Implications: The tragedy of technology development is that in order to get investors to throw money at the idea it has to do more than simply support a viable business model or simply make sense. It has to be sexy and support speculation. Investing is more than a crap shoot it is an exercise in dealing with a mass of lemmings. Investment banking involves hyping a product, service, and company. Gerson Lehrman’s model can facilitate the air clearing needed for investors to make a decision. No - Gerson Lehrman did not ask me to write this.
Analysis: I can guarantee that in the next 6 months you will hear incredible things about LTE. You will hear things about why WiMAX is better and will get even better than LTE. Hear is my suggestion to investors.
Hire a bunch of consulting engineers who participate in the standards process of both technologies and ask them what is going on in the standards development arena of both. The engineers will give you their opinions about what is what. However, the only problem is if they cannot speak in plain English for the investment banker to understand.
Why do the vendors and carriers hype technologies? The answer is you have the money they want. You are not going to invest in something that has a 40% probability of working. You want to hear that there is a 51% probability of the technology working and becoming the leader in 4G wireless. You want to hear a sexy and compelling story. You want to know who is going to win because you will only throw a few billion dollars at a winner. We are not talking the chump change of a few million dollars. We are talking about hundreds of millions and billions of dollars in investment money. With so much at stake, hyping is necessary.
Over 18 years ago when the TDMA, GSM, and CDMA wars began (these are the wars Arun Sarin had referred to in his CTIA 2008 comments about a single 4G standard – See my analysis entitled WiMAX v. LTE – Let’s Fight!! Standards Fighting is a Necessity) the following was first touted by TDMA and GSM:
- Digital technology that could support low power transmissions
- Smaller handsets
- Longer life batteries
- 3 times the subscriber capacity than the equivalent analog channel
The CDMA camp said:
- Digital technology that could support low power transmissions
- Smaller handsets
- Longer life batteries
- 40 times the subscriber capacity than the equivalent analog channel. Then it dropped to 20 times. Then it dropped to 10 times. Then it dropped to 3 times. The early deployments showed that the best it could get was about on par with TDMA and GSM.
Finally both camps stopped talking about capacity all together. Here is a key thing to understand about technology versus product. Mathematically, technology will always work to its optimal level of performance. However, product is the physical manifestation of technology. What limits technology is the performance of available products to enable the technology.
When you compare TDMA of 1992 with TDMA of 2008, the TDMA of 1992 is garbage by comparison. The same can be said of CDMA of 1992 and CDMA of 2008; the CDMA of 2008 is superior.
Most investors will want a simple answer to this very complicated question: “What technology will win LTE or WiMAX?” The question may be also phrased as: “Which technology is better? The questions may be also phrased as: “If you had to choose, which was the better technology, which one would you choose?” The funny thing about these questions was that the engineer really just wants to do their job and not deal with people wanting three second answers. The answers investors were and still are seeking are never going to be simple because the answers are dependent on usage and market needs.
Back in the early 1990s, I would actually tell the bankers that both TDMA/GSM and CDMA brought a great deal to the marketplace and that TDMA’s and GSM’s strength was that they were available while CDMA was still in development. The bankers hated that answer. I remember someone actually said: “I just want you to tell me which one was better. I don’t want to hear about pros and cons. Can’t you engineers just give me a simple answer?” I finally stopped talking to the bankers and let our marketing people deal with them. Guess what, marketing people and engineers see the world a bit differently.
Intel is now disavowing he comments made by their sales and marketing chief regarding the harmonization of WiMAX and LTE (long term evolution). Intel’s comments almost give you a feeling they are saying: “What!! Are you kidding us? It was the sales guy talking. He does not know what he is talking about.” Boy I remember the days I used to blame the sales and marketing guy for every stupid idea floated by our company. Of course, the sales guy was actually sent out there to float the stupid idea and dumb position but we called it “plausible deniability”.
My advice to investors then and even today is: speak to an expert and think through their answers making sure you understand your investment decision model. Not meaning to be a plug, but the Gerson Lehrman model is a good one. Rather than paying a research firm for a meaningless report, the investors can speak to an expert directly. You may not like their answer but tough, an independent opinion is important. Some of the experts may have a bias but you know, the investors are not responsible for the expert’s daily paycheck so there is a good likelihood the opinion is totally the expert’s opinion and not their daytime employers.
Over the next several months, LTE and WiMAX will be so hyped to get your attention that you won’t know up from down.
It is important for investors to speak to technology experts in the field. Expect disagreements between the camps. It is very rare when you ever see a clear winner of any technology battle. The marketplace and market needs dictate the winner.
In my opinion neither technology is going to disappear. LTE is based on UMTS. WiMAX has many deep pocketed backers. Too many people have invested too much money in both to let either die.
Which is better? My answer is that depends on what your service needs are.
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