Free article: Strong opportunities for WiMAX will be few and far between, even in developing countries

Early business cases from the WiMAX community show attractive potential returns from a variety of business environments, including urban, suburban and rural areas of both developed and developing markets. However, these business cases depend on optimistic assumptions for a number of critical factors, such as those shown in Figure 1. More realistic modeling reveals that there may be very few situations in which WiMAX has a secure long-term business case.

Figure 1: Critical factors in the business case for WiMAX

Developing countries are often cited as the prime opportunity for WiMAX networks, by virtue of the lack of a viable fixed network alternative. While WiMAX operators do have the opportunity to seize control of the broadband markets in these countries, the low level of disposable income and low penetration of PCs will limit the rate of growth and ARPU that can be achieved. Voice telephony will have greater relative importance to end users in these markets and low-cost cellular services (with low-cost handsets) are already growing strongly. These may be more likely than broadband access to attract the limited available disposable income. Also, expensive WiMAX CPE is likely to suppress growth if customers have to pay for it up front, or pay a monthly lease fee. Therefore, operators may have to bear the significant cost of WiMAX CPE themselves. With WiMAX remaining a niche product, there will be limited reduction in the cost of equipment from economies of scale.

In developed markets, head-to-head competition with DSL could be disastrous for WiMAX. DSL performance is continually advancing, and operators are offering new services, such as IPTV. Meanwhile, major consumer brands now offer their own broadband services, using either wholesale DSL or local loop unbundling. Amid this fierce competition, WiMAX operators will struggle to carve out a significant share of the fixed broadband market, confining them to the much smaller, and somewhat uncertain, opportunity of mobile broadband access. Even in rural areas, previously out of the reach of broadband services, DSL operators are extending the reach and capability or their services.

For WiMAX operators and investors, small returns in many situations, from lower ARPU or take-up than expected, make high up-front investments in network infrastructure, marketing and customer premises equipment highly risky. They will need to select their targets with extreme care.

Our new report The Business Case for WiMAX models the business case for WiMAX in a number of potential deployment scenarios, including a developing market urban area, a developed market urban area and a developed market rural town. It identifies the critical factors that will make or break the business case for WiMAX in these environments, illustrated by a variety of case studies and market data.