1Kenneth R. Carter

Wi-Fi Hardware and Chipset Sales(World-wide 2001-2007)

Sources: In-Stat/MDR, December 2002 & March 2003

9.6

18.4

28.8

44.4

60.2

74.9

8.8

20.6

33.3

51.9

72.2

86.5

$230$422

$567

$2,200

$2,800

$4,100

$404$527

$575

$2,900

$1,800

$3,900

0

10

20

30

40

50

60

70

80

90

100

2001 2002 2003E 2004E 2005E 2006E

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

MillionsWi-Fi Hardware

Chipsets

Chipset Revenues

Hardware Revenue

Mil

lion

s

2Kenneth R. Carter

WiMax: A Reality Check(Hardware and Chipset Sales World-wide 2001-200?)

Sources: OSP estimate

Somemore

Some

$0 $ a tiny bit

0

2001 2002 2003E 2004E Sooner Later

$0

WiMax Hardware

Chipsets

0.00.00.0

$0$0

a few

Somemore

Some

Lots

Tons

Lots

Tons

3Kenneth R. Carter

Choice of Licensing Regime Concerns

• Market: Service Provider or Equipment

• Licensing regime should offer flexibility and choice

• Licensed handles relocation better

• Use and User

4Kenneth R. Carter

Does the FCC Determine if WiMax will be Licensed or Unlicensed?

LicenseRegime MarketTechnology

RightsMarket Entry

Petition LobbyingRulemaking

FCC Initi

ative

sNew Companies

5Kenneth R. Carter

WiMax Band Map

WiMax Bands

2000 MHz 6000 MHz

Licensed Gov’t/Licensed Unlicensed

Part 15C U-NII

MMDS

Frequency (MHz)

Satellite Radio Location/FWA

2300-24002480-2700

3300-3800 5400-5725

5725-5850

7Kenneth R. Carter

Charting Unlicensed Devices

RF DevicesPart 15

U-NII Subpart E

U-PCSSubpart D

UWBSubpart F

IntentionalRadiators Subpart C Low Power

Transmitters

Spread Spectrum

Wi-Fi802.11b802.11g

802.11a

Motorola Canopy

RFIDs

Cordless Phones

GarageDoor

ISMPart 18

Blue-Tooth

HomePlug

9Kenneth R. Carter

WiMax in the Regulatory Process

Allocation Policy Licensing Oversight

•Modulation and emissions limits

•Power limits

•Interference

•Tower siting

•RF Safety

•Band Selection

•Use decisions

•Network architecture

•Identification of Users

•Assignment of rights

•Police Role

10Kenneth R. Carter

(un)Licensing Regimes for WiMax

• Unlicensed

• Licensed by Rule

• 70/90 GHz

• Station/Geographic

• Operator (Ham)

• Private CommonsI received a license, and loss all my property rights.

11Kenneth R. Carter

Implications of Licensed and Unlicensed WiMax

• Clarity of Rights and Duties

• Fair Price Discrimination

• Unfair Competition

• Urban v. Rural Concerns

12Kenneth R. Carter

Summary

• WiMax is standard, not a radio service

• Ideally, the market will decide the licensing regime for WiMax

• Increased flexibility for spectrum users• Transition focus from command and control to

market and user

• Both licensed and unlicensed spectrum access fulfill important communications roles

13Kenneth R. Carter

WISP Business Opportunities• Small companies are significant for

broadband in small and underserved markets

• Low capital costs (unlicensed equipment)

• Interference protection vs. license fee tradeoff

• Can achieve profitability at very small scale

Source: Strategic Information Services LLC

McCall, Idaho – 100 country miles north of Boise.

14Kenneth R. Carter

Investor Behavior Assumptions

• Require Compensation for Capital• More is More• Time Value of Money• Risk & Volatility are Bad• Increased Levels of Risk Require Greater Return• Optimal Trade-off between Risk and Return

(Sharpe Ratio)• Corporate Entity Manages Risks and

Transaction Costs

15Kenneth R. Carter

Capital Structure

• Debt - obligation to pay (principal + interest)+ Tax deductible, fixed rate of return, no profit sharing– Fixed repayment schedule

• Equity – interest in ownership (dividend)+ Not required to pay– Not tax deductible, profit sharing

• Financial Leverage+ Increases expected return– Increases risk

16Kenneth R. Carter

Financing Decision

• Two Questions: How Much? What Instrument?• Business Plan

– Forecast revenues and costs – free cash flows– Net Present Value + or - ?

