For the past 15 years, American tech giants such as Intel and Microsoft have been largely shut out of the European-dominated mobile phone industry. Not that they haven't tried"”Intel (INTC) made processors and memory for handsets and Microsoft (MSFT) is still pushing a pint-sized version of Windows for handheld devices. But the business was still largely controlled by telecom companies such as Nokia, Ericsson, and Vodafone.
Now, with the pending arrival of a disruptive new wireless technology called Mobile WiMAX, the U.S. crowd stands its best chance in years at knocking down Fortress Europe. A kind of Wi-Fi on steroids, Mobile WiMAX delivers data at speeds comparable to conventional third-generation (3G) mobiles but promises to be cheaper to implement because it uses newer, more efficient technology.
More importantly, because it's based on Internet protocols, WiMAX lets carriers offer a single data service"”akin to wireless DSL"”that can carry any kind of traffic, from voice calls to Web surfing to video. That's a significant advantage over the separate voice and data services now delivered by mobile operators. 'We're not just building a WiMAX operator, but a full telco,' says Krassimir Stoitcheff, chief executive officer of Max Telecom, a Bulgarian startup that plans to blanket the country with wireless services by the end of 2008. Forget triple or quadruple play: with WiMAX, all services are delivered as one.
An Urgent Call to Speed Things Up
The implications for Europe's existing mobile players are enormous. Operators who have sunk billions into 3G spectrum licenses and speedy new networks will likely face significant competition from new entrants, including fixed-line telcos such as Britain's BT Group (BT) that could add WiMAX services and compete with mobile carriers. According to Washington (D.C.)-based Telegeography Research, 345 operators around the world"”including 57 in Eastern Europe alone"”either have acquired WiMAX licenses, launched trials, or begun commercial services.
At the mobile industry's biggest annual confab, the February 3GSM show in Barcelona, Vodafone (VOD) CEO Arun Sarin issued an urgent call for the mobile industry to speed up development of 3G successors to fend off the threat from WiMAX. Yet even Vodafone, which is expected to stick mainly with traditional mobile technology, is experimenting with WiMAX in Malta and Bahrain.
Handset makers such as Nokia (NOK) and Sony Ericsson (SNE) (ERIC) also must contend with the potential impact of WiMAX. For now, they remain mostly committed to 3G and its successors, but they're dabbling in the new technology to hedge their bets. Nokia, for instance, has already said it will make a WiMAX-compatible handset by 2008, as have Motorola (MOT) and Samsung. British researcher Informa Telecoms & Media forecasts that the market for WiMAX-enabled devices could amount to $4.7 billion in 2012.
Intel is Seeding the Market
Equipment makers face a similar choice: So far, Alcatel Lucent (ALU), Nortel (NT), and Nokia Siemens Networks (SI), among others, have committed to delivering mobile WiMAX gear. But the industry's No. 1 seller of wireless networks, Stockholm-based Ericsson, is skipping WiMAX entirely and betting its whole future on 3G and telecom-style successors. That could be risky, but given that Informa pegs WiMAX infrastructure sales at just $2.4 billion in 2012, Ericsson may be justified in leaving the business to its rivals.
The biggest potential opportunity lies for companies like Intel that have ached for years to get a piece of the mobile action.