Soma, whose executives we interviewed as part of our Sidecut Report on WiMax, had told us they would be seeking additional funding to help the company fulfill its big WiMax contract with Bharat Sanchar Nigam Ltd (BSNL), India’s state-owned telecommunications company. The deal with BSNL was announced earlier this year.

For WiMax followers, Soma’s a pretty interesting company — they have been around almost 10 years, starting with wireless mesh technologies before finding their way to WiMax. Privately held, Soma had previously raised around $200 million in financing, but needed a boost to start fulfilling the big BSNL deal.

So what does the investment round say about WiMax? Here’s a quick excerpt from our Sidecut Report on WiMax that quotes company exec Tom Flak:

For several players in the WiMax market, the overnight sensation is something that has been years in the making. “We’ve been waiting a long time for this market to arrive,” said Tom Flak, chief marketing officer and senior vice president of operations at WiMax gear provider Soma Networks of San Francisco. Flak said that Soma, like other WiMax infrastructure players, is bullish on the near-term future, as standards firm up and production prices go down. End-user equipment, Flak said, is now about “half the price” of pre-standard WiMax gear, which should lead to a lot of WiMax activity in 2008. “With WiMax, you can stop wondering if the technology is viable,” Flak said. “It’s really market-share grabbing time.”

Sounds like the investors in Soma’s new round are doing some market-grabbing themselves. Not a surprise to anyone who has read our report, which offered the following as one of its conclusions:

If WiMax delivers on service providers’ plans of being cheap, easy and pervasive, then there are big opportunities today for venture investors, businesses, application and device developers, as well as infrastructure and service-provider players, who still have time to get in ahead of the mass-market adoption part of the curve.

Soma’s other interesting angle is that they are the equipment provider for AT&T’s hush-hush WiMax network in Pahrump, Nev. Want to know more WiMax inside stuff? Order the report.

© 2008 MuniWireless. All Rights Reserved.

ABI says that hotspots are moving towards a “free” model: “Charging for service is counter-productive in the long run because the real money will be in value-add content downloads. In the near future hotspots are likely to encourage users to pay to download the latest music and TV shows. Airport clubs are likely to offer hotspot users the chance to download movies for their upcoming trips. Starbucks has already begun selling music CDs in its stores. The next logical step will be to move to selling music downloads.”

I disagree with ABI’s conclusions.

(1) I don’t think that charging for Wi-Fi service is counter-productive per se. I think it is counter-productive in areas where people are in a hurry (railway stations, airports, bus depots) because the entire process — putting in your credit card number, getting authorized — takes too much time. For people who travel a lot, having to pay so many different airport and railway providers is a hassle. But because airports know they have a captive audience, a lot of them charge for Wi-Fi. The smaller ones do not, and there is a growing trend, albeit not growing fast enough for me, for airports to offer Wi-Fi for free.

Some people are willing to pay for Wi-Fi access where they have enough time to sit down and do work, and they will find it valuable only if it’s very fast and reliable (meaning, it lets you use your favorite bandwidth-heavy applications, download and upload speeds are fast). So I don’t think everything has to be for free. Many are willing to pay if the service is great.

(2) I disagree with ABI’s conclusion that the real money is in value-add content downloads. While large media and telecom companies that buy ABI’s research reports might want to believe that, in my view, most people just want to get on a fast, reliable connection and get on with their own applications: Skype for VOIP calls, Youtube for video, a variety of P2P music and video download services and applications, Microsoft’s and Google’s office applications, iTunes, and so on. In reality, people want the hotspot operator to get out of the way once they are connected. They are on the network NOT for the value-added content, but for the connectivity itself. I certainly don’t see people in airport lounges connecting to the Wi-Fi network wondering what great download offerings the airport lounge has for them on that day!

(3) So, if a hotspot operator thinks that it can make money (and therefore cover the costs of operating the Wi-Fi network) from value-added content downloads, it is mistaken. They will make money only if they offer better connectivity (faster, more reliable) than a competitor who is offering free, but inferior, service. Again, it depends upon where the Wi-Fi service is being offered and to whom. If people just want to check email quickly and are not uploading or dowloading heavily, they will be happy with the free “inferior” service because they are content with Wi-Fi that is just good enough.

