Mobile WiMAX: The Long Term Revolution

By Adlane Fellah

The performance of the BWA/WiMAX industry during the first half of 2008 suggests significant growth is near. BWA/WiMAX subscribers worldwide reached 2.3 million in second quarter 2008--a 19 percent growth over the first quarter and a 70 percent increase over second quarter 2007. The launch of Xohm by Sprint represents the beginning of a tipping point for the industry. Confidence in WiMAX technology, and the disruptive incubator nature of the WiMAX business creation model, is growing, but the revolution will take years to fully materialize. In fact, large-scale WiMAX networks remain elusive in every region of the world.

Sprint's U.S. debut was pushed from April to September and chances are Xohm in Baltimore is experiencing its first paid traffic as you read this. French and Malaysian license holders claim to be waiting for more certified products before they start rolling out services. Taiwan and Japan remain in the network planning and deployment stage. Australia canceled its OPEL broadband program. WiBro South Korea subscribers are peaking in Seoul, requiring additional cities to develop coverage. BSNL's regional franchisee program looks promising for India, but needs more time. Much remains to be accomplished to demonstrate that WiMAX is a service that rivals the network coverage of 3G cellular. 

The task of achieving competitive coverage is modified by the degree that operators provide multi-mode WiMAX plus GSM and EV-DO support and roaming to other networks. Sprint has announced plans to provide WiMAX and EV-DO multi-mode by early 2009. Chipset and module suppliers have begun to introduce multi-mode GSM and EV-DO plus WiMAX. How pervasive and price competitive multi-mode with 3G will become remains to be seen, but this shifts the market matrix needed to achieve coverage. Instead of being in conflict with incumbent networks, WiMAX might evolve similarly to each generation of mobile network that gained coverage via multi-mode in prior generations.

WiMAX deployments continue to surface across all regions of the world, mainly for fixed and portable applications. Mobile WiMAX, based upon the 802.16e-2005 standard, will continue to gain traction and eventually overtake 802.16-2004 and vendor proprietary deployments in most statistical categories. Something to watch will be costs along the entire supply chain as volume chipsets for terminals ramp to meet the demand of regional and nationwide network launches. For mobile WiMAX, converting the business plans of mobile broadband into real success depends on the availability of terminals and compelling customer applications.

WiMAX is being predominantly used to deliver high-speed Internet, and we believe this will continue for another year or two. Voice-over-WiMAX is becoming a more critical application that helps improve the ISP business case and offer competitive tariffs. Some regulatory barriers to voice remain. India and South Korea do not permit full-function voice to be offered over a WiMAX network. This is expected to change soon though, as governments undertake consultations to investigate the merits of expanded services. Another application that could potentially associate customers with WiMAX solutions is IPTV. The high-bandwidth requirements of this application are likely the limiting factor. Operators with minimal spectrum allocations will struggle to offer triple-play services that require 30 MHz to 60 MHz of spectrum bandwidth.

Global service revenues continue to rise thanks to subscriber growth and despite the fact that average revenue per user remains unchanged in the last quarter. However the average subscriber base per deployment remains very modest at 15,000, and contributes to the challenging lack of volumes facing the emerging device ecosystem. The launch of Xohm by Sprint represents the beginning of a tipping point for the industry. Last quarter, we expressed the need for operators and investors to look beyond the "Why WiMAX?" and "Why LTE?" questions to anticipate market needs. This challenge remains, as more networks deploy WiMAX technologies for broadband wireless access in hopes they have devised an efficient, profitable plan. Perhaps it will take the rest of the year before the success stories and failures surface.

The second half of the year is eagerly anticipated. WiMAX investments are switching to deployments with commercial services looming shortly thereafter. Consumer and business demand for affordable, scalable broadband remains active. As a result, we expect BWA/WiMAX subscriber growth to accelerate and approach 3 million quickly.

Mobile WiMAX does not need hundreds of deployments to be successful. Rather, it needs 20-plus champions with deep pockets in strategic countries and transnational operations to drive future volumes. This is quietly and slowly taking shape, but it will take years before these operators gain the confidence they need to pour billions of dollars into large national or transnational mobile WiMAX networks. They will be watching very closely the experience of Xohm from all angles for signs that the disruptive business model works in a highly competitive and sophisticated mobile environment. The often discounted perspective is that WiMAX is an extension of the unfettered Internet that has participation from PC and Internet developers who correspondingly shift the service environment. The question is how much and quickly this shift to open IP will occur, offering more choice to consumers, and how much pressure this will put on incumbent operators to adopt a next generation network. WiMAX has a time-to-market advantage when it comes to technology, but also for the new open IP business generation model. 

WiMAX is a disruptive model that could prove revolutionary, but the revolution will take time.

Adlane Fellah is the CEO and founder of Maravedis, a research and analysis firm focusing on broadband wireless technologies including WiMAX, 802.20, TD-CDMA and wireless local loop systems. Learn more at www.maravedis-bwa.com.

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