.3 Gigabit Wireless
    7.4.4 NextNet
    7.4.5 Spike Technologies, Inc.

    Chapter VIII
    FIXED WIRELESS INTERNET ACCESS INFRASTRUCTURE

    8.1 Overview
    8.2 Network Architecture
    8.2.1 One-Way With Telephone Return Path
    8.2.2 Two-Way MMDS Setup
    8.3 Selected Wireless Cable Modem Products
    8.4 Access & Service Availability
    8.5 Security Concerns

    Chapter IX
    MMDS SERVICE PROVIDERS

    9.1 American Telecasting, Inc.
    9.2 CAI Wireless Systems, Inc.
    9.3 MCI WorldCom, Inc.
    9.4 People’s Choice TV Corp. (SpeedChoice)
    9.4.1 Markets & Services
    9.4.2 Network Infrastructure
    9.5 Sprint Corporation
    9.6 Other Players

    Chapter X
    MARKET FORECASTS

    10.1 Overview
    10.2 Drivers of Demand for Broadband Services
    10.2.1 Business Customers
    10.2.2 Residential Customers
    10.3 Total Broadband Market
    10.4 Wireline Access Methods
    10.4.1 Telephony
    10.4.2 Fiber
    10.4.3 DSL
    10.4.4 HFC/Cable TV Networks
    10.5 Penetration of Wireline Broadband Access
    10.6 Wireless Broadband Market
    10.6.1 Wireless Broadband Rollout Status
    10.6.2 Wireless Broadband Market Forecasts
    10.6.2.1 Digital Microwave
    10.6.2.2 MMDS
    10.6.2.3 LMDS
    10.7 Conclusions


    Table of Figures

    Chapter I
    I-1 Total US LMDS Revenue, 1998-2004 ($Millions)
    I-2 Local Access Investment, Sprint MMDS Assets vs. AT&T Cable Assets ($Billions)
    I-3 Total US MMDS Revenue, 1998-2004 ($Millions)

    Chapter II
    II-1 LMDS Spectrum Layout
    II-2 Top Ten LMDS Spectrum Winners By Amount Bid, 1998 ($Millions)
    II-3 Population Covered by Top Ten LMDS Spectrum Winners, 1998 (Millions)
    II-4 LMDS Coverage Ownership of the Top 30 US Markets, 1999
    II-5 Monthly Average Revenue for LMDS Services

    Chapter III
    III-1 Wireless Local Loop Network
    III-2 Point-to-Multipoint Architecture
    III-3 LMDS System Components
    III-4 LMDS Backbone Architectures
    III-5 Example of an CPE Antenna and Network Interface Unit

    Chapter IV
    IV-1 Consecutive Point Ring Architecture
    V-1 WinStar’s Building Access Rights, 1996 to 1998
    VI-1 Homes Covered Within MMDS Market Areas, 1996 and 1997
    VI-2 Total MMDS Subscribers, 1996 and 1997

    Chapter VII
    VII-1 A Point-to-Multipoint Architecture With Satellite Feeds
    VII-2 A Digital MMDS Transmitter/Antenna Layout

    Chapter VIII
    VIII-1 Wireless Internet Access Using Telephony Return Path
    VIII-2 Wireless Return From a Customer Site to an Internet Headend Using QPSK

