1 Kenneth R. Carter Wi-Fi Hardware and Chipset Sales (World-wide ) Sources: In-Stat/MDR, December 2002 & March 2003

2 Kenneth R. Carter WiMax: A Reality Check (Hardware and Chipset Sales World-wide ?) Sources: OSP estimate Some more Some $0$ a tiny bit E2004ESoonerLater $0 WiMax Hardware Chipsets 0.0 $0 a few Some more Some Lots Tons Lots Tons

3 Kenneth R. Carter Choice of Licensing Regime Concerns Market: Service Provider or Equipment Licensing regime should offer flexibility and choice Licensed handles relocation better Use and User

4 Kenneth R. Carter Does the FCC Determine if WiMax will be Licensed or Unlicensed? License Regime Market Technology Rights Market Entry Petition Lobbying Rulemaking FCC Initiatives New Companies

5 Kenneth R. Carter WiMax Band Map WiMax Bands 2000 MHz6000 MHz Licensed Gov’t/LicensedUnlicensed Part 15CU-NII MMDS Frequency (MHz) Satellite Radio Location/FWA

6 Kenneth R. Carter Unlicensed Operation Low Power Operation without a User License No Vested Right to Continued Operation May Not Cause Harmful Interference Must Accept Any Interference Must Cease Operation if Notified by FCC that Device is Causing Harmful Interference Must Receive Equipment Authorization before Marketing/Importation

7 Kenneth R. Carter Charting Unlicensed Devices RF Devices Part 15 U-NII Subpart E U-PCS Subpart D UWB Subpart F Intentional Radiators Subpart C Low Power Transmitters Spread Spectrum Wi-Fi b g a Motorola Canopy RFIDs Cordless Phones Garage Door ISM Part 18 Blue- Tooth HomePlug

8 Kenneth R. Carter World Radio Conference Provided an Additional 255 MHz of Spectrum for U-NII Devices FCC Adopted New Rules (ET Docket ) Power Constrains for Unlicensed in the 5 GHz Band 250 mW 1 W Frequency (MHz) Link Indoor Devices Link Devices to Nodes Link Nodes (Campus) Provides A Total of 555 MHz of Spectrum! New Spectrum 250 mW mW Indoor Use Only Power

9 Kenneth R. Carter WiMax in the Regulatory Process AllocationPolicyLicensingOversight Modulation and emissions limits Power limits Interference Tower siting RF Safety Band Selection Use decisions Network architecture Identification of Users Assignment of rights Police Role

10 Kenneth R. Carter (un)Licensing Regimes for WiMax Unlicensed Licensed by Rule 70/90 GHz Station/Geographic Operator (Ham) Private Commons I received a license, and loss all my property rights.

11 Kenneth R. Carter Implications of Licensed and Unlicensed WiMax Clarity of Rights and Duties Fair Price Discrimination Unfair Competition Urban v. Rural Concerns

12 Kenneth R. Carter Summary WiMax is standard, not a radio service Ideally, the market will decide the licensing regime for WiMax Increased flexibility for spectrum users Transition focus from command and control to market and user Both licensed and unlicensed spectrum access fulfill important communications roles

13 Kenneth R. Carter WISP Business Opportunities Small companies are significant for broadband in small and underserved markets Low capital costs (unlicensed equipment) Interference protection vs. license fee tradeoff Can achieve profitability at very small scale Source: Strategic Information Services LLC McCall, Idaho – 100 country miles north of Boise.

14 Kenneth R. Carter Investor Behavior Assumptions Require Compensation for Capital More is More Time Value of Money Risk & Volatility are Bad Increased Levels of Risk Require Greater Return Optimal Trade-off between Risk and Return (Sharpe Ratio) Corporate Entity Manages Risks and Transaction Costs

15 Kenneth R. Carter Capital Structure Debt - obligation to pay (principal + interest) +Tax deductible, fixed rate of return, no profit sharing –Fixed repayment schedule Equity – interest in ownership (dividend) +Not required to pay –Not tax deductible, profit sharing Financial Leverage +Increases expected return –Increases risk

16 Kenneth R. Carter Financing Decision Two Questions: How Much? What Instrument? Business Plan –Forecast revenues and costs – free cash flows –Net Present Value + or - ? Optimal Capital Structure –Volatility of Cash Flows –Market Conditions –Management Small Business: Debt or Internal Financing

