Early business cases from the WiMAX community show attractive potential returns from a variety of business environments, including 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 modelling shows 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 (Source: Analysys Research, 2006)
Developing countries are often cited as the prime opportunity for WiMAX operators, 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 customer premises equipment (CPE) is likely to suppress growth if customers have to pay for it up front, or pay a monthly lease fee. Therefore, WiMAX 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. DSL operators are even extending their services to rural areas previously out of the reach of broadband services.
Small returns – from lower than expected ARPU or take-up – make high upfront investments in network infrastructure, marketing and CPE highly risky for WiMAX operators and investors. They will need to select their targets with extreme care.
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, and determines the realistic financial returns.