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Fixed Market Trends

The fixed/portable broadband wireless equipment market (sub-11GHz) has grown from a
$430 million (USD) market to $562 million, a 30% increase. Maravedis predicts the fixed
broadband wireless market to pass the $ 2 billion mark by 2010.

For the first time in its history, vendors including Airspan and Alvarion have made yet
modest but positive cash flows.  Further broadband wireless has evolved from an obscure
acronym to the next big thing thanks to Intel's marketing machine and the formidable
progress made by the WiMAX forum, growing membership to the extent that WiMAX is
now synonymous with broadband wireless.

Maravedis has been following the industry long enough not to fall into the trap of using
WiMAX as representing the whole story. WiMAX is an important, highly visible part of
the evolving fixed/portable field but not all of it! Other technologies including DOCSISbase,
TD-CDMA and 802.20 merit to be analyzed as well.

The fundamentals for continued growth remain sound. Broadband is becoming a
necessity for many residential and business subscribers worldwide. There were close to
130 million broadband subscribers worldwide at the end of 2004, a 30% growth from
2003.

Although DSL and Cable are poised to remain the dominant technologies for access in
urban and developed areas, pre-standard wireless access technologies are already
becoming reliable and cost effective complements or alternatives to providing voice and
data services.

Some Key Findings include:

Service Provider Trends

Maravedis estimates that close to 1 million subscribers worldwide had some form of
fixed broadband (+256Kbps bi-directional) wireless access. Maravedis estimates total
service revenues in 2004 to be US$1.4 billion.

In developing countries, representing most of the worldwide population, the potential for
BWA/WiMAX growth is most pronounced. In rural areas, governments at all levels are
driving the growth of broadband wireless through continuing frequency allocation and
subsidies to make the rural business case more attractive in order to reduce the digital
divide. Our research indicates that a tipping point that will drive increased unit demand
is likely to occur due to effects of standardization: commoditized IC/SoCs will help drive
the price equation, stimulate increased awareness and market driven demand, and provide
increased supply stability and compatibility across similar equipment profiles

This year, operators will explore the challenge of growing broadband ARPU. There will
not be a single solution: faster speeds and VoIP will work for some; content and IPTV
services for others. There will be a growth in commercial bundles driven by telcos'
responses to cable operators' triple play services. We expect VoIP services to continue to
show strong growth and continuing acceleration in subscriber base in both the consumer
and enterprise segments.

Maravedis surveyed operators to understand their greatest expectations vis a vis
upcoming WiMAX equipment. The results of the survey are presented in the report. In
essence, the number one expectation for service providers is lower CPE equipment cost,
ideally in the sub $300 range. This is not a surprise when considering the impact of CPE
subsidies in the total business case. The second highest priority expressed is for base
stations to deliver more throughput, a response that came ahead of benefits such as
Interoperability, ease of installation or coverage. Responses changed noticeably
depending on service class: business or residential customers.

We also looked at BWA operators strategy towards mobility. The majority of service
providers are excited about the prospects of mobility but concerns about regulation and
network complexity alter the excitement.

Whether it is 3 G or 802.16 e,/WiBro the success of mobile broadband will be driven by
the development of user friendly applications and handsets. In this section, Maravedis
provides an overview of what are the applications driving the mobile broadband market
including mobile gaming, multimedia messaging, gambling and other applications such
as ring tones. The mobile consumer market represents the lion's share of mobile data
services revenue due to gaming.

Spectrum & Regulation Trends

Maravedis spent more than six months directly surveying regulators in each of the fifty
countries reviewed in this section. This aspect of the research and the construction of a
detailed database reference is by far the most thorough in the industry. Maravedis fulfills
the challenging task to contact, collect and continuously update its database because
many customers have come to depend upon this resource to determine product
development and marketing efforts.

Our research indicates that 82% of regulators surveyed allow both TDD and FDD
multiplexing. About 50% of the countries require 3.5MHz channels while the rest is
divided between 7 and 14Mhz. Very few countries impose narrow 1.75MHz channels. In
Asia, the situation is more diverse. For spectrum block sizes, the situation also varies
form region to region and between countries within the same region.
3.5GHz remains a band allocated mostly for fixed only services in 77% of the countries
surveyed. However the regulators are starting to revise their positions to allow portable
services in a first step towards allowing full mobility at 3.5GHz. 13% of countries
surveyed have loosened up their requirements for fixed only services at 3.5GHz.
Regulators recognize that the line distinguishing BWA and 3G is blurring and may
converge in the future.