17 Kenneth R. Carter WISP Business Opportunity Small Companies are Significant for Broadband in Small and Underserved Markets Internet Service can be Vital in These Markets Emerging Platforms to get to Customers Low Capital Costs (unlicensed equipment) Interference Protection vs. License Fee Tradeoff Input Pricing Limited Resources for Security and Best Practices Local Zoning Ordinances, Towers Siting, and Safety Standards Issues

18 Kenneth R. Carter WISP Business Risks Spectrum –Network performance issues –Interference issues among Part 15 devices –Enforcement against “bad neighbors” Competition Regulatory Change Uncollectible Accounts Receivables

19 Kenneth R. Carter Policy Concerns Capital Friendly Environment vs. Competition Perverse Incentives: Moral Hazard Regulation vs. Market Forces

20 Kenneth R. Carter WISP-Friendly FCC Practice Building relations between Government and Industry –Government sponsored information exchanges can facilitate roll-out underserved markets –Government interaction is greatly appreciated –Increased Accessibility of FCC in Rural America –Education on rules Greater transparency and “plain English” in proceedings –Topical Index of WISP-related Commission Items and Activities –Plain English Summaries of Commission Items –Outreach to WISPs Increase “average Joe” comments to develop more diverse record for proceedings Education of FCC Field Personnel to Rural WISP issues

21 Kenneth R. Carter Source: Tribal Digital Village

22 Kenneth R. Carter Nearly 3000 square miles Each circle is 8 miles or 15 miles in radius Terrain issues are not factored in I’ll eventually fill in the gaps Gotta cover larger areas first Source: Odessa Office Odessa

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24 Kenneth R. Carter The diagram of the company’s wireless network illustrates better than any written description the magnitude of the network AMA TechTel has fully designed, installed and continues to maintain and expand. AMA TechTel offers a secure Layer 3 network with guaranteed uptime, QoS, and advanced services like VPNS. By using proven “carrier class” technology, AMA TechTel offers a quality, cost-effective wireless networking system operating on multiple bands to include 900 MHz, 2.4GHz, and 5.7GHz for last mile connections to customers. Most of the tower locations are connected within the 5GHz range.

25 Kenneth R. Carter Operation Anytown, IA Population 700 – Site 1

26 Kenneth R. Carter Source: Connect Rio Arriba

27 Kenneth R. Carter Source: PDQLink

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31 Kenneth R. Carter Grand Haven Area Coverage Map

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37 Kenneth R. Carter Summary WiMax is a set of standards, not a radio services. Licensing regime should offer flexibility and choice. Ideally, market will decide licensing regime. Both licensed and unlicensed spectrum access indicate successful liberalization policy Emergence of “light licenses” is likely. The hierarchal nature of WiMax lends itself to a licensed regime, but not exclusively.

38 Kenneth R. Carter Part Two: Municipal Wireless Networks in the United States Should municipal be permitted to offer wireless networks? If so, how should municipal wireless networks be regulated? The promise of municipal networks includes ubiquitous, affordable broadband and new services for communities. An elegant solution allows for municipalities to provide networks, but minimizes the negative impacts of a government’s offering communications.

39 Kenneth R. Carter Municipal Wireless Promote Open Metro-scale Wireless Connectivity Advocate Wireless Community Networking Provide a Forum for Wireless Networking Recommend Policy Develop Future Uses Free Internet access (5 locations) Cost: –$40,000 to $60,000/ sq. mile. –Total project for the entire city estimated $7 to $10 million.

40 Kenneth R. Carter Municipal Wireless: Pros and Cons The Good Underserved communities –Rural –Inner-city Provides a competitor in other markets Public/private collaboration New & improved services The Bad  14 States considering considering laws restricting municipalities –Includes Philadelphia Most municipalities are not capable of running entire network –Construction –OSS –Billing, etc.

41 Kenneth R. Carter Issues Facing Municipal Wireless 1.Unfair Access to Risk Capital 2.Partial Privatization 3.First Amendment – Freedom of Speech 4.Federal-State Preemption 5.Unfair Competition

42 Kenneth R. Carter Policy Recommendations 1.Unfair Access to Risk Capital Financed in whole or part by tax revenue Trust fund to equalize cost of capital 2.Partial Privatization Full separation of government entities Impartial rulemaking and enforcement 3.First Amendment – Freedom of Speech No prior restraints 4.Federal-State Preemption 5.Unfair Competition Open networks and regulatory parity

43 Kenneth R. Carter Conclusions Both licensed and unlicensed spectrum access fulfill important communications roles. Transition from command and control to market and user. More intense use of RF spectrum. Increased flexibility and experimentation. Experimentation  failures and successes.