Taipei has the largest Wi-Fi system in the world. The WiFly network comprises more than 4,000 access points positioned throughout the city, providing Internet connections for notebook computer, personal digital assistant and phone users who choose between subscribing to the service and pay-as-you-go fees. So, is WiFly the model for anytime, anywhere wireless communication for the 21st century? Not if the ambitious Mobile Taiwan, or M-Taiwan, program initiated by Taiwan's government two years ago is successful.
The government has backed the longer-range, more stable and secure--and faster--WiMAX technology, which could position Taiwan ahead of the global curve with respect to wireless broadband communications while upgrading its information communications technology (ICT) industries.
Indeed, Taiwan is well positioned to be a model of wireless communication deployment: Over 60 percent of the country's population, or 14.9 million people, are Internet users, 5.2 million of whom gain access via wireless networks; wireless devices like mobile phones are universal, and laptop ownership is very high; and Taiwan is a world-leading ICT equipment manufacturing center. To stay competitive, however, Taiwan must expand into the ICT-related applications services industry.
Eyeing this need, the Cabinet's National Information and Communications Initiative Committee launched the Mobile Taiwan program in 2005 with an NT$37 billion (US$1.1 billion) budget and a mission to build the world's first seamless combined wireless and fixed broadband network environment for application services, while at the same time developing an industry that could generate trillions of NT dollars (tens of billions of US dollars) of revenue annually. The program has committed the bulk of its budget, about NT$30 billion (US$900 million), for the deployment of some 6,000 kilometers of broadband cable to improve stability and efficiency. The remainder of the five-year budget is being devoted to developing wireless broadband services. The broadband cable-laying work has been underway for years and is relatively straightforward. Developing wireless broadband services, however, involves more risks and uncertainty. With several competing wireless broadband options, the government is betting WiMAX will be the technology end-users adopt worldwide.
WiMAX stands for Worldwide Interoperability for Microwave Access. It is based on IEEE 802.16 standards and transmits data at up to 75 megabits per second (Mbps). By way of comparison, Wi-Fi, which stands for Wireless Fidelity and is based on the IEEE 802.11 standards, is limited to 11 Mbps on most networks. WiMAX is the runaway favorite in terms of coverage area, handily outdistancing Wi-Fi's 100-meter range--by 10 to 50 kilometers, depending on the terrain. Taiwan is developing WiMAX before related equipment and products are mass produced. By participating in the standardization process with international organizations, Taiwan thinks it will be able to strengthen its ICT industrial value chain.
Maximizing Revenue
Evidence of Taiwan's enthusiasm for WiMAX was on display at the Asia-Pacific Conference & Exhibition 2007 Taipei Summit and at the WiMAX Forum Member Conference, both held in Taipei earlier this year. According to Wang Chang-ying, director of the Industrial Development Bureau's M-Taiwan Applications Promotion Program Office, when M-Taiwan was first proposed, not a single local company was involved in the production of WiMAX customer-premises equipment (CPE--devices like telephones or modems that connect subscribers to the telecommunications grid). But after three years of effort, a couple dozen manufacturers are involved in CPE production. Others are developing base station equipment, a first for Taiwan companies.
Taiwan's Market Intelligence Center (MIC) estimates the global WiMAX industry will generate US$29.4 billion of revenue by 2012. Revenue from producing WiMAX base stations, which relay WiMAX signals, is expected to account for about one-sixth of the total, or NT$170 billion (US$5 billion). According to MIC, Taiwan's combined annual revenue from CPE and base station production could reach NT$100 billion (US$3 billion) by 2010. To promote this business, the Ministry of Economic Affairs subsidizes companies through the M-Taiwan program for WiMAX network deployment and wireless broadband service provision. Companies receiving subsidies, as much as 30 percent of required capital, must use a certain percentage of locally designed and manufactured equipment.
Wang says if Taiwan could develop small WiMAX base stations that will be purchased globally, the benefits would be enormous. Conceding that many more handsets than base stations are sold, Wang maintains that base station "production requires higher-order technology and is thus more profitable." She adds, "Going into base station production will help cultivate technological know-how in Taiwan, which will also be helpful in the 4G cellular technology push."
