Fixed broadband wireless, can it “duplicate” local ILEC networks?

With CRTC deliberations on a new essential facilities and wholesale services regime about a week old, commissioners will be going through all the evidence to determine what an essential facility is and what the appropriate model is for determining whether a facility can be duplicated. Some, primarily the ILECs, argued during the cross examination phase of the proceeding that fixed broadband wireless can duplicate, and has in some cases already duplicated local ILEC networks. Without any wireless equipment vendors testifying on this matter, Network Letter thought it appropriate to ask a few of them if they believed fixed broadband wireless could in fact replicate ILECs' local networks. We asked not only about the suitability, but also the costs to cover urban centres - the thinking being if a densely populated city could be covered economically with a reasonable return on investment, then it stands to reason a less densely populated rural area could as well. While in most cases the equipment vendors were reluctant to provide any hard figures, one did a quick analysis and gave NL a figure that included return on investment based on a certain monthly subscriber fee. Network Letter called a number of vendors, with Vecima Networks Inc., Nortel Networks Corp. and Redline Communications Inc. agreeing to be interviewed on the subject. They noted that they all offer wireless equipment capable of offering data and telephony features, and in some cases video services as well. Robert Forget, director of wireless sales at Vecima, explains that the company's BWIN product line - DOCSIS-based wireless gear - can deliver the same data and telephony functionality that Shaw Communications Inc. can offer over its wired cable infrastructure. "We can have voice on a separate channel. We can do full quality of service on that link and there is no additional latency on wireless since it is DOCSIS-based," he tells NL. Forget adds that Vecima's WiMAX equipment can offer telephony as well with full quality of service. Both Nortel and Redline also highlighted cases where their equipment is being used to provide voice and data services. And like Vecima, they also have deployments in Canada and other parts of the world. The real issue at play here is not whether fixed broadband wireless can provide the same functionality as an incumbent telephone company local loop, but whether it can be done on a cost effective basis and provide the operator of that network with a reasonable return on investment over a reasonable period of time. All three generally agree that wireless can be used to deliver local loop functionality, but there are challenges associated with assessing the economic viability of such a network rollout. Nortel and Vecima note, however, that determining how much it would cost to deploy a network isn't an easy task because of a variety of factors, including topography and population density. Wayne Fredin, VP of sales at Vecima highlights this difficulty by noting that both Calgary and Edmonton are approximately the same size, but have very different topographies: Calgary being very hilly, while Edmonton is mainly flat. He notes the same scenario would present itself when comparing Ottawa to Gatineau. "This is why the business case becomes a challenge, and the number of you can reasonably expect to connect to a base station and the density of base stations. So I couldn't give you a ballpark, but an order of magnitude for a large city would be a multimillion rollout," he tells NL. Regina Moldovan, senior manager of WiMAX marketing, and Maniam Palanivelu, senior manager for CDMA/LTE/UMB marketing, both of Nortel, agree with the assessment from Vecima that topography is a major factor in determining fixed wireless network deployment costs. "Digging up terrain and taking fibre to these new areas would be more expensive than, say, with a WiMAX network," Moldovan explains. Palanivelu adds, "It's hard to put a number down to generalize it. We definitely get surprised even internally when we don one case versus another to see how much variation to the business cases." There are examples, however, of fixed broadband wireless network deployments that compete head-on with existing companies. Moline Dispatch Publishing Co. is one such example where the company partnered with the local college and an ISP to bring high-speed broadband to communities in western Illinois and eastern Iowa. "With a small investment, they could go ahead and get started," states Palanivelu. "There are cases where the technologies that are coming out now, especially with the advent of WiMAX, the cost of starting up a network is going down rapidly, which allows some of these smaller companies to get into the business especially the new entrants. I wouldn't say it's completely out of reach for some of the guys who are ambitious and want to get into it." While Vecima and Nortel were a little light on specifics, Kevin Suitor, VP of marketing and business development at Redline was more forthcoming in his assessment of the cost of deploying a broadband wireless network and the return on investment an operator might expect to make. He maintains that there is a business case to be made, even for rolling out a national broadband wireless network, albeit for a player with deep pockets. The following are the parameters of Suitor's assessment for a residential deployment for broadband data only: one million people, 18 square-kilometres of urban space, 500 square-kilometers of suburban, 2,000 square-kilometres of rural, 320,000 households and 22,000 businesses. The operator would have 30 MHz of spectrum, would be leasing backhaul primarily and monthly service rates would range between $30 and $50. According to his model, the greater Ottawa area would require 67 cell sites and the network would cost about $19 million to $20 million to deploy. "Our business model says that you would make money at 40,500 subscribers in the fifth year, so it actually isn't an onerous business model," he says. Telephony isn't part of this business case assessment, and Suitor admits that this would add to capital expenditures and wouldn't measurably change the return on investment time frame. But, he adds, the operator could overlay voice onto the network to increase average revenue per user, add PC card functionality and eventually smartphone service when mobility becomes a reality. As has been previously noted by Network Letter, the essential services proceeding was less about the residential market because many of Canada's cities have either forborne local service or ILECs have applied for forbearance and more about the business services segment. And a business case assessment for broadband fixed wireless in the business sector presents even more inviting potential. According to Suitor, with monthly service rates ranging from $500 to $1,000, return on investment in the business sector can be decreased to a time frame of about three to six months. So while fixed broadband wireless may in fact represent a viable alternative to the incumbent telephone companies' local loops, Suitor says that success hinges on other factors as well. He highlights the need for a smart go-to-market program with considerable marketing dollars, satisfying early customers, create good helpdesk and customer support processes as well as having a minimum of 30 MHz of contiguous spectrum. Regardless of what services the commission decides are essential, according to the wireless equipment makers - and they have cases to support their statements - fixed broadband wireless appears able to replicate the ILECs local loop functionality.

Fixed broadband wireless, can it “duplicate” local ILEC networks?

News | November 15, 2007

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