    Chapter IX
    IX-1 ATI’s Tiered Internet Access Pricing, Portland, OR

    Chapter X
    X-1 Share of Online Services by Access Technology, 1998 vs. 2004
    X-2 Total Households and Business PCs Online, 1998-2004 (Millions)
    X-3 Total US Broadband Access Lines, 1998-2004 (Millions)
    X-4 Total Broadband Services Revenue, 1998-2004 ($Millions)
    X-5 Growth of DSL vs. Cable Modem Access Lines, 1998-2004 (Millions)
    X-6 Average CPE Price and Service Revenue, Broadband Wireless Service, 1998-2004
    X-7 Total 24 GHz and 38 GHz Access Lines, 1998-2004 (Millions)
    X-8 Total CPE and Service Revenue, 24 GHz & 38 GHz, 1998-2004 ($Millions)
    X-9 Total MMDS Access Lines, 1998-2004 (Millions)
    X-10 Total CPE and Service Revenue, MMDS, 1998-2004 ($Millions)
    X-11 LMDS Deployment Timeline
    X-12 Total LMDS Access Lines, 1998-2004 (Millions)
    X-13 Total CPE and Service Revenue, LMDS, 1998-2004 ($Millions)
    X-14 Share of Broadband Access Lines by Technology, 1998 vs. 2004
    X-15 Broadband Services Revenue by Access Technology, 1998-2004 ($Millions)
    X-16 Broadband CPE Revenue by Access Technology, 1998-2004 ($Millions)
    X-17 Broadband CPE and Services Revenue by Access Technology, 1998-2004 ($Millions)


    Table of Tables

    Chapter II
    II-1 Allotted Bandwidth of Various Wireless Services
    II-2 LMDS Auction Frequencies and Specifications
    II-3 Comparative LMDS Auctions, 1998 and 1999

    Chapter III
    III-1 TDMA vs. FDMA in Fixed Wireless Systems
    III-2 Phase Shift Keying vs. Quadrature Amplitude Modulation
    III-3 Spectral Efficiencies of Various Modulation Methods
    III-4 How Modulation and Operating Frequency Affect The Power Level
    (Example of P-Com)
    III-5 Network Planning Tradeoffs
    III-6 Fiber Trunking Advantages and Disadvantages
    III-7 Wireless Trunking Advantages and Disadvantages
    III-8 Functions of a Typical LMDS Network Planning OSS
    III-9 ATM vs. IP

    Chapter IV
    IV-1 Range of Lucent’s OnDemand Equipment by Modulation Format

    Chapter V
    V-1 ART’s Spectrum by Market
    V-2 Nextlink LMDS Licenses
    V-3 Speedus.com Service Plans
    V-4 Teligent’s Spectrum Licenses & Operating Status
    V-5 WinStar’s Spectrum Ownership

    Chapter VI
    VI-1 The LECs’ Quixotic Plans to Offer Video Services, 1997
    VI-2 US MMDS Spectrum in the 2.1 to 2.7 GHz Range
    VI-3 Designation of MMDS Response Channels
    VI-4 MMDS Auction Final Statistics
    VI-5 Winners of MMDS Licenses in 10 Largest BTAs

    Chapter VIII
    VIII-1 Selected MMDS/LMDS Wireless Cable Modem Products

    Chapter IX

    IX-1 American Telecasting Licensed Markets, Households, And Activity Status
    IX-2 CAI Wireless & CS Wireless Licensed Markets, Households, And Activity Status
    IX-3 People’s Choice TV: Principal Markets and Product Offerings
    IX-4 Sprint’s MMDS Acquisitions: Total Cost, Total Households, and Market Areas

    Chapter X
    X-1 Projected Households with Personal Computers, 1998-2003 (Millions)
    X-2 Projected Households Online, 1998-2003 (Millions)
    X-3 Share of Online Services by Access Technology, 1998-2004
    X-4 DSL Versions
    X-5 Activity Status of MMDS, 24 GHz, LMDS, and 38 GHz Services in the Top 50 MSA Markets, 1999
    X-6 Activity Status of Wireless Broadband Access Services in the MSA Markets 51-100, 1999
    X-7 Annual Additional Subscribers and Churn Rate, 24 GHz & 38 GHz, 1998-2004 (Millions)
    X-8 Annual Additional Subscribers and Churn Rate, MMDS, 1998-2004 (Millions)
    X-9 Annual Additional Subscribers and Churn Rate, LMDS, 1998-2004 (Millions)
    X-10 Share of Broadband Access Lines by Technology, 1998-2004
    X-11 Total Broadband Access Lines by Technology, 1998-2004 (Millions)
    X-12 Broadband Services Revenue by Access Technology, 1998-2004 ($Millions)
    X-13 Broadband CPE Revenue by Access Technology, 1998-2004 ($Millions)
    X-14 Broadband CPE and Services Revenue by Access Technology, 1998-2004 ($Millions)


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