Market inertia stunts Wimax potential

23 Jan 2008

The Wimax industry continues to gather momentum in Asia as it draws attention as a hotbed of opportunities and deployment. This is despite recent setbacks and negative press, clouded investor confidence especially in the US, continued delays in certified mobile Wimax equipment, and uncertainty about customer-premises equipment and technical performance.

Across Asia Pacific, considerable licensing activity and initial deployments are being seen. However, although spectrum is the lifeblood of wireless, it does not ensure a business case nor warrant success.

The potential for Wimax is different across the region, particularly in view of uneven infrastructure development. Wimax will have considerable success in developing Asia where broadband uptake will be a catalyst for adoption, but is it the advanced markets like Japan, Korea and Taiwan that provide potential adopters.

In 2006 operators in many developed AP markets planned mobile Wimax deployments in 2007 but various delays have pushed back many timelines by about 12-18 months. Certified mobile equipment is not expected until late 2008. However, there are players offering 'pre-Wimax' services - fixed Wimax serving various niches - and they are vigorously pursuing licenses and deployment.

Given Wimax is a competitor to both cellular broadband solutions and fixed broadband, much of its market potential is shrinking even before this appears.

High-speed packet access has established itself for mobile broadband in many markets. This means Wimax will need to demonstrate superior service or vastly cheaper prices to gain widespread take-up, which is unlikely in the short to medium term. HSPA has huge scale advantages and strong momentum, translating to more devices and lower costs. In this sense, Wimax delays are critical to its mass market success.

The supply of laptops with built-in Wimax connectivity (free CPE from operator perspective) does provide Wimax a potential leg up. However, this will have virtually no impact in the region until at least 2009. Intel has only announced commitment to build in 2.5-GHz mobile Wimax connectivity. While 2.3-GHz and 3.5-GHz bands are important for the region, Intel has not given timelines when these bands will be included.

The attach rate of HSPA in laptops is also expected to ramp up as cost points improve. HSPA advantages in terms of distribution and coverage mean alternative Wimax operators will struggle until Wimax-ready laptops become available.

Still waiting

Also, despite mobile broadband take-up as a fixed-service substitute, it is doubtful whether consumers are willing to pay for mobile broadband on top of fixed broadband connection.
Another difficulty for Wimax is that, even when supporting speeds of 2-4 Mbps, it does not compare to the tens of Mbps on offer, huge capacity and services such as pay-TV that are available on upgraded fixed networks.

Beyond these, numerous new business models have been proposed for Wimax, and there is certainly a possibility of new and innovative services emerging. Most of these are driven by the development of an ecosystem of built-in consumer electronics devices.

However, limitations with cellular broadband solutions like HSPA - such as spectrum availability and capacity - will drive numerous operators to take advantage of Wimax spectrum ownership to deploy and leverage the technology and provide further capacity.

Because of the speed to setup Wimax and its nomadic ability, it has further opportunities to provide fixed/nomadic broadband substitute services in various niches where wireless operators are already seeing success.

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