• Optimal Capital Structure– Volatility of Cash Flows– Market Conditions– Management

• Small Business: Debt or Internal Financing

17Kenneth R. Carter

WISP Business Opportunity

• Small Companies are Significant for Broadband in Small and Underserved Markets

• Internet Service can be Vital in These Markets• Emerging Platforms to get to Customers• Low Capital Costs (unlicensed equipment)• Interference Protection vs. License Fee Tradeoff• Input Pricing • Limited Resources for Security

and Best Practices• Local Zoning Ordinances, Towers Siting, and Safety

Standards Issues

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WISP Business Risks

• Spectrum– Network performance issues

– Interference issues among Part 15 devices

– Enforcement against “bad neighbors”

• Competition

• Regulatory Change

• Uncollectible Accounts Receivables

19Kenneth R. Carter

Policy Concerns

• Capital Friendly Environment vs. Competition

• Perverse Incentives: Moral Hazard

• Regulation vs. Market Forces

20Kenneth R. Carter

WISP-Friendly FCC Practice

• Building relations between Government and Industry– Government sponsored information exchanges can facilitate roll-out

underserved markets– Government interaction is greatly appreciated– Increased Accessibility of FCC in Rural America– Education on rules

• Greater transparency and “plain English” in proceedings– Topical Index of WISP-related Commission Items and Activities– Plain English Summaries of Commission Items– Outreach to WISPs

• Increase “average Joe” comments to develop more diverse record for proceedings

• Education of FCC Field Personnel to Rural WISP issues

21Kenneth R. CarterSource: Tribal Digital Village

22Kenneth R. Carter

• Nearly 3000 square miles• Each circle is 8 miles or

15 miles in radius• Terrain issues are not

factored in• I’ll eventually fill in the

gaps• Gotta cover larger areas

first

Source: Odessa Office

Odessa

23Kenneth R. Carter

24Kenneth R. Carter

The diagram of the company’s wireless network illustrates better than any written description the magnitude of the network AMATechTel has fully designed, installed and continues to maintain and expand. AMA TechTel offers a secure Layer 3 network with guaranteed uptime, QoS, and advanced services like VPNS. By using proven “carrier class” technology, AMA TechTel offers a quality, cost-effective wireless networking system operating on multiple bands to include 900 MHz, 2.4GHz, and 5.7GHz for last mile connections to customers. Most of the tower locations are connected within the 5GHz range.

25Kenneth R. Carter

Operation Anytown, IAOperation Anytown, IAPopulation 700 – Site 1Population 700 – Site 1

Operation Anytown, IAOperation Anytown, IAPopulation 700 – Site 1Population 700 – Site 1

26Kenneth R. CarterSource: Connect Rio Arriba

27Kenneth R. CarterSource: PDQLink

28Kenneth R. CarterSource: PDQLink

29Kenneth R. CarterSource: PDQLink

30Kenneth R. CarterSource: PDQLink

31Kenneth R. Carter

Grand Haven Area Coverage Map

32Kenneth R. Carter

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Summary• WiMax is a set of standards, not a radio

services.

• Licensing regime should offer flexibility and choice.

• Ideally, market will decide licensing regime.

• Both licensed and unlicensed spectrum access indicate successful liberalization policy

• Emergence of “light licenses” is likely.

• The hierarchal nature of WiMax lends itself to a licensed regime, but not exclusively.

38Kenneth R. Carter

Part Two: Municipal Wireless Networks in the United States

• Should municipal be permitted to offer wireless networks? If so, how should municipal wireless networks be regulated?

• The promise of municipal networks includes ubiquitous, affordable broadband and new services for communities.

• An elegant solution allows for municipalities to provide networks, but minimizes the negative impacts of a government’s offering communications.

39Kenneth R. Carter

Municipal Wireless

• Promote Open Metro-scale Wireless Connectivity • Advocate Wireless Community Networking• Provide a Forum for Wireless Networking• Recommend Policy• Develop Future Uses• Free Internet access (5 locations) • Cost:

– $40,000 to $60,000/ sq. mile.

– Total project for the entire city estimated $7 to $10 million.

http://www.phila.gov/wireless/

40Kenneth R. Carter

Municipal Wireless: Pros and Cons

The Good • Underserved communities

– Rural

– Inner-city

• Provides a competitor in other markets

• Public/private collaboration

• New & improved services

The Bad • 14 States considering

considering laws restricting municipalities– Includes Philadelphia

• Most municipalities are not capable of running entire network– Construction– OSS– Billing, etc.

41Kenneth R. Carter

Issues Facing Municipal Wireless

1. Unfair Access to Risk Capital

2. Partial Privatization

3. First Amendment – Freedom of Speech

4. Federal-State Preemption

5. Unfair Competition

42Kenneth R. Carter

Policy Recommendations1. Unfair Access to Risk Capital

• Financed in whole or part by tax revenue• Trust fund to equalize cost of capital

2. Partial Privatization• Full separation of government entities• Impartial rulemaking and enforcement

3. First Amendment – Freedom of Speech• No prior restraints

4. Federal-State Preemption5. Unfair Competition

• Open networks and regulatory parity

43Kenneth R. Carter

Conclusions• Both licensed and unlicensed spectrum

access fulfill important communications roles.

• Transition from command and control to market and user.

• More intense use of RF spectrum.

• Increased flexibility and experimentation.

• Experimentation failures and successes.