Wimax maintains its edge

Staff Writer
14 Oct 2010

Ovum report sees HSPA services posting the steepest price drops in emerging markets, compared to DSL and Wimax

Broadband services are still a pipe dream for many consumers in emerging markets worldwide, as prices continue to be as much as two to three times higher than in their developed counterparts.

In a study titled "Broadband pricing in emerging markets: a comparison of DSL, Wimax and HSPA," Ovum notes that as GDP per capita is also lower in emerging markets, broadband services are unattainable by most consumers and are only affordable to users on the higher end of the income strata.

The muted competitive environment also does not help the consumers' case, as broadband service providers are able to "skim" the market, keeping prices higher than in more mature markets where competitive rivalry is fierce.

Given this scenario, the report says demand for broadband services in emerging markets will remain relatively slow, at least until prices decline.

While waiting for prices to significantly decline, consumers who want broadband services will do well to seek the technology that offers either the lowest entry-level price or the best value for money.

According to Ovum, consumers who are conscious of price alone may take the HSPA route, as this offers the lowest entry-level rate, averaging only $381 a year in the 15 countries included in the study. However, HSPA does not necessarily offer the best value for money as entry-level plans have far lower usage caps than their DSL and Wimax counterparts.

The study finds Wimax as the best value-for-money entry-level broadband technology, with the average emerging market price placed at only $432 a year but with higher usage caps than HSPA plans. This pricing strategy is reflective of service providers' positioning of Wimax as a cheaper alternative to DSL.

DSL, while the most expensive alternative of the three available options, is next to Wimax in terms of value for money. In Ovum's sample of 15 countries, entry-level DSL plans average around $542 a year, but with very high usage caps. Being provided mostly by old incumbents, however, DSL is hard pressed to bring prices down to lower than Wimax levels due to general lack of efficiency and ongoing adjustment to the new competitive environment.

To be more specific, the study shows that for entry-level plans, Wimax has the lowest average price per 100MB usage at around $0.80 - almost 40% lower than the DSL average of $1.31. The price of entry-level HSPA services is a high $17.73, on average, across the 15 economies included in the study.

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