While most of Europe the band 2.5-2.69 GHz is exclusively reserved for UMTS mobile
services and is therefore not available to BWA/WIMAX service providers. In other parts
of the world, initiatives such as the ITU WP8F, are pushing to allow interoperability
bodies between UMTS and OFDM in these mobile services.

Beyond the regulation constraints, WiMAX needs lower bands to economically deploy
networks that will provide full mobility. Higher than 3GHz bands are not suitable for
mobile networks as proper coverage would require too many base stations compared to
sub 1GHz bands. The WiMAX regulatory group is working towards influencing the
regulatory bodies worldwide to open up bands for WiMAX mobility. Those bands could
include the 700 MHz and 450 MHz. The regulatory working group is also working to
create an environment to support eventual global roaming for nomadic & mobile WiMAX devices

Solution Vendor Trends

Maravedis has surveyed more than forty BWA/WiMAX system vendors and larger
infrastructure suppliers. During our careful review of product specifications, we have
attempted to get a sense of the true capabilities of current proprietary broadband wireless
and future WiMAX solutions.

In this study, Maravedis provides its readers with a review of real life deployments,
product specifications, as well as an in-depth analysis of the strengths and weaknesses of
every vendor. Alvarion, the market leader with 26% market share, may not have the
highest performance system in the market, but it continues to beat every competitor
according to several important business metrics such as customer base, OEM
relationships, installed base, revenues and financial position. We also came to the
conclusion that proprietary systems will be phased out only gradually and coexist in
hybrid networks with WiMAX certified solutions. Such solutions will not be
implemented commercially until at least Q1 2006.

We also provide a dynamic review of continued industry consolidation and guidance as
to who will be around in the next 2 years and why. We look at how 802.16 compliant
vendors will differentiate themselves from one another once the standard is in place and
becomes widely adopted. OEM relationships have become key for system vendors
hoping to grab a share not only of the soon to be commoditized fixed WiMAX market,
but more importantly to position themselves among large mobile operators who will
continue to shop with their traditional large suppliers.

WiMAX Trends

The whole concept around standardization is to reduce equipment and component costs
through integration and economies of scale that will, in turn, allow for mass production at
lower cost. In particular, current chipsets are custom-built for each BWA vendor making
equipment development and manufacturing both costly and time consuming.

With large volumes, chipsets could sell for as little as $25 and other WiMAX
components could benefit from these mass volumes as well. We expect the cost
reduction impact to be mostly on the CPE at an average selling price close to $100 by
2008. Base station costs are more complex due to the variety of types and scale.
However base stations are less of a factor in the economic equation for operator
deployments.

A notable initial benefit of WiMAX is to reduce customer confusion represented by the
advent of a WiMAX compliance label. However the hype generated by the press and
vendors has sent an overly optimistic picture of what WiMAX systems can actually
deliver. In this report we provide an in-depth reality check about what to expect in the
next five years. Both proprietary systems and WiMAX are aiming at improving the
coverage and penetration limitations of existing systems. The fact is that no system can
go beyond the laws of physics and every deployment will face different challenges.

WiBro

WiBro is being incorporated into the WiMAX standard effort but can be viewed, for the
time being, as a separate market development centered in South Korea that is valuable
because it will be an early large scale deployment. WiBro will demonstrate the early
capabilities of WiMAX systems for both fixed and mobile broadband communications
that compares favorably for nomadic to mobile applications of 3.5G-4G cellular.
WiBro is likely to change opinions about the technical credibility and market merits
while dispelling myths perpetrated by some that WiMAX is too late or offers nothing
new. A major problem with the credibility of the WiMAX camp is that any delay or
perceived delay registers as vaporware and validation to the proposition that WiMAX
will not shape up as a viable competition to existing wireless cellular or as some new
breed of popular wireless broadband phenomena. WiBro is a central factor in proving
that mobile WiMAX is real and is gaining more sales momentum.

The three operators who have been licensed spectrum by the Korean government are
required to spend at least $1 billion US each on deployment of WiBro systems.
Operators Korea Telecom, SK Telecom and Hanaro Telecom are required to start
offering service in 2006.

