Filling in the Frontier

Industry wonks are giving the year 2005 a lot of monikers; 2005 is the year of 3G, 2005 is the year of IMS. Some say it's the year that wireless data will truly come into its own. What they're not saying is 2005 will be the year of in-building coverage. Nor are they saying that 2005 will be the year of rural deployments. “2005, the year we filled the mobile dead zones in our nation's highway infrastructure” just doesn't haven't the same ring as “2005, the year America discovered mobile data.”

It may not be year of in-building or spot coverage. We may not be entering the era of the microcell or the base station hotel. This may not be the day we finally tackle the rural wireless frontier. But this may be the year vendors start paying attention. For as long as the wireless industry has existed, it's been a macro base station-dominated market, but as the urban footprint gets more densely filled in, carriers are starting to look at different deployment topographies. Those indoor and rural dead zones are starting to assume greater importance as customers demand more ubiquitous coverage.

So far, however, the major access vendors haven't seriously addressed those areas, choosing instead to focus on 3G equipment and upgrading their macro gear. Their reasoning is sound. The market for infrastructure outside of the urban core is a niche play. Most vendors say it's but a fraction of the overall radio access capex spending — generous estimates put it at less than 10%.

“An awful lot of lip service is paid to the fact that in-building is the last great frontier in wireless, but the Big Six have yet to develop a live product for the market,” said Bill Carlin, CEO of Spotwave Wireless, which develops intelligent repeater technology it calls adaptive coverage systems. “All of the innovation is coming from the small vendors, and all of the demand for the equipment is coming directly from the carriers.”

According to Spotwave, it's not just the enterprises and the malls that are driving demand for in-building coverage today. Carlin cited Sprint numbers that claimed 25% to 40% of its consumer customers' minutes came from inside the home. Customers are demonstrating that they not only want to use their phones indoors, they will increase their spending if given the opportunity, Carlin said.

For the big vendors' parts, they say they're being cautious and deliberate. While they identify the growing trend in alternative coverage solutions, they aren't fully convinced the market will be as big as their smaller brethren think it will be. Nortel Networks has developed a microcell product for GSM networks, which Nortel officials say does relatively well. There just hasn't been the surge to switch to microcell solutions that many in the industry are predicting, partly due to difficulties and uncertainties in that space, said Alan Pritchard, Nortel vice president for GSM and UMTS global marketing.

“There's been challenges for those niche markets,” Pritchard said. “A lot of companies have been banging away at the indoor markets for years. The fact is that indoor coverage is a costly thing to do.”

For most carriers, the returns of bringing a voice network into a specific building or subway tunnel didn't justify the costs. There just wasn't enough individual interest to make a business case for a pico-cell as opposed to increasing the capacity and reach of the overall macro network. But that cost-return analysis is starting to shift, especially with the large-scale deployment of data networks, Pritchard said.

One of the major factors in that shift is the rise of Wi-Fi and voice-over-IP technologies. Instead of deploying the equivalent of a miniature base station or repeater, carriers are realizing they can use the existing local area networks to offload voice and data traffic, a far cheaper proposition, Pritchard said. But there are perceptible shifts on the wide area network side, too. 3G data networks have different coverage footprints than their voice equivalents, especially in countries where 3G is running over entirely different spectrum from its voice precursors.

“As you look at the portfolios of 3G vendors, you'll see that they're offering more complete product lines,” Pritchard said. “They're starting to offer microcells and picocells to meet those coverage needs.”

In particular, major vendors without a significant network presence in the U.S. are starting to do just that. Asian vendors, in particular, are targeting the U.S. markets, and while the Huaweis, ZTEs and Samsungs haven't had too much success in penetrating the already-crowded U.S. radio access market, they're definitely ramping up their efforts. Huawei is reportedly on the hunt for a U.S. partner, and Samsung recently revamped its CDMA product line to include not only its standard macro base transceiver station, but also a series of modular base stations as well as a micro- and picocell. Instead of going after the macro base station market where Lucent and Nortel reign supreme, it's targeting the areas where no base stations yet exist.

“The cities here are pretty well-covered,” said Jim Parker, Samsung portfolio manager for wireless systems. “The highways, the buildings and many rural and suburban areas, however, are not.”

