Will WiMAX Come to Taiwan

The Telecom yesterday suggested the future of WiMAX in Taiwan maybe in doubt. Oh dear! The Telecom writes:

Last week, Taiwan’s six WiMax service providers considered teaming up to buy WiMax equipment in bulk as a way of reducing costs.

The six providers - Vastart Cable TV Network Co, First International Telecom Corp, Global Mobile Corp, Tatung InfoComm, Far EasTone Telecommunications, and VMAX Telecom - met to talk about the possibility of jointly procuring base station equipment.

Together the companies hoped to increase their bargaining power and secure volume discounts - potentially halving the costs of base stations.

However, this week doubt has been cast over the whole future of WiMax in Taiwan, with two companies warning that, even with joint procurement, the cost of installing WiMax networks is too high to be economically viable.

Far EasTone Telecommunications (FET), a WiMax network provider in southern Taiwan, has said that the costs of WiMax base stations and customer premises equipment (CPE) are much higher than expected.

FET vice president Chen Li-jen added that WiMax might not work properly in metropolitan areas because signals could be deflected by skyscraper windows.

Tatung InfoComm, who also operates in southern Taiwan, has estimated that it will take eight years to recoup the costs of installing WiMax base stations.

The company says this is too high a risk for an unproven technology that has yet to gain widespread acceptance.

WiMax may now be left wondering about its long term worldwide future, as it was initially billed as a low-cost solution to provide high speed wireless internet access in metropolitan areas.

This is big news. There has been a lot of emphasis on the development of WiMAX in Taiwan and Taiwan was trying to become a leader in the development and manufacturing of WiMAX products. Taiwan even hosted the first WiMAX exhibition at the new exhibition center in Taipei and there was a lot of optimism about the development of the new wireless protocol. However, if the price tag too high and break even point expected in eight years, perhaps the licensees will hold off on the development of the network.

The Telecom: Taiwan’s WiMax future in doubt

Taiwan WiMAX Plan Joint Procurement

Its been a while since we last commented on Taiwan's burgeoning WiMAX industry. (See Wireless Taiwan and WiMAX Explosion in Taiwan) . Now, China Economic News (CENS) reports the six WiMAX license holders in Taiwan are considering joint procurements to drive down base station costs by as much as 50%. Some operators however have already installed Motorola base stations and will have to solve interoperability issues before being able to come on board.

CENS writes:

The six WiMAX service providers in Taiwan are mulling joint procurement of equipment in a bid to minimize costs, and will announce the decision next month.

The six providers—Vastart Cable TV Network Co., Ltd., First International Telecom Corp., Global Mobile Corp., Tatung InforComm, Far EasTon Telecom, VMAX Telecom—recently met to discuss the joint procurement of base-station equipment, with the majority supporting such idea for team procurement enables more advantageous bargaining power and volume discounts.

Vastar’s executives pointed out that a WiMAX base station, priced about NT$2 million (US$62,500 at US$1:NT$32), would sell for half as much under joint procurement. The six service providers plan to buy 15,000 base stations for over NT$30 billion (US$937 million), or for only half as much if bought jointly.

Global Mobile executives stated corporate backing of such proposal as joint procurement would pare costs.

VMAX executives noted that, despite joint procurement being a good idea, service providers have to overcome interoperability problems that may exist with the systems already installed.

First International Telecom executives pointed out, with Motorola base stations already bought, the company has to deal with potential problems with such equipment before taking part in the joint procurement.

Vastar executives said that the joint-procurement can be tried with the equipment planned for a selected city.

First, its good if the fixed costs can be driven down. It is even better if those savings can be distributed to the end users but that may be doubtful (although we can be hopeful). The base stations are a fixed cost. The marginal cost of using the network will be very small and therefore it is not clear whether the companies can offer any substantial savings on the WiMAX contract prices when they are launched. Maybe!

Secondly, there is a lot of wisdom in the joint procurement. WiMAX has not yet won the "standards war" and there are other competing wireless technologies out there. Which technology will eventually win is not certain yet. WiMAX has a good chance, but then again it is not always the superior technology that wins.

Finally, this is good for company shareholders of course. Lower costs mean more earnings can be distributed to the shareholders through dividends or higher-share prices. So ultimately, it is good to see these companies cooperating like this. It is an excellent illustration that not all strategy must be a win-lose scenario. Sometimes strategy can include a win-win alternative. Although in a joint procurement process the losers are the suppliers.

