1. EXECUTIVE SUMMARY

As popular consumer electronics categories continue to penetrate, many devices inexplicably do not yet support connection to the Internet.
Digital devices such as portable audio and video players rely on a personal computer with a high -speed Internet connection to purchase, synchronize, and access their media library. The same behavior exists with digital cameras, which promise to give consumers more control over their images. Only those comfortable with their PC skills and ability to master new software and online portals have been able to take advantage of these new functions. Small businesses have emerged solely to assist iPod owners with transferring their CD collections to portable audio players. Eastman Kodak has developed a global kiosk business enabling consumers to bring their digital camera media to a retailer and print their own images. Complexity of software applications and operating systems has created phobias for consumers who want to gather, interact with, and share their material. Internet services make this connection for some,
while others remain on their own digital islands.

Traditionally, the Internet is where consumers check their electronic mail or obtain information from remote servers about sports, weather, news, and personal interests. However, the Internet is foremost a global communications network. Consumer applications such as television, radio, voice communications, and socializing are increasingly popular Internet applications typified by online services such as Joost, Live365, Podshow, Skype, Second Life, Blogger, and MySpace. Consumers are looking for more ways to partake in these experiences.

The widespread availability of broadband Internet access has made the Internet a larger part of how consumers access media. These high -speed connections first emerged in business enterprises but have become more common in the home. Estimates show that one billion people today have access to the Internet. Companies who provide Internet access services are actively looking for how to connect the next billion users to the network. The overwhelming method for consumer Internet acc ess is via the home computer. Internet access is delivered over phone lines, coaxial cable, fiber optics, and radio frequency wireless services. The home receives the signal through a modem box that translates data into the Ethernet protocol, which connect s to a desktop or laptop computer using the same protocol.

To broaden connections beyond the home, consumers are looking for ways to remain connected and get access to their multimedia content anytime and anywhere. Wi -Fi hotspots are more commonly available, but still confine service to a facility. Cellular voice services using third generation (3G) services now include small data pipes for services like email, web browsing, and short message service (SMS). Trying to replicate the broadband experience fro m home over these connections is a frustrating experience. The ecosystem to support development of 3G protocols for the variety of desired consumer electronics is not yet achievable at minimal IPR impact and low chipset costs. Standards development organizations saw this bottleneck forming several years ago and created broadband wireless protocols that are designed on an Internet Protocol (IP) network like that supporting home broadband services. Promising multi -megabit per second performance to each user, these broadband wireless networks are the baseline for delivering the Internet experience to any location and any device.

One such broadband wireless technology is WiMAX. WiMAX takes the high-speed experience of home broadband Internet access and puts it wherever the consumer is – at home, at work, or on the road. The combination of wireless Internet access anytime, anywhere for the mass of unconnected consumer electronics devices brings about new opportunities for convenience and real -time immersion in th e digital world.

Despite the political battle in Europe over wireless spectrum policy, network operators continue to invest in Mobile WiMAX. Over 200 WiMAX trials have been announced, touching all of the continents. The majority of the trials are not with mobile carriers, but with broadband operators and new entities. The first Mobile WiMAX network to launch commercially was the WiBro service in South Korea. All of Seoul is currently covered by deployed infrastructure with services being offered by carrier s KT and SKTelecom. Both operators selected Samsung as their infrastructure and device partner to fast -track government mandates to launch a commercial service during 2006. The initial launch has been met with slow adoption. Approximately 2,000 paying subscribers are now testing the WiBro service in an effort to identify the most popular applications an attractive business models. At this rate, attaining one million users on the WiBro network would be very far off.

The announcement grabbing the most attention – and perhaps the most ambitious – of the second half of 2006 was Sprint Nextel’s intent to invest $3 billion for a Mobile WiMAX network covering 100 million potential subscribers by 2008. Sprint Nextel has enlisted the support of Motorola, Nokia, and Samsung as equipment partners, with each being assigned trial territories including Chicago, Washington D.C., and four cities in Texas. A roadmap for 20 U.S. cities beyond the initial trials was announced in March 2007. Intel, LG Electronics ZyXEL, ZTE, and other device manufacturers have been courted to build a product portfolio for the mid-2008 commercial launch.