It's not just the traditional international vendors looking toward the U.S. UTStarcom is taking a similar tack. Targeting rural markets, base station hotel deployments and in-building areas with its new UMTS-time division duplexing (TDD) and CDMA2000 IP architectures, UTStarcom is hoping to scratch out a niche in North America from which to build out into the major urban markets. Unlike larger vendors trying to play the ‘me-too’ game, UTStarcom is trying to make its case to U.S. vendors with a next-generation product line instead of offering legacy gear, said Manish Matta, UTStarcom's director of international marketing.

“Carriers already have circuit-switched networks in place, and they aren't going to get rid of them,” Matta said. “The onus is on us not only to prove we're compatible with those legacy vendors but that we can provide a superior technology. We're obviously targeting areas where there is no coverage.” Once UTStarcom has proved its IP technology's chops in the rural and in-building markets, its hope is that carriers will begin migrating that IP footprint to the urban markets, Matta said. “We have a niche play now, but we hope to turn it into a core play.”

Challenging the big U.S. incumbents won't be easy. Carriers have cemented their relationships with radio access network manufacturers over the years, and one of the last opportunities for major disruption in vendors has already passed: Cingular's selection of UMTS vendors, in which Siemens pulled off a coup. Even with a niche market play, newcomers will still have to make a very convincing argument to convince carriers to hire on yet another base station vendor. Except in completely greenfield markets, new gear will still have to co-exist with an incumbent vendor's edge and radio infrastructure. Despite interoperability and standards, hand-off between different vendors' base stations isn't as good as that between two cells installed by a single vendor, said John Leonard, vice president of mobility offer management for Lucent.

“You still have to deal with the same issues of hand-off from microcell to macrocell,” Leonard said. “It's not very likely that a new vendor would be able to introduce new cell sites in areas where one vendor already has access infrastructure.”

For that reason, carriers may look to a smaller breed of vendors to help them fill in the holes in their networks. Instead of welcoming a new vendor looking to penetrate into a carrier's network from radio to core, they're looking toward vendors that just brush up against the fringes of their installed networks, providing the critical radio access and transport components but back to the Nortel, Lucent, Motorola or Ericsson gear already in place. Solutions like Spotwave's adaptive coverage system aren't even supposed to register on the macro network, seamlessly extending a signal from macro site to an indoor location without producing any interference. The same goes for Andrew's repeater and distributed antenna technologies in both rural and in-building deployments. RadioFrame Networks, while still producing base stations, isn't moving any further into the network. Its modular base station is designed to work in both hoteling and in-building configuration, but it leaves control over the access network to the incumbent's base station controller.

“We've learned that at the end of the day, carriers really like their relationships with Ericsson, they like their relationships with Nortel and they like their relationships with Lucent,” said Rick Applegate, senior vice president of sales and marketing at RadioFrame. “We looked into developing our own BSC, but what we heard from carriers is they don't want it. They wanted a solution that could plug right into their existing networks.”

This partner-not-pressure approach seems to be working for the smaller vendors. RadioFrame just announced a major deal with Nextel to build out base station hotels and in-building cell sites across its entire network. Spotwave has incorporated its gear into the networks of the top 11 carriers in North America. It's an approach that the major vendors seem willing to live with. Nortel's Pritchard said that the vendor actively works with companies like RadioFrame or IP Access to ensure interoperability between their equipment.

So far, the major vendors are satisfied with that relationship because in the grand picture, spot coverage is still a relatively small market, Pritchard said. Nortel and other network equipment providers are still focused on the macro base station market where the majority of infrastructure spending and carriers' interest still lies. While niche markets like in-building may not be priority No. 1 compared with innovating on the macro level, that may change.

From a smaller vendor's perspective, the worst thing that could happen is for those niche markets to grow as big as they claim they will. If that's the case, the large vendors will look to break in, and while that might mean a lucrative acquisition deal for a smaller company, Pritchard said they probably shouldn't hold their breaths. The basic technology behind microcell and picocells isn't much different from that of the macrocell. There's little to prevent a Nortel or an Ericsson from developing their own product lines, Pritchard said.

“If the major infrastructure vendors make the decision to go into those markets,” Pritchard said, “there's not a huge barrier for entry for them to do so.”