CENS: Taiwan WiMAX Operators Plan Joint Buying of Equipment

Wireless Taiwan

As we have noted on this blog before, WiMAX is becoming big in Taiwan. Intel have invested significantly in WiMAX in Taiwan and yesterday Digitimes notes Motorola has made a significant investment in Taiwan's WiMAX industry:

Motorola will soon set up its first WiMAX IOT (interoperability testing) center worldwide in Taiwan, fulfilling the commitment of an MOU it signed with Taiwan's Ministry of Economic Affairs (MOEA) in October 2007 aimed at helping foster the development of the WiMAX industry in Taiwan

Monday also saw the opening of the first annual WiMAX show in Taiwan with a significant number of international and local companies putting up displays. Perhaps the most notable comments on WiMAX came from President Ma himself who has vowed to develop WiMAX in Taiwan as a way to bridge the digital divide.

However, does anybody remember Wi-Fly, the wireless Wi-Fi network developed in Taipei city when he was Mayor. Yes, Wi-Fly are still struggling along and still advertising aggressively on buses etc. but it seems hardly anyone uses it. The New York Times reported on the difficulty of the Wi-Fly system way back in 2006:

Despite WiFly's ubiquity — with 4,100 hot spot access points reaching 90 percent of the population — just 40,000 of Taipei's 2.6 million residents have agreed to pay for the service since January. Q-Ware, the local Internet provider that built and runs the network, once expected to have 250,000 subscribers by the end of the year, but it has lowered that target to 200,000.

On Tuesday President Ma said:

We did not develop WiMAX infrastructure then because it was only in the making at that time.

So what was the cost of Wi-Fly? According to the New York Times article around US$30 million. Who footed the bill? Apparently it was Q-Ware, the company that runs the 7-11. Of course they have tried to bundle other things together with Wi-Fly but with so many competing technologies it is just very difficult.

OK. Before we bash Wi-Fly too much the New York Times does acknowledge that Wi-Fly has led to some savings:

The brainchild of Taipei's mayor, Ma Ying-jeou, the CyberCity project was first conceived in 1998 as a way to catapult past Seoul, Hong Kong and other Asian capitals that were recasting themselves as cities of the future. Many government agencies now communicate almost exclusively online, saving millions of dollars, and citizens have been given hundreds of thousands of free e-mail accounts and computer lessons.

WiFly plays a role, too, by allowing policemen to submit traffic tickets wirelessly, for instance. But making it appeal to the average citizen is another story.

Getting enthusiastic about technology is great and to be honest it is good to see some governments trying to be progressive. But I do feel sorry for those who invest in systems that become redundant in a few years. WiMAX now is the next big thing and is sure to provide many benefits to Taiwan. However, project managers in more conservative computer industries here are not that excited. For them it is just a bridge to the next wireless standard and they are cautious about investing to much into developing WiMAX compatible systems.

Digitimes: Motorola to set up first global WiMAX IOT in Taiwan
NY Times: What if They Built an Urban Wireless Network and Hardly Anyone Used It?

WiMAX Explosion in Taiwan

Yesterday we noted Intel's commitment to investing US$500 million in Taiwan's WiMAX industry. Apparently the commitment is even deeper than that. Intel are also committing to entering in joint ventures with Taiwanese companies to develop broadband networks on the island. China Economic News (CENS) has more:

Intel will spend US$500 million over the next five years ending in 2013 on its WiMAX investment and procurement of the equipment in Taiwan, in addition to its original pledge to invest an undisclosed amount of capital to open WiMAX joint venture in Taiwan, according to an Intel top executive.

Intel Executive Vice President Sean Maloney noted the procurement items would include WiMAX chips and consumer premise equipment. Taiwanese suppliers likely to benefit from the procurement deal include MediaTek Inc., Faraday Technology Corp., GemTek Technology Co., Ltd., D-Link Corp. and Zyxel Communications Corp.

In reaction, CENS reports that President elect Ma Ying Jeo has committed to attending the WiMAX trade show to be held in Taiwan in June. In the same article CENS reports Intel has opened a WiMAX office in Taiwan and also notes the following observations:

Taiwanese industry watchers estimate the latest and previous commitments to cost Intel around NT$20 billion (US$666 million at US$1:NT$30) in investment capital.

The joint venture will assess plans to put money into Taiwanese network-communications equipment makers and WiMAX-service providers. Taiwanese companies of both sectors reported to receive the investment capital include GemTek, D-Link, Tatung InforComm Co., Ltd., First International Telecom Co., Ltd., and Global Mobile Corp. However, Intel said it was still assessing.