These developments and emerging trends make WiBro developments and harmonization
within WiMAX a key area of focus through 2005-2007. Maravedis provides insights into
the plans of major players in the WiBro initiative and how this is likely to effect markets
globally.

Mobility Trends:

The largest markets for wireless broadband will be for mobile applications. Mobile
broadband is being developed from two opposing directions: From the WiMAX side,
systems will become increasingly mobile as unification takes place under the 802.16
standard. From the cellular mobile side, systems are being driven to deliver voice, rich
media and broadband data over an IP network. Both streams of development eventually
will deliver similar data rates. However cellular phone/data network sales currently
greatly exceed BWA in terms of both unit numbers and revenues.

The trend for WiMAX systems starts with the first stage being for fixed-nomadic CPEs
with systems expected to become WiMAX Certified starting in the mid-2005.
The second stage of WiMAX systems based on 802.16e will provide greater nomadic
followed by PCMCIA enabled laptop mobility. Maravedis analyses the trends towards
greater mobility within individual IC and equipment companies, within the standards
groups and forums, spectrum and regulatory issues, and major regional deployments such
as WiBro. The exciting stages of growth of WiMAX are fueled by fundamental shifts in
underlying wireless technology, global shifts in market demand, and political and
corporate aspirations to take part in a less fettered, standards based 3.5G-4G wireless
platform.

Maravedis does not expect WiMAX to become a 3G killer in the near future. WiMAX
provides a framework for 4G mobile, more squarely pitted in the mobile market arena
against 3GPP rev.7 than against either current 1x EV-DO/EV-DV or soon to roll out
HSDPA.

For future considerations as the road maps of the two camps unfurl, WiMAX and 3GPP
will overlap and contend for common mobile broadband ground, each with distinct
market and technology development orientations but less distance that separating them.
Qualcomm and other vested interests in cellular fields contend, WiMAX is either too late
or unnecessary. Competitive approaches should be recognized realistically and
welcomed by implementers and users, particularly those that fit global patterns of
economic and political expression. These major trends and others lead to both a
conflicted and exciting future for wireless developments.

Maravedis spent time to build fundamental data through extensive interviews, fact
gathering and analysis of legacy proprietary, fixed Point to Point infrastructure and the
emerging field of 802.16/WiMAX technologies and trends because these fields are new
or less understood and will have influence on converging markets. We also present the
fields of legacy and emerging 3GPP mobile systems and road maps because this also
defines a major adversary and direction in which the emerging field of technology is
headed.

Key Findings include:

Chipset Vendor Trends

The whole industry is benefiting from the entry into the market of Intel which is behind
most of the publicity around WiMAX. Intel has signed partnerships with the most
important traditional BWA players but those deals are not a guarantee of future purchase
orders, as evidenced by the announcement of multiple chipset suppliers to the same
system vendors such as Airspan. On the CPE side however, we believe that Intel will
dominate the market. However other chipset makers such as Wavesat and Sequans or
Picochip have made their footprint with base station and/or CPE solutions.

The market for 802.16 chipsets should pass the one million-unit mark per year in 2007-
2008 while 802.16e chipsets will be introduced in late 2007 and will grow exponentially
thereafter.

Traditional Point to Point Analysis

Point-to-point (PTP) microwave communications is an industry with deep roots and still
constitutes a far larger industry than any other segment of broadband wireless with
current sales approaching the $4 billion mark worldwide and projected to reach
approximately $6 billion before the end of the decade. Backhaul itself accounts for
roughly 70% of overall sales within the PTP category today. We expect that figure to
increase to 80% within five years. In the future we see PTP microwave losing ground to
both PMP/WiMAX and to fiber.

Market Size Forecasts

We believe the BWA market will finally pass the billion dollars psychological mark in
2007 using a CAGR of 45% for CPEs and 25% for base stations revenues. This is a
realistic expectation in light of the historical industry overall CAGR in 1999-2004 of
50%. This report provides market forecasts in units and $ for the 2005-2010 period for
both CPEs and base stations, fixed and mobile systems as well as numerous breakdowns.

Updates
The Maravedis WiMAX report comes with regular FREE updates in the form of highly selected newsletters of the industry sent to you on a regular basis. You will receive those newsletters until a new edition of the report is published.

Copyright ©March 2005 Maravedis Inc

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