3 posts tagged “wimax”
In its ongoing struggles to offer broadband Internet access, cable company Comcast recently had its hand slapped by the FCC for selectively shutting down access to certain Web services. Now, Comcast has decided in lieu of shutting down legitimate file sharing programs, it will simply limit users' Web access. If a Comcast customer creates more than 250 GB of traffic in a month, the company may terminate their service agreement.
While this is a throwback to the days when folks were charged by the kilobyte for access (remember MCI Mail and CompuServe?), it underscores some deeper problems at Comcast (and perhaps augurs similar problems at other cable Internet providers). Investors and Internet users (okay, all of us) should wonder: The profit margins are ostensibly quite healthy in the online access business, so why would a company go to such extremes—flaunt FCC rules, infuriate customers, hack clients' computers—to restrict Internet access?
Two reasons:
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It has serious infrastructure problems, very serious infrastructure problems. Clearly Comcast cannot adequately handle the data load of its current subscribers, which means possible failures or tremendous capital expense in the future to keep up. So investors should be leery.
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Its premium services, such as video on demand, are struggling. So Comcast wants to restrict movie studios and companies like Tivo from competing with Comcast's own video-on-demand business. The best way to do this is by limiting Internet access and thus preventing people from using those competing services in the future.
The first issue should certainly cause investors to worry. It indicates that the company has not anticipated the demand for Internet services and since it cannot keep up with that demand, the future looks bleak indeed for Comcast. It will either have to extensively upgrade the nodes on its network (the hubs in each neighborhood) or-–worse—add more lines. The latter is so expensive a proposition as to be prohibitive.
The second problem is ineluctable. As more video services become available, it's only a matter of months before more and more customers bump up against the 250 GB limit. Comcast tries to make 250 GB sound like a lot of data; the equivalent of 125 standard definition movies (at 2 GB a movie), the company says. However, people are watching movies in high definition now (what year is it, anyway). Those movies are more in the range of 25 to 33 GB each. Order 10 movies online from the growing number of legit movie sites, and you'll exceed Comcast's limit and your connection could be terminated, according to Comcast.
This way leads Comcast directly into antitrust lawsuits and extensive court battles. That means corporate distraction and declining profits.
Furthermore, while some may claim that 250 GB of data traffic a month is plenty for anyone, they would be wrong.
Increasingly popular Internet services promise to only raise the demand for data. Consider online backup and storage (just backing up a typical PC online would exceed Comcasts limits), and look at applications like Microsoft's Photosynth, and video calling services. These are data intensive, mainstream services. Photo and video sharing on sites like Youtube are commonplace. And online software purchases (want the next version of Photoshop?) can easily account for gigabytes of downloads. And never mind adding a few family members on the home Wi-Fi network who are addicted to World of Warcraft and iTunes. It won't take the average suburban family long to crash the 250 GB limit.
Now will Comcast actually call those families when they exceed the limits? That remains to be seen. However, it does indicate how deep the company's problems run.
On the upside, investors might look more closely at the likes of Sprint. Comcast's problems could be a boon to Sprint and its forthcoming WiMax wireless broadband service. All Sprint has to do is drop WiMax cell towers wherever Comcast has service, and voila, thousands of new subscribers.
After rumors of its demise and resurrection, it looks like WiMax will finally get the push it needs in the U.S. to become a viable contender in the wireless communications space.
Sprint and Clearwire finally rekindled a deal to launch a nationwide service--thanks to a multi-billion-dollar push from investors Comcast, Intel, Time Warner Cable, and Google. The new service will be marketed under the Clearwire brand, and it could offer true wireless broadband Internet access a year or two ahead of Verizon and AT&T's planned offerings.
For those not familiar with WiMax or some of its potential uses (ranging from cars to rural broadband service to virtually free mobile calling), see "WiMax Network's Rollout Abroad" in Popular Mechanics, "Web Surfers Can Take the Internet Along for the Ride" in The New York Times, and "Beyond WiMax" in PC Magazine.
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I like WiMax, I think WiMax is an excellent solution for broadband Internet access. I've got nothing against WiMax. But I think WiMax has a major, perhaps fatal, problem.
WiMax, as the name suggests, is an extension of the popular wireless Wi-Fi standard--a big extension. Basically, rather than just covering an office or home with wireless access, WiMax would offer wireless Internet access to people up to 30 miles away. Of course, towers would need to be built and you would have to buy a new antenna (the first models are smaller than a DirecTV dish, but bigger than a bread box).
WiMax is a great idea because it can quickly enable high-speed Internet access without digging up streets or stringing cable. More important, it could offer access to places that cannot be reached by cable or DSL, specifically rural areas where stretching cable is impractical and making DSL work is next to impossible (you need to be within a couple of miles of the phone company's local central office for DSL to work properly).
There's also another reason to feel optimistic about WiMax: Intel has been throwing its support behind it in the form of chipsets and hundreds of millions of dollars invested in WiMax startups (to see some examples, check out WiMax: Intel Capital's big bet).
The problem: Most of the initial WiMax focus has been on cities, where WiMax isn't really needed. Most municipalities already have cable, DSL, and local shops offering free Wi-Fi. None of the early WiMax rollouts are in rural areas, but if WiMax is to catch on, that's precisely where it needs to be.
The argument for why WiMax isn't going into the netherlands is that there are simply not enough customers to support the service in those areas--which is precisely the reason cable and phone companies give for failing to develop a way to extend high-speed access to these areas. Cellular companies could fill the gap, but their monopolistic lethargy makes it unlikely they will do so.
So the fear is that WiMax will face too much competition in urban areas and fail before it ever reaches rural markets, which are better suited to accept the technology. Perhaps Intel should reconsider some of its investment strategies....
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