Base stations and microwave receivers installed on building roofs have aroused concern about the potential effect of electromagnetic waves on area residents. (Photo by Huang Chung-hsin)
Local companies, including telecommunications operators, television companies and vendors are actively participating in WiMAX-related development. Working with international organizations like WiMAX Forum is a crucial facet of the M-Taiwan program. Alliances between domestic and global players, such as one between Chunghwa Telecom Co. Ltd. (CHT) and LG-Nortel Co. Ltd., are also forming. "We are making such partnerships a win-win proposition," Wang says. International cooperation is needed given that Taiwan's market is relatively small and the use of WiMAX involves international roaming.
Preparing the Ground
To become a valuable partner for international companies, Taiwan must have something to offer. "We invite major international players to conduct field trials for WiMAX products and services in Taiwan given that Taiwan has optimal size and population density for such tests," Wang says. Taiwan has been chosen by WiMAX Forum to establish two test labs, out of six worldwide, to verify that equipment complies with standards. This builds on Taiwan's importance in the standards enforcement sector--three Wi-Fi certification labs are operating on the island.
All networking devices made by vendors require testing for compatibility and interoperability. For WiMAX international roaming to work, certain microwave frequencies must be allocated. One factor that gave WiMAX additional momentum in Taiwan was the issuance of WiMAX frequency spectrum licenses in late July this year. Six companies, out of eight qualified bidders, won licenses to operate either in northern or southern Taiwan. First International Telecom Corp. (FITEL) is one of three licensees in northern Taiwan. Its bid was higher than all its competitors: It has committed to pay the government 12.89 percent of its annual WiMAX operations revenue as a licensing fee.
The license gives FITEL the right to provide WiMAX services to subscribers living in and north of Miaoli County on the west coast and Yilan County on the east coast. With the addition of WiMAX, FITEL wants to transform itself from a PHS (personal handyphone system) mobile service provider to a mainstream telecom operator. FITEL General Manager Charlie Wu says, "We have received numerous joint investment offers since we announced our plan to increase capital to engage in the WiMAX business."
A License to Expand
FITEL is the only PHS operator in Taiwan. Its subscribers like the low power consumption of PHS handsets--and the relatively low cost of domestic calls. But the company does not think its million-subscriber market has much room to grow. Given WiMAX's advantages, which include a wider range and fast transmission speed, FITEL hopes to gain an edge on traditional cellular network operators.
"The selling point of this technology is convenience and mobility," Wu says. He notes that the success of mobile phones, in spite of higher call rates than fixed phones, suggests that for many consumers, convenience outweighs price as a purchasing consideration.
Wu observes that many households in Taiwan currently access the Internet via ADSL or cable modem for video downloads or email. But if these services go mobile, he projects that about 40 percent of ADSL customers will shift to WiMAX. He thinks notebook users, of which there are about 2 million in northern Taiwan, would make the switch in disproportionately high numbers. "My estimate exceeds MIC survey results, which show that about 35 percent of ADSL customers are willing to try WiMAX," Wu says.
Wu has calculated the advantages of pursuing WiMAX business over voice services. "To engage in data services instead of voice is less capital-intensive as long as residential and commercial subscriber areas are covered," Wu says. FITEL will expand its WiMAX network deployment to less commercial areas after WiMAX-enabled consumer devices are ready to be rolled out. "The capital expenditure needed is relatively lower than what it would cost to deploy 3.5G networks," Wu says. But FITEL isn't painting PHS out of the picture just yet. Wu says, "In the future, we will continue to provide voice services over PHS and data over WiMAX."
FITEL has won a license to provide WiMAX services and hopes to transform itself into a major telecom player by adding to its existing PHS voice services. (Photo by Huang Chung-hsin)
FITEL had evaluated the Wi-Fi business before going with WiMAX. Wu says the company concluded that Wi-Fi transmission was too easily interrupted. "We discovered users in the building next door weren't even able to receive the signals delivered from the base station we installed on the roof of our headquarters," he recalls.
Competition for 3G Carriers
As voice and data services converge, WiMAX will certainly have an impact on incumbent carriers. CHT, the dominant player in Taiwan's telecom marketplace, has been concerned about the impact of WiMAX on its 3G business. "There's a lot of overlap between services associated with WiMAX and 3G," says Eric Wang, an account manager at CHT's Kaohsiung branch office. He points out that while 3G players are still recovering the high fees they paid as down payments for their licenses, they will also face competition from WiMAX. In response to such industry concerns, Wang Chang-ying of the M-Taiwan office points out that technological progress is inevitable. If a service becomes available at a lower cost or even free of charge, users will switch to it whether it is fixed or wireless.
