After a recent review of its WiMAX business, Cisco Systems has announced its decision to discontinue designing and building new WiMAX base stations and modems. It plans to focus on delivering core network and IP products. This refocusing of business direction is not a surprise. Indeed, it was more surprising when Cisco decided to enter the wireless access business in 2007.
Cisco’s announcement has prompted us to make three comments:
- it forms part of the consolidation of vendors in the WiMAX market that we predicted last year
- it should not affect the WiMAX deal struck between Cisco and Clearwire in May 2009
- Cisco will have gained some very important IPR from its WiMAX venture.
Cisco bought Navini Networks, a vendor of WiMAX RAN equipment, for USD330 million in October 2007. This was a surprising foray into the radio access marketplace for a vendor that has focused on core networks. Its competitor, Nortel Networks, signed an agreement with Alvarion in June 2008 to develop a range of WiMAX radio access units. Both vendors felt that the WiMAX market had potential at that time. Several more-conventional radio access vendors, including Alcatel-Lucent, Huawei and Nokia Siemens Networks, were also vying for a share of the WiMAX market, with their own access products.
When investors in Clearwire wrote off billions of dollars in August 2009, we commented that WiMAX still has a role to play and will continue, albeit mostly in developing countries. We predicted that consolidation of vendors and providers would be inevitable because of the limited potential of these markets.1 Much of the vendors’ early interest in WiMAX has waned since their initial moves into the market. Alcatel-Lucent has downgraded the development of its WiMAX product.2 Nokia Siemens Networks has stopped developing its WiMAX product and started to resell Alvarion’s BreezeMAX. Nortel withdrew from the WiMAX market six months before it went out of business. We expect further consolidation in the WiMAX market because there are still far too many vendors for a market of this size, among them: Airspan Networks, Alcatel-Lucent, Alvarion, Aperto Networks, Axxcelera Broadband Wireless, Huawei, Motorola, NEC, Nokia Siemens Networks, Proxim Wireless, Vecima Networks and ZTE.
Cisco’s announcement could undermine investor confidence in Clearwire, which received a welcome boost when Cisco signed a WiMAX deal with the ISP in May 2009. However, Cisco has confirmed to us that its change of focus will not affect the deal with Clearwire. The vendor plans to withdraw only from the radio access market. It will remain in the core network business, and the Cisco/Clearwire deal was for the supply of core equipment and new devices.
Cisco will not walk away from the WiMAX market empty-handed. It gained valuable IPR and expertise in new antenna systems, such as smart beamforming, when it acquired Navini. The vendor’s wireless products, such as Wi-Fi, will continue to benefit from these assets, which form an important part of the company’s wireless capability. Until now, improvements in wireless capacity have been made through engineers’ and designers’ efforts to squeeze more bits out of each unit of spectrum. However, they will soon have exhausted the possibilities of this approach. Advanced antenna systems will be the next major technical innovation when it comes to creating more capacity in wireless networks. Knowledge of these techniques and related IPR will prove to be very valuable to Cisco.
1 Norman, T., As Clearwire investors write off billions of dollars, what is the future for WiMAX?, Analysys Mason (Cambridge, 2009).
2 Despite a lot of misunderstanding in the industry after Alcatel-Lucent announced on 12 December 2008 that it was redirecting its focus to what it calls the ‘Enhanced DSL market’, it does still support its WiMAX IEEE 802.16e product. However, it is uncertain whether Alcatel-Lucent will continue to support the product’s development through to the IEEE 802.16m evolution.