(4) As for how hotspot owners are going to charge people who have Wi-Fi/3G devices when they move from 3G to Wi-Fi (this dilemma was mentioned in ABI’s report), frankly, it’s completely uninteresting to the user and the more expensive, confusing or cumbersome the procedure, the more users will migrate to free, open Wi-Fi networks. In a lot of airports, the airline lounges already have offer free Wi-Fi. If we are talking about a city, users will just sit in cafes with free Wi-Fi. It’s utterly counterproductive for a hotspot owner to think in this way.

In summary, hotspot owners have to be careful about the “free model”. Assuming that they will cover the cost of their investment and make money from content downloads is a fantasy. Users want broadband access. That’s it. They just want to get on the Internet and use their applications. They want the Wi-Fi provider to get out of the way. Some users are willing to pay for better quality access: very high speed broadband, fast symmetrical upload and download speeds, reliable service. But are Wi-Fi service providers willing to make the investments necessary to bring high-quality broadband service to users?

© 2008 MuniWireless. All Rights Reserved.

“Hundreds of projects, organizations, and municipalities are rolling out Meraki-based networks, yet few seem to understand that they’re buying a service not a piece of hardware. Over time, these initiatives will end up paying an unknown amount of money to Meraki just to keep their system running. It is, in fact, the ultimate bait-and-switch paradigm — you think you have a one-time hardware cost, instead you get vendor lock-in, recurring charges, and path dependencies.”

Read more about Meraki on Sascha’s blog.

© 2008 MuniWireless. All Rights Reserved.

Sidecut Reports: Can you give us an update on where Clearwire stands right now? Does Clearwire have any access yet to the new investment capital, and have any integration efforts started with Sprint?

Clearwire CEO Ben Wolff: We won’t get access to the new capital until the deal closes [expected in Q4 2008]. Until we’re through with the FCC and DOJ processes, we can’t coordinate activities. We can do some planning on what the company will look like after the closing.

Sidecut Reports: Where does that leave Clearwire for the rest of 2008?

Ben Wolff: We’ll continue building out the markets we were going to build out in 2008 — Portland, Ore., Atlanta, Las Vegas, and Grand Rapids, Mich. Sprint continues to do the same thing with the markets they were targeting [Baltimore, Chicago and Washington, D.C.]. The good thing is, they are different markets. What has become clear is that we and Sprint are building in a very similar architecture, in some cases using many of the same [infrastructure] vendors. So I don’t imagine there will be much complexity in integrating [after the deal closes].

Sidecut Reports: Will your new markets use Mobile WiMax?

Ben Wolff: Yes.

Sidecut Reports: What about your plans to upgrade your existing networks to Mobile WiMax? Is anything happening there yet?

Ben Wolff: Physically, nothing is happening yet. It’s certainly in the planning stages. Once we consolidate our spectrum with Sprint’s, that will give us enough spectrum depth to do a WiMax overlay [in Clearwire's existing markets]. So we’ll have the ability to share infrastructure and run our legacy network side by side with a Mobile WiMax network. In Seattle, for instance, we are currently using all the spectrum currently available to us. With Sprint’s spectrum, it opens up the way for Mobile WiMax.

Sidecut Reports: What are your day to day responsibilities? It seems like there might be a split between running the “old” Clearwire and getting ready for the “new” Clearwire.

Ben Wolff: We need to continue to prove out the fact that this can be a profitable business, and that it can scale out. So I do pay close attention to operations and profits. I also spend a lot of time on the integration process — thinking about what the team will look like when we’re combined, getting all the things in place. We want to move toward Mobile WiMax and introduce the new Clearwire in one fell swoop.

Sidecut Reports: What about educating Wall Street analysts? How is that process going?

Ben Wolff: Education is important, especially in this financial climate. A lot of my job is to help Wall Street understand what is different — what the services are, what the revenue model is. It doesn’t fit into a neat convention or any one description.