Although CHT did vie for a regional WiMAX license, its bid was lower than all other contenders. However, it is reportedly going to bid for one of the nationwide licenses planned by Taiwan's telecommunications regulatory agency, the National Communications Commission, for 2009. CHT's Eric Wang notes the greatest concern is interoperability, and concludes, "We'll see how it goes by the end of 2008." CHT will look carefully before it leaps into this emerging market.
FITEL expects northern Taiwan, which comprises around 70 percent of the market, to yield many customers. "I project that after three years we will have around 400,000 WiMAX users and FITEL will break even within four years if everything goes smoothly," Wu says. He thinks by the time the national WiMAX licenses are put to tender, FITEL will already be the dominant player in the market. By then, it will be prepared to vie for the national license.
Covering Rural Taiwan
WiMAX and fixed networks are expected to be co-dependent as the wireless technology is launched. Having presided over WiMAX deployment via ADSL at remote places like Chuhsing village in Tainan County, CHT's Eric Wang believes WiMAX is a viable technology for the last mile. He notes it is far more cost-efficient to deploy WiMAX base stations than to roll out fiber-optic cable in isolated areas. But for a profit-oriented company, it still does not make economic sense to hook up remote villages via WiMAX. FITEL's Charlie Wu thinks this kind of penetration should be subsidized, perhaps through a universal service fund. Universal service funds are set up on an ad hoc basis to help companies rolling out telecommunications networks in isolated areas to recoup losses with help from profit-making telecoms in urban areas. Currently, wireless network deployments are not funded by this mechanism.
Chuhsing village is the site of an M-Taiwan pilot project that is bridging the digital divide for rural residents. Chunyang village in Nantou County is also taking part in the project. Remote villages like these usually have trouble attracting enough teaching and medical resources. For them, electronic learning via broadband and medical care via IP broadband videophone are already a reality. The pilot project can serve as a model not only for other communities in Taiwan, but also for rural communities in other countries. Indeed, M-Taiwan's Wang Chang-ying says the projects are attracting interest from Taiwan's diplomatic allies.
The ground has been prepared for WiMAX's commercial release. Frequency spectrum licenses have been issued and Taiwanese companies are developing the equipment that will drive the industry. Operators are discussing the tricky issue of roaming across different regions and countries. "We are now talking with Sprint Nextel Corp. on issues like roaming, including how revenue should be shared among involved parties," Wu says. FITEL and other operators are already working with city and county governments to install and test WiMAX-related devices for certain services, such as surveillance and distance medicine. Given this progress and Taiwan's advantage as the home of a developed ICT sector, Wu is convinced that Taiwan could well prove to be the world leader in WiMAX development in coming decades.
M-Taiwan Program Objectives (2005-2008)
The M-Taiwan program seeks to upgrade Taiwan's broadband network environment while enhancing opportunities for industrial development. The program's objectives span industrial, social and national dimensions.
Industrial
Objective: to create 5C (communication, computer, control, consumer and content) business opportunities by:
˙Upgrading industry through incentives for companies to develop equipment used to connect to WiMAX networks in homes and offices and to develop WiMAX base stations with a target annual output value of NT$100 billion (US$3 billion) by 2010.
˙Providing integrated solutions through cooperation with international communication companies and organizations.
Social
Objective: to create an islandwide wireless Internet environment by:
˙Enhancing wireless Internet access with a target of 8 million subscribers (compared with 4 million currently).
˙Promoting wireless services on campuses by expanding online learning opportunities.
National
Objective: to strengthen IT infrastructure and services by:
˙Raising national competitiveness with a target of becoming one of the five top countries for mobile Internet application development.
˙Bridging the digital divide between cities and remote areas as well as between large and small-to-medium-sized enterprises.
˙Building M-cities, which are cities where 80 percent of inhabitants have access to wireless broadband Internet services.
˙Promoting competitiveness among telecoms and providing new options for last-mile solutions.
Source: Mobile Taiwan Applications Promotion Program Office, Ministry of Economic Affairs
Write to Zoe Cheng at zoecheng@mail.gio.gov.tw