WiMAX – A Tale of Two Markets?

WiMAX broadband wireless technology has promised much but has been plagued with delays--the recent launch of Sprint's Xohm service has shown that the technology is at last mature enough to be rolled out. The services offered via WiMAX and other wireless broadband technologies will depend on the types of markets served; these markets tend to be either emerging markets, where there is a pent-up demand for basic broadband and voice services, or mature markets, where personal mobile services are in high demand. Each of these markets have very different requirements resulting in very different coverage needs that, together with other factors greatly impact business case economics. It remains to be seen whether WiMAX will prove to be economically attractive to both of these market types when compared to 3G/LTE technologies, or whether WiMAX will become more of a niche play.

Mobile WiMAX technology (IEEE 802.16e) offers great promise to deliver high speed broadband Internet access with DSL-type quality, performance, and price, as well as facilitating the supply of low price CPE’s (Consumer Premise Equipment) that will ‘free’ end users from locking in to carriers that require more expensive PDA’s and modems for network access. Unfortunately, this promise is not yet fulfilled and WiMAX network deployments have been plagued with delays related to technical and performance issues as well as insufficient supplies of CPE’s. These delays have created opportunities for other technologies to catch up with WiMAX and fill the demand void—notably HSPA (High Speed Packet Access) services added to 3G networks. This delay has also enabled the other 4G-like technology, LTE (Long Term Evolution), to become uppermost in the minds of existing 3G operators, since the technology is now perceived to be sufficiently developed for 3G operators to include it in their 5 year strategic plans, sometimes in place of WiMAX.

However, there is good news for WiMAX. Sprint-Nextel, long regarded as the bell whether for WiMAX network deployment and service introduction in the US, finally launched its WiMAX service in Baltimore last month. The service is called Xohm and initial service offerings are priced starting at $25 per month. There are a number of CPE’s available all under $100 ranging from desktop modems to PC cards and various laptops with embedded WiMAX modems can be purchased. Xohm was launched with 180 base stations that give partial coverage to Baltimore, but more will be deployed in the city as well as other cities in the coming months. So, from a technology perspective, the Xohm launch represents a coming of age of WiMAX—the next phase will prove whether the economics of the business case hold up.

Regarding the business case, analysis suggests that two distinct types of market situations are developing for WiMAX and wireless broadband in general (refer to the figure that shows, at a country level, broadband access pent-up demand vs. Country GDP (Gross Domestic Product)):

Emerging markets—these are typically countries where there is a pent-up demand for basic broadband and voice services in underserved markets. These basic services require only fixed wireless and perhaps nomadic types of access and window mounted or externally mounted antennas/CPE’s will be adequate—this greatly enhances coverage per cell site and has a large positive impact on business case economics.

Mature markets—are typically prevalent where well-developed fixed and wireless network infrastructures are present. Typical demands are for services that are anytime, anywhere, high POP traffic, full mobility and deep in-building penetration. These requirements result in very different price points for services and much greater demands on coverage resulting in more cost to serve these markets with wireless networks.
These two types of market extremes result in very different business case economics. The less stringent coverage requirements suggest that there is an overall better business case for emerging markets for technologies such as WiMAX—this may yet result in WiMAX being deployed more in these markets and hence being somewhat relegated to a niche technology, while the mature markets develop through existing mobile networks via HSPA and ultimately to LTE.

The business case economics will ultimately determine the success and penetration of each type of wireless technology; the two markets defined above present very different economic considerations. First and foremost for any wireless technology is the cost of coverage; the incremental cost of capacity will be added to this cost as the number of users increases. Radio factors that affect coverage, such as frequency and morphology, have a significant impact but coverage is also greatly affected by the type of service offered. Emerging market service needs are basic broadband and voice services in a fixed environment. The coverage for these services will be achieved with considerably less cell sites than for mature market services. For example, a gain of just 3 dB in the link budget will reduce coverage costs typically by 30%[i]. Of course, there are other factors that have a significant impact on the business case and include CPE price and types, site acquisition costs, spectrum cost and frequency range, and network costs (RAN and core network). While all of these costs are important and will be different for each of the two markets, it is the type of services demanded that will have one of the greatest impacts.

[i] “The Dollars and Sense of Broadband Wireless”, Signals Research Group, March 2008, www.signalsresearch.com

John Barton is a managing partner at Santiva www.santiva.net

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