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3/9/2006 2:19:44 PM
Barbara Grady, Business Writer
Wireless technologies help less developed countries grow IN THE BANANA and sweet potato growing villages of Uganda, farmers now
use wireless gadgets to find out current market prices for their
commodities, ending decades of price gouging by traders who assumed
they didn't know.
In the Tamil Nadu region of India, cases of dengue fever are now
diagnosed through Internet connections to doctors in the city, rather
than festering until it is too late.
New inexpensive wireless Internet technologies called WIMAX, wireless
Internet Protocol and WiFi are beginning to answer "the digital
divide" or how to bring to developing nations the benefits of the
information age enjoyed here.
And Bay Area companies UTStarcom Inc. of Alameda, Aperto Networks of
Milpitas and Intel Corp. of Santa Clara sit at the fulcrum of this
change as suppliers of equipment to India, Vietnam, Colombia, Haiti,
Brazil, Uganda and elsewhere.
Supplying these wireless technologies to Third World nations can be a
lucrative business — many developing countries have scant
telecommunications infrastructures and are eager to buy an inexpensive
way to get up to speed. Yet the business is fraught with risk, as
UTStarcom's financial experiences show.
After several years of growing revenues and profits — and beating
analysts' expectations — UTStarcom has struggled of late. In May,
UTStarcom said it would be cutting 1,400 jobs, or one-sixth of its
work force, and the company posted a loss for 2005. Its shares traded
around $6.20 last week, whereas a year agothey traded around $14 a
share and two years ago around $30 a share.
Intel, which supplies the equipment used in the Uganda and Tamil Nadu
projects, is so large (revenues of $38.8 billion in 2005) its
involvement in these markets does not present a risk. But mid-size and
small companies are venturing into new territory — albeit very
promising territory. Sales of WIMAX equipment by all sellers worldwide
grew 759 percent last year to $142 million, according to Infonetics
Research.
"WIMAX can help (developing countries) leapfrog decades into the
future and catch up with the rest of the world," said Reza Ahy,
Aperto's chief executive officer. Aperto has sold WIMAX equipment to
carriers in Pakistan, Ecuador, Colombia, Ukraine, Poland and India.
"When you have broadband access, suddenly the cost of making things
and doing things comes down."
Founded in 1999, privately held Aperto has raised $94 million. Its
revenues doubled in three out of the four years it has been offering
products; and executives say it is on track to be profitable in the
second half of 2007.
Ahy's comments agree with academics who have studied the issue of the
digital divide. Both the University of California, Berkeley and
Stanford University have research departments devoted to this problem.
"Our general belief is that connectivity increases options for income
and reduces cost of living," said Eric Brewer, a Cal professor who is
co-director of Intel Research at Berkeley, a collaboration using Intel
equipment and Cal researchers whose main project is wireless
communications.
"If you can get connectivity to these areas, you can get other
benefits: You can improve health care and education and access to
government services," Brewer said. A Cal-Intel project called
Technology and Infrastructure for Emerging Regions studies the use of
cheap wireless communications in Ghana, India and elsewhere.
"We focus on wireless because that is the cheapest to deploy," Brewer
said.
Stuart Gannes, director of Stanford's Digital Vision Program, said
that the "cost of technology and the range or radius of technology"
are the variables that suddenly make wireless broadband access the
"potential" answer for bridging the digital divide.
WIMAX is a wireless Internet and data transport technology that
basically provides a much wider catch than cellular nodes. One WIMAX
base station, or contraption for receiving and sending wireless data
and voice, can reach a 30-mile radius, compared with 3 miles for a
third-generation cellular network, according to Forrester Research.
Forrester says the cost of deploying WIMAX is about half the cost of
deploying a cellular network and many times cheaper than deploying a
traditional copper line phone system.
UTStarcom developed and sells a wireless technology it calls PAS, or
personal access system. PAS and an iPAS version let carriers take
existing telephone wire networks, no matter how limited, and expand
their reach with wireless Internet-based connectivity. The system
transports voice and data on wires where available and then passes it
off to wireless IP nodes.
UTStarcom began selling its wireless PAS technology in 1999 in China,
where it has covered 800 cities with connections. It now has
installations in Thailand, Vietnam, Taiwan, the Philippines, Mexico,
Brazil, Colombia, India, Honduras and Haiti.
UTStarcom founder Hong Lu says his mission is to "bring
telecommunications to the remaining 4 billion people," referring to
the approximate number of people in the world without regular access
to telecommunications.
What makes WIMAX and PAS — or broadband wireless technologies
generally — so much cheaper than a traditional wire telephone service,
executives from these companies as well as analysts say, is the
absence of labor costs to dig trenches, lay wires and build switching
stations, and the lack of high ongoing maintenance costs.
UTStarcom and Aperto executives describe it as the last-mile dilemma.
In a traditional landline phone system, a pair of copper or fiber
wires has to be strung to every house or business that will have a
telephone. That cost is huge, not just in equipment but in labor and
maintenance.
"WIMAX is a technology out of the box. You literally can have
connection in a day" that reaches hundreds of businesses or thousands
of homes, Ahy of Aperto said. Manish Gupta, Aperto's vice president of
marketing, said traditional landline systems "with fiber and copper
will cost hundreds of millions of dollars to wire a city. With WIMAX,
it may cost hundreds of thousands."
UTStarcom's Brian Caskey describes the ease of deployments of
UTStarcom's wireless IP phone gear.
"We drive up in a Humvee that holds all the equipment — a base station
that's about the size of a file cabinet" — unload the vehicle and
"fire up the base station and immediately you provide wireless CDMA
coverage for people with CDMA handsets." CDMA refers to
bandwidth-matching technology in the handsets.
