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WiMAX Strategic Responses

Diamond Viewpoint: WiMAX's Disruptive Potential Driving Strategic Responses

Other topics: Motorola Fiber-to-the Node (FTTN), WiMAX VoIP Networks

April 11, 2007

Consulting Firm Report Explores WiMAX as Both Threat and Opportunity

Chicago, Illinois - Intel, Motorola and Sprint/Nextel are
betting billions of dollars that WiMAX, the trade name given to
technologies based on the IEEE 802.16 standards for broadband wireless
communications, will disrupt the communications industry. Those investments
should compel traditional cable companies, wireless service providers and
others to rethink their own strategies over the next 12 months according to
telecom experts at Diamond Management & Technology Consultants, Inc.

"The revenue potential of WiMAX has given rise to an entirely new
ecosystem of component suppliers, infrastructure vendors and device
manufacturers that have established bedrock industry-wide standards," said
Hamilton Sekino, a partner in Diamond's Telecom and High Tech practice.
"Not everyone agrees on WiMAX's impact, but the threats and opportunities
are so pervasive that every company in the communications space has to
consider a competitive response. They have to hedge their bets."

Diamond's latest report, "WiMAX Outlook in the US Market: Implications
for Service Providers," points out that WiMAX has a large addressable
market in the US: 73 percent of American households and 52 percent of
mobile subscribers. WiMAX will enable two types of broadband offers --
fixed broadband as a substitute to DSL and cable services and mobile
broadband as an upgrade or complement to existing 3G technologies such as

Sekino noted, however that WiMAX technology may acquire only a small
share of those markets since incumbent fixed and wireless technologies are
also evolving in terms of bandwidth and costs. That uncertainty makes
building an accurate business case imperative.

The Diamond report notes that service providers are only beginning to
grapple with potential offer strategies as they face many unanswered
questions on both the demand and supply sides of a WiMAX business case.
Diamond addressed the demand question by segmenting the market for both
fixed and mobile WiMAX and by estimating the addressable market for each of
these segments. In addition, the management and technology consulting firm
considered market benchmarks of new technology introductions in the telecom
industry to further estimate the potential market that WiMAX can capture.
They also determined the breakeven capital investment of fixed and mobile
WiMAX based on demand and WiMAX's expected market share estimates.

On the supply side, Diamond's telecom and high tech experts identified
nine categories of potential WiMAX providers, including Regional Bell
Operating Companies (RBOCs), cable operators, local exchange carriers, Web
portals and media companies, reviewing the potential fixed and mobile WiMAX
plays available to category and highlighting key strategic questions these
players will need to address before they decide on any WiMAX initiatives.

New Opportunities for Service Providers
According to the Diamond report, WiMAX may disrupt fixed incumbents
like AT&T, Verizon, and Qwest by providing fixed broadband services to
underserved or overpriced customer segments (for example small- and
medium-sized businesses currently with a slow DSL connection or an
expensive T1 line).

WiMAX may disrupt the cellular industry by offsetting declines in
average revenue per user (ARPU) with an increase in adoption of mobile data
applications. A multitude of consumer electronic devices with an embedded
WiMAX interface could deliver video, music, multi-player games, and enable
the sharing of pictures and video, more cheaply and with a better customer
experience than alternative technologies.

Sekino said, "While it threatens the incumbent position of AT&T and
Verizon, the two integrated fixed-mobile telecom giants also entering the
video market, WiMAX may create opportunities for other service providers,
such as cable and satellite operators, as well as VoIP providers, MVNOs,
Web portals and media content owners and aggregators."

"Cable operators will be looking at WiMAX as a potential technology to
deploy their own mobile infrastructure to gain more control and margins off
their quadruple play offers," he explained.

"Satellite operators can use WiMAX to provide fixed broadband and
voice, as well as video-on-demand, and overcome a competitive disadvantage
against cable. Web portals and media companies may consider owning or
leasing a WiMAX pipe to deliver fixed and mobile entertainment to millions
of households and mobile users, thereby bypassing the walled gardens and
toll fees currently imposed by cable and mobile operators."

"Whether threat or opportunity, all classes of telecom and content
service providers will need to adapt their business strategies to reflect
the new competitive and technological realities brought about by the
introduction of WiMAX," said Sekino.

"The success of WiMAX hinges on how quickly its ecosystem organizes and
collaborates to compete for specific market segments and develops and
markets easy-to-use, affordable end-user applications and devices," Sekino
said. "Potential WiMAX players need to accelerate the adoption of the
service and attract a critical mass of users before competing technologies
can catch up.

"But if they succeed, by 2009, we'll see a real battle for the
projected 87 million U.S. households using broadband and the 161 million
users of mobile data."

About Diamond

Diamond is a management and technology consulting firm.
Recognizing that information and technology shape market dynamics,
Diamond's small teams of experts work across functional and organizational
boundaries to improve growth and profitability. Since the greatest value in
a strategy, and its highest risk, resides in its implementation, Diamond
also provides proven execution capabilities. We deliver three critical
elements to every project: fact-based objectivity, spirited collaboration,
and sustainable results.

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