In a separate article CENS observes that the Taiwan government is trying to get 8 million on-island WiMAX subscribers during 2008. According to CENS:

Taiwan has been actively engaged in developing WiMAX (worldwide interoperability for microwave access) network technology, and planned to have a total of 8 million users of services based on the technology by the end of this year, according to Chen Chao-yih, director general of Industrial Development Bureau (IDB) under MOEA.

PC manufacturers are also getting on this bandwagon. Digitimes noted yesterday that Acer is currently testing WiMAX enabled notebooks that they hope to launch in June. The notebooks will be based on the fifth-generation Centrino code-named Montevina.

WiMAX is going to change the world no doubt. It provides added wireless convenience and enables easy connectivity over long distances. One wonders though what the packages will be like. The push towards WiMAX in Taiwan is not surprising. Under now president elect Ma Ying Jiou Taipei became the worlds first wirless city in 2006 with thousand of Wi-Fi nodes distributed throughout the city. However, as noted by the New York Times, the system had a very low adoption rate in the beginning. Of course WiMAX's big advantage is the bandwidth and the speed with which data can be dowloaded. But still, how will it be packaged?

Article 1: Intel Pledges to Up Ante On Taiwan`s WiMAX Biz
Article 2: Taiwan Aims to Attain 8 M. Users of WiMAX in 2008
Article 3: Acer to launch WiMAX-enabled Montevina-based notebooks in June-July
Article 4: What if They Built an Urban Wireless Network and Hardly Anyone Used It?
Website 1: WiFly Website
Website 2: WiMAX Show Website

Quanta and ACER get behind WiMAX

Recently Digitimes noted the formation of a WiMAX consortium here in Taiwan. According to Digitimes:

Four Taiwan WiMAX licensed operators – Global Mobile, Vastar Cable TV System, Tatung Telecom and First International Telecom (Fitel) – on April 15 formed the Consortium of Mobile Broadband (CMB) with an aim to facilitate the development of the WiMAX industry in Taiwan.

China Economic News (CENS) reported shortly thereafter that Taiwanese PC manufacturers are supporting the WiMAX standard. CENS reported:

Taiwan's top two PC makers-Acer and Quanta Computer-recently joined the island`s telecom providers to form an alliance christened "Consortium of Mobile Broadband (CMB)" to promote WiMAX technology.

The article continues:

Industry watchers on the island said the allying suggests that makers of network-communications equipment PC makers have emerged as another major force pushing the formation of the next-generation mobile industry in Taiwan.

Intel has is also getting behind the development of WiMAX in Taiwan. Reuters reports:

Intel Corp said on Monday it will invest $500 million in Taiwan over the next five years, with a large amount of the investment targeted at the island's WiMAX sector.

As I also noted last week, at the top of NEC's procurement list were WiMAX components. WiMAX is growing in Taiwan.

Article 1: Taiwan licensed WiMAX operators form consortium
Article 2: Taiwanese PC Makers Join WiMAX Camp
Article 3: Intel to Invest $500M in Taiwan to Boost WiMAX
Previous: NEC to Purchase Components Worth Three Billion USD
About WiMAX: WiMAX Forum, Wikipedia

NEC to Purchase Components Worth Three Billion USD

The government website Invest in Taiwan (IIT) reports NEC, Japans largest computer manufacturer, will purchase more than USD3 billion worth of components from Taiwan, second behind Sony. Their largest procurements will be of WiMAX components. IIT says:

At the top of NEC's procurement list were WiMAX components such as broadband and network peripherals, surpassing notebook computers for the first time ever as the top procurement item, said NEC Taiwan general manager Akira Kubota. NEC has also set a procurement goal of USD 3 billion for the new fiscal year, which starts in April, he said.

Additionally, NEC has set already setup a WiMAX R&D center in Taiwan and will also focus on selling more products into the Taiwan market.

Kibota (NEC Taiwan GM) said that with the new fiscal year, NEC Taiwan will place equal focus on selling hardware and introducing its SI solution to the Taiwanese market. The company's customer targets will be Taiwanese government agencies, financial institutions, the retail sector, IT industry, and the manufacturing sector; the company also plans to introduce a version of its SI solution for the tourism industry, specifically to European and US-run five-star hotels, he said.

Article 1: NEC procurement in Taiwan to reach USD 3 billion this year, plans to market SI solution