Other notable Mobile WiMAX projects include Japan’s KDDI, which plans to complement its 3G voice offering with a WiMAX network, and Taiwan’s self-named “M-Taiwan” project. M-Taiwan attempts to tackle how mobile wireless technology can enhance public services by assembling corporate project teams focused on creating optimal application services and business plans. Enabling service coverage with these major infrastructure investments is critical. The range of consumer devices will be limited until network coverage is widely available.

Mobile WiMAX infrastructure and client devices to support the operator trials and commercial launches continue to emerge. This report has identified more than 50 consumer electronics product announcements for Mobile WiMAX, from desktop customer premise equipment (CPE) to multi - mode ultra-mobile PCs to in-dash vehicle information and entertainment systems. Devices that enable WiMAX services for computing platforms such as laptop and desktop PCs were the first to emerge in 2006. This year, dual-mode HSDPA/WiMAX handsets have been demonstrated, with general availability expected in 2008. Initial Mobile WiMAX chipsets are not optimized for power consumption and result in less than optimal battery life for handheld devices. This behavior, also seen in first generation hand held devices for GSM and CDMA protocols, will be overcome in the next 18 -24 months through improved OFDMA efficiencies and tighter integration of core building blocks.

Consumer access to Mobile WiMAX products will initially occur in sales channel partnerships with network operators. Subsidized product offerings bundled with 12-24 month contracts are expect ed. Carriers have learned from 3G data trials and deployments that consumers do not understand how to measure data consumption (How much of my monthly subscription is consumed when transferring an image or song?) as they do for voice minutes. A fixed month ly cost is impractical for digital cameras and other consumer electronics devices that experience data transfers in bursts. As a result, Mobile WiMAX subscriptions will be offered based on time (unlimited use for an hour, day, or month) in addition to subscriptions based on monthly data consumption levels measured in MB and GB. Additional sales channels for consumer devices will open as consumers seek solutions at retail and e -commerce without a service contract.

Many analysts are forecasting significant growth in the global implementation of WiMAX networks and services. The home broadband experience can now be enjoyed anytime, anywhere using embedded WiMAX consumer electronics devices. Successful consumer electronics categories such as portable MP3 audio p layers and digital cameras rely on PC households to synchronize or transfer content. Mobile WiMAX connects these multimedia devices to the Internet, enabling new revenue sources for operators and content owners while providing convenience and valuable new services for consumers.

This report includes analysis of interviews with more than 35 leading consumer electronics vendors and WiMAX manufacturers. Findings from these interviews include opportunities and risks for embedding WiMAX in consumer electronics devices.

2. KEY FINDINGS

As the focus of WiMAX shifts from fixed and stationary deployments for broadband wireless access, to portable and mobile uses, there appear to be several opportunities to embed Mobile WiMAX technology in consumer electronics devices. We interviewed more than 35 companies in the consumer electronics market and WiMAX ecosystem to understand what opportunities and risks arise as these two industries intersect.