It isn't altruism that leads Aperto and UTStarcom to the Third World;
it's a business model. They sell their equipment to telecommunications
carriers, which in turn see enough revenue coming from businesses and
wealthier individuals to make it a profitable business. After all, one
WIMAX base station, which can reach hundreds of businesses or
thousands of individual homes, costs the carrier only between $5,000
and $10,000, according to Aperto. To provide service to a mid-size
city, a carrier would need to buy a number of these but could do it
for under $100,000.
UTStarcom's PAS system costs a carrier $50 per subscriber, so a small
city with potentially 2,000 subscribers would cost $100,000.
Part of the business attraction for UTStarcom and Aperto is that in
Third World countries with scant telecommunications, they do not have
to compete with wireline Internet access providers and cable
companies, as they would in the United States, so they can be sure to
get basically all end-user customers who can afford it. The initial
cost to the end user in a handset or PC, however, is still beyond
reach for many individuals. UTStarcom handsets cost approximately $30,
although carriers sometimes subsidize them. So a business or a whole
family might buy one handset. When these systems reach outlying areas,
sometimes a whole village will purchase one handset and share it.
In Vietnam, for instance, UTStarcom's system sold to the Vietnam
Ministry of Post and Telegraph for deployment in Hanoi is getting lots
of end-user customers because they haven't had affordable access to
communications.
"In Vietnam, they are always asking us which city is next," Caskey
said. "They can't get enough."
UTStarcom also develops and sells wireless handsets.
UTStarcom, which has been in business longer than Aperto, has shown
that the business proposition is both lucrative and volatile.
UTStarcom's revenues grew fast — almost tripling between 2002 and 2004
to $2.7 billion. But operating income fell by nearly two-thirds during
that period, which company officers attribute to UTStarcom growing its
business so rapidly. Then in 2005 revenue growth slowed to $2.95
billion, and that resulted in net losses for the company.
Chesha Kamieniecki, UTStarcom director of investor relations, said the
losses were partly due to the company growing so fast that it did not
adjust its processes to match the growth of the company. Now it is
spending money to automate systems, such as procuring supplies. But
the losses also came from abrupt changes in the markets. China's
telecommunications operators stopped buying more of its wireless
equipment. Also, UTStarcom revealed that a sale to a carrier in India
that it had recorded as revenue during 2004 and parts of 2005 was a
premature recognition of revenue — the money did not materialize. The
company set up an internal investigation of why the India contract was
recorded as revenue.
Despite UTStarcom's recent troubles, wireless Internet technologies
have had a promising beginning — as evidenced by the 759 percent
growth Infonetics tracked. And, it is still only the beginning,
executives and analysts say.
To date, most installations of these wireless systems in Third World
countries have been in the cities — where carriers can be sure to get
a return on investment from businesses and residents in close
proximity to each other. But the more city customers carriers get, the
more revenue they will have to expand into more rural areas.
Analyst George West from West Technology Research Solutions, which has
looked at the potential for wireless technologies to bridge the gap in
the digital divide, said the spread of wireless communications to
rural or poorer areas will likely happen as a piggyback from clear
profitable sales.
"It might work out like this: A multinational corporation like a
mining company or a petroleum company wants broadband communications
between their remote locations. What we're seeing is a scenario where
those kind of business operations install equipment, but then once it
is there they decide to sell unused channel capacity to the
surrounding area," West said.
West said that in Africa his firm is seeing increasing use of wireless
phones for short messaging, such as the farm commodities messaging
cited above.
"Adoption of cell phones for short message services is starting to be
pretty widespread in disadvantaged areas," West said. "They are not
using it for chatting or talking," but for real business or livelihood
purposes.
Business Writer Barbara Grady can be reached at or
.
WIRELESS TECHNOLOGIES
- WIMAX is a new technology for wireless communications and Internet
access across broad regions. Unlike cellular or even WiFi, which
transfer wireless signals in short jumps from one cell or WiFi node to
another, WIMAX carries signals for long distances — typically 30
miles. It also provides wireless connection from one point to many
points. WIMAX stands for Worldwide Interoperability for Microwave
Access. WIMAX is so new that the first WIMAX products were just
"certified" in January — meaning an industry panel tested various
WIMAX products. Aperto Networks' equipment was among the first to get
certified.
- WiFi is wireless broadband technology for getting a wireless
connection to the Internet. WiFi nodes placed around a city allow
people with WiFi-enabled laptops or personal digital assistants to
connect to the Internet — that is, if they are near a node or "hot
spot." WiFi is based on a standard that is quite similar to WIMAX but
for shorter hauls and operates more like a local area network (LAN).
Many cities including San Francisco are devising plans to provide free
WiFi access citywide. Oakland also is considering doing so. - VoIP
stands for Voice over Internet Protocol technology. It means that a
voice conversation is routed over the Internet like data instead of
over a dedicated pair of copper or fiber wires. To transmit like data,
the analog waves of voice are translated into digital signals and then
compressed into packets; the conversation becomes one digital packet
among many traveling over the Internet. As a result, VoIP systems are
cheap to deploy — and often free to users.
- Wireless VoIP is when a wireless phone is configured to translate
conversations to data and send them over the Internet. UTStarcom Inc.
makes such phones. UTStarcom's iPAS technology is a personal access
system that provides both telephone communications and Internet access
and uses Internet Protocol standards to transport the signals. It is a
VoIP, or voice over IP wireless network technology.
- PAS, or personal access systems, is UTStarcom's technology for
wireless telecommunications in a city or region and works similarly to
cellular systems. PAS provides short-distance wireless connections,
using small cells or nodes to transport the signal around a city or
geographic area.
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Source: Inside Bay Area
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