The WiMAX way

With WiMAX offering a more efficient and flexible way of delivering broadband internet access, Delta Partners looks at the development of the technology and the commercial opportunities it offers.

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By  Federico Membrillera, Ingrid Flores, and Matthew Beckner Published  February 13, 2008

Wireless local loop (WLL) technologies should also be seen as competitors to the WiMAX technology. Several of these solutions exist, including CDMA EV-DO which is being used across sub-Saharan Africa for internet and data services. This is a more cost-effective solution when data usage is low, but WiMAX will be more cost effective in high data usage networks due to inherent spectral efficiencies.

Nomadic deployments will become more prevalent as WiMAX evolves, bringing new devices to market and lowering the capital requirements to cover large geographical areas.

WiMAX will offer DSL like-speeds but will struggle to cost-effectively provide bandwidth intensive services such as IPTV, particularly as a mass market application.

This will be seen in both emerging and developing markets where data use extends beyond the home and office. Nomadic internet connectivity will be the key service, though value-0added services such as video streaming and music downloads will increase as WiMAX enabled devices become available. In this setting, WiMAX will compete against Wi-Fi, HSPA, and EV-DO.

Compared to Wi-Fi, WiMAX has two distinct advantages, despite its higher cost of deployment. First, it allows for quality of service (QoS) guarantees from the operator. And second, it has a larger coverage area than Wi-Fi. However, it is unlikely that WiMAX will compete directly with Wi-Fi.

It is more likely that Wi-Fi will complement WiMAX deployments, where Wi-Fi will help to fill gaps in coverage areas, particularly in difficult to penetrate indoor public spaces. Integrated WiMAX and Wi-Fi devices are already being considered for this scenario.

HSPA and EV-DO, as high-speed mobile technologies, represent the main nomadic challengers to WiMAX. All three