• We expect 25 million CE WiMAX units to be shipped in 2012 representing 67% of all Customer Premises Equipment (CPE)
• Consumers want the experience of their home, PC -based broadband without restriction of location. WiMAX is the first wireless WAN protocol built from the ground up for IP networking, the same standards that the Internet is based on. WiMAX does not rely on low data rate, high-latency, circuit-switched voice technology. Quality of service (QoS) mechanisms are built into the WiMAX chipsets to support and manage multiple service flows.
• Broadband spectrum necessary for the WiMAX experience is different spectrum from that which is being used today by 3G operators for voice services. For 3G operators to offer broadband megabit -plus services to each user they will also seek additional spectrum.
• More than 200 announced operator trials of WiMAX technology will give way to several nationwide Mobile WiMAX networks and numerous regional deployments in place from 2008 to 2009. Enabling the home broadband experience in new locations is the early “killer app” for Mobile WiMAX.
• With one of the strongest technology ecosystems today, WiMAX is being promoted by more than 400 companies across the telecommunications and networking industries. Six of the 10 largest semiconductor companies have announced WiMAX strategies and products.
• More than 50 WiMAX-enabled consumer electronics prod ucts have been announced. A similar number are expected to be announced over the balance of 2007. WiMAX operator dialogue and product planning with many consumer electronics manufacturers have already commenced.
• Mobile devices that combine WiMAX and 3G data services will become the predominant implementation of WAN data access. Development will continue in parallel on LTE, NGMN, and 802.16m specifications towards post-2010 4G networks.
• Certain consumer electronics categories such as digital cameras do not require always-on broadband connections. As a result, network operators have the opportunity for new subscription billing plans that permit hourly or daily use.
• Consumer electronics devices that currently store music and video content can lessen their storage requirements by streaming media to the subscriber from home media libraries or e -commerce portals. New content can be leased to consumers instead of purchased. This leasing model of micro-payments creates new revenue sources for the network operator as well as the content owner.
• Multiple successful consumer electronics categories such as MP3 audio players and digital cameras rely on personal computers to synchronize or share music and images. Embedding Mobile WiMAX in these devices removes the requirement to connect them to a PC, while creating an opportunity to reach consumers who do not have a PC but value the devices and still want to share content.
• Existing technologies for recording video content (such as TiVO) and place-shifting video playback (such as Slingbox) extend to Mobile WiMAX networks. Custom content, personal interests, recorded content, and on - demand services are possible with a Mobile WiMAX network. More consumer eyes are on more content in more places. Opportunities and risks for embedding WiMAX in Consumer Electronics
• More than a dozen Taiwanese ODM vendors have announced WiMAX equipment plans. The early involvement of these companies to accelerate volume production capabilities is a significant win for WiMAX. Their experience in OFDM and MIMO are valuable for productization of Mobile WiMAX.
• Government endorsement of initiatives, such as South Korea’s WiBro service and Taiwan’s M-Taiwan program, are positive indicators for broadband wireless adoption.
• Early winners in Mobile WiMAX are the manufacturers providing the network infrastructure base stations. Their ability to get operators deployed with acceptable coverage and performance – and to create a highly repeatable process for that – is key to satisfying consumer needs.

2.2 Risks for Embedding WiMAX in Consumer Electronics

• Large service networks do not yet exist for Mobile WiMAX. Champions of 3G data protocols for broadband wireless network adoption point to existing circuit-switched networks built over the last 10 years as the quickest path to a ubiquitous network. Consumer applications such as Opportunities and risks for embedding vehicle telematics and information systems will not be feasible until WiMAX network coverage is satisfactory.
• Spectrum allocations for WiMAX vary in each country. Initial consumer electronics devices will be frequency or certification profile -specific (2.3 GHz, 2.5 GHz, or 3.5 GHz, for example). Multiple product SKUs 1 are necessary to support language and regulatory requirements.
• 3G carrier resistance to Mobile WiMAX will continue. 3G operators could threaten adoption by purchasing WiMAX spectrum and sitting on it, a defensive investment that is significantly less expensive than rolling out a competitive service. Other 3G operators will invest in WiMAX spectrum as an insurance policy. Most of the enthusiasm about 3G is coming from Europe, where fundamental barriers such as spectrum availability have been erected to keep incumbents in place. 3G operators can delay up to 1-2 years at most before they will have to switch to an IP -centric network offering.
• Current Mobile WiMAX chipsets do not meet acceptable levels of power consumption and heat dissipation for integration into battery -powered handset devices. First generation Mobile WiMAX chipsets yielded total consumption around 1 watt. Ideally, these levels need to come down to about 150 mW for support of current CE handset batteries. These inefficiencies are expected to be overcome in the next 18 -24 months. Next generation chipsets are exhibiting consumption reductions of around 300 - 500mW. While this is a drop of nearly 50% from first generation chipsets, it leaves ample room for improvement. Initial Mobile WiMAX consumer devices are computing peripherals such as PC cards, USB dongles, and desktop CPE modems that rely on host or external power and will not be impacted by the consumption of current chipsets.
• The WiMAX Forum Certified industry certification program may be insufficient or delayed. Network operators could choose to launch Mobile WiMAX networks without certified products or delay network launches in general. Carriers who lack trust in industry certification programs will only permit consumer electronics devices on their network that have passed operator-specific testing programs.
• Operator business models for Mobile WiMAX are unproven. Mobile broadband wireless services are new. Ideal channels for product distribution and subscription plans are not understood.