Sidecut Reports: Is that a tough job?

Ben Wolff: Some analysts get it, and others just can’t get their heads around it. Some of the cable industry analysts want to compare it to residential broadband, to pigeonhole it. I think it’s a somewhat jaundiced view to say that if it doesn’t offer video, it’s going to be hard-pressed to get high enough ARPU. Then there are some wireless analysts who want to see only a national [coverage] footprint, all at once.

It’s getting some [analysts] out of their comfort level. For our new network, the overall cost structure [for infrastructure] is a lot different, and so is the idea that spectrum is what makes the [WiMax] world go around. That is an awful lot for people to try to get their arms around.

Sidecut Reports: Does the popularity of the iPhone and its 3G launch help or hurt your efforts?

Ben Wolff: I think it will help significantly in the long run. When Steve Jobs got on stage and showed the 3G iPhone downloading a National Geographic web page, they made a big deal about how it only took 21 seconds. We went out on our Portland network, using a small-screen device, and downloaded the same page in four seconds. As great as the iPhone is with its wonderful user interface and applications, it’s still dragged down by the speed of the network. It’s a great precursor, because it’s clear that customers want an Internet experience in their hand. What’s next is a network that can really support it.

Sidecut Reports: What is your take on the growing publicity around LTE, the 4G choice for AT&T and Verizon?

Ben Wolff: I want to make it clear that Clearwire is not in a technology holy war. That said, WiMax is here today and it’s our choice. But if you look at it closely, only the uplink [technology] of LTE is different from WiMax — 85 percent of the DNA is the same. I think the real [question] is what spectrum you are going to use to deploy technology. LTE is mainly a frequency division duplex (FDD) technology, and if you look globally, there’s not much FDD spectrum for use. What’s really available is time division duplex (TDD), which WiMax uses. In most of our U.S. markets we have about 150 MHz of spectrum, versus the 22 MHz of spectrum Verizon got in the 700 MHz auctions.

So technology is only half the equation. You’ve got to have a pipe that’s big enough. But really, the consumer doesn’t care if it’s LTE or WiMax. They just want a good experience at a good value.

Sidecut Reports: Speaking of value, can you talk at all about what WiMax pricing might look like?

Ben Wolff: We really can’t talk about pricing yet, but I will say that we will be able to offer a better value than 3G because we can make bits move at a better cost. What we really want is to give consumers a variety of different services — you’ll have residential broadband plans at different speeds and bandwidth, you’ll have day passes, and devices with [WiMax] chips embedded — so it’s hard to talk about what pricing is or will be.

Sidecut Reports: When will Clearwire offer those services?

Ben Wolff: We’re going to go with Portland first, and learn from there. We are looking at a soft launch before the end of the year, say early fourth quarter. We’ll see how that goes and then make a decision from a “grand opening” perspective and then make decisions about the other markets.

Need to know more about WiMax? Order our recently updated WiMax report, with full analysis of the “new” Clearwire deal and the motivations for investors Comcast, Google, Intel and others.

© 2008 MuniWireless. All Rights Reserved.

My friend, Andy Abramson, has posted a helpful guide called “Tools of the Global Nomad” which goes beyond finding Wi-Fi access. He writes about the software and services he uses to stay connected, how he avoids nasty roaming charges and more. Of the services he mentions, I have been using Sightspeed for video conferencing, Boingo (which has been absolutely indispensible for me when traveling in different countries), Skype, Maxroam, and Truphone.

Like Andy, I have found a way to minimize outrageous roaming charges, but it has not been easy. Thankfully, the European Commission is doing something about it: they will force the EU operators to lower roaming charges on text messages and data. Today the operators charge 29 eurocents for SMS when their customers text abroad and under the EU’s proposals, the amount will drop to 11 to 15 eurocents. I can’t wait to see what the EU does with data roaming because that’s a killer.

Read the European Commission’s official documents on how they plan to end the Great Roaming Rip-Off. So far my way of fending off roaming charges has been to use Wi-Fi as much as possible. But sometimes, it’s just not available.

© 2008 MuniWireless. All Rights Reserved.

KT Corporation (formerly Korea Telecom) is the city’s partner in the deployment using Firetide’s wireless mesh equipment. KT is also offering free outdoor Wi-Fi service along the 2-kilometer stretch of beaches in Gyeongpo. The total cost of the network including the sensors and other equipment is US$1.6 million.

Gangneung (pop. 225,000, area: 400 square miles) is the economic center of Korea’s Yeongdong region and is a popular tourist destination because of its proximity to Gangneung’s lake and the Sea of Japan.

© 2008 MuniWireless. All Rights Reserved.

Intel’s WiMax silicon is still not available. As the company has stated before, on Monday it reiterated that its dual Wi-Fi/WiMax silicon for notebooks will not be available to notebook OEMs until sometime in the second half of 2008. While Intel PR folks did confirm that the company’s promised reference design of a WiMax PC Card is now available to device manufacturers, the board-level silicon gap means that there won’t be WiMax-enabled PCs ready to ship when the first WiMax networks come online in the U.S. this fall. Is this a major problem? Probably not, since there won’t be much in the way of WiMax networks available until later in 2009 anyway. But it’s not a positive development, either.

Clearwire and Sprint must still operate separately until the “new” Clearwire deal closes in Q4. This has always been a somewhat murky question, but Clearwire CEO Wolff cleared it up — Clearwire will not have access to any of the new investment capital and cannot coordinate ongoing activities with Sprint until after the deal passes DOJ, FCC and shareholder approval. That means that for 2008, the “old” Clearwire will be looking to launch Mobile WiMax in Portland, Ore., while Sprint will keep its Xohm name around until at least January, with a September launch in Baltimore and later launches in Chicago and Washington, D.C.

Sprint’s Xohm network is on schedule for September launch in Baltimore. Sprint Xohm guru Barry West was on stage at the Intel event Monday, and said the network will launch “between [September] 1st and the 30th,” and will have 150 cell sites offering “in-building coverage as well” in downtown Baltimore. “Despite what you’ve heard, WiMax is alive and well” and will launch in Baltimore, Chicago and Washington, D.C., West said.

Clearwire is already beta testing its Mobile WiMax network in Portland, Ore., and is pointing to a commercial launch by “early Q4.” “We’ve already started loading customers on the network in Portland,” said Wolff, who hopes to have a commercial launch by “early fourth quarter.” Clearwire will then take its learning experiences from Portland to its next scheduled launches, in Atlanta, Las Vegas and Grand Rapids, Mich. (ed. note: Better get that Vegas network ready by CES!) All Clearwire’s launches going forward will be Mobile WiMax, Wolff said.

Paul Kapustka is the editor of Sidecut Reports, which has recently published an updated report on the state of WiMax deployments in the U.S., focusing on the new Clearwire deal.

© 2008 MuniWireless. All Rights Reserved.

To find out more details about the project and the RFP, go to:

Austin to field test public Wi-Fi

© 2008 MuniWireless. All Rights Reserved.

Rural towns and counties are continuing to set up muni Wi-Fi networks because cable and DSL operators are not interested in delivering service to these areas. They are also terrific places to launch WiMAX service because of the absence of high-speed broadband access. Take our poll (see right-hand side) — do you think WiMAX is more attractive in rural than urban areas?)

UPDATE: Make sure you read this article about Meraki:

Is Meraki as inexpensive and open-source as it seems?

Related stories on rural wireless broadband:

Wi-Fi service as a utility in Tabor, Iowa

Racine County Wi-Fi: providing access where it’s really needed

Craven County, North Carolina goes wireless: rural Wi-Fi connects schools, towns

Cambria County, Pennsylvania launches countywide wireless network

© 2008 MuniWireless. All Rights Reserved.

Previous articles about Lompoc:

Lompoc network not a failure, says city council member

Lompoc launches citywide wireless broadband network

© 2008 MuniWireless. All Rights Reserved.