The groundwork is being laid for a risky experiment in consumer electronics as manufacturers prepare for Sprint Nextel and Clearwire's Xohm WiMax service.
Motorola unveiled a WiMax client chipset on Tuesday and praised Sprint's strategy of leaving WiMax clients to device makers and retailers. But that plan, a change of pace from U.S. carriers' usual practice of selling and subsidizing phones themselves, could take years to pay off in the mass market.
The chipset, introduced at WiMax World USA in Chicago, is small, economical, and more power-efficient than 3G platforms, according to Gary Koerper, Motorola's vice president of platform planning and architecture. It will hit the market in client devices in the second half of 2008, with the company initially focusing on building WiMax phones that carry its own brand, he said. The devices will be offered for various WiMax services around the world, including Xohm.
With Xohm, Motorola will have free rein to make whatever kind of device it wants as long as it's certified to work on the carrier's network, Koerper said. Motorola calls that great news, but some observers see a hard road ahead with device makers or carriers pushing an alternative to carrier-subsidized phones.
"The model Sprint is pursuing is really taking the shackles off Motorola innovation and Motorola's brand," Koerper said. Typically, the world's second-largest mobile phone maker has to develop a new product and then get a carrier to buy in on it. With WiMax devices designed to work with Xohm, Motorola can look straight to the consumer and build what they want. This could make it easier for Motorola to compete with Apple's hot iPhone, he said. Apple's product has stolen the thunder from Motorola's popular Razr line even though it commands a full, unsubsidized price.
Sprint's whole WiMax initiative is a risky bid to gain an edge in the U.S. mobile market, where Sprint is in third place by subscribers. The technology promises a fat pipe to the Internet that subscribers can take with them all over a metropolitan area. Motorola said its chipset offers 10Mbps downstream and 3 to 4Mbps upstream, far faster than current 3G and comparable to a cable modem.
But it will take more than fast Internet access to attract and keep paying customers, said Albert Lin, an analyst at American Technology Research. There are other ways to get fast data service, and there will be more in the future, so Sprint needs to create attractive services such as a VoIP application, high-quality video content, and easy tools for professionals to access corporate networks over VPNs, Lin said. Ease of use, support, and coverage will also be key because cellular services already have those established, he added.
"You don't automatically get hundreds of thousands of early adopters," Lin said.
The lack of a subsidy isn't even the biggest concern for vendors trying to sell devices for such a service, but it is a long-term problem, he said. Although down from about 95 percent a few years ago, the percentage of phones sold with subsidies in the U.S. is still 85 percent or more, according to Lin. Worldwide, about half of all cell phones are sold with subsidies, he said. As people look for more special features on their phones, they are looking outside of carriers' offerings more often, but it will be three years before the average U.S. consumer will want an unsubsidized phone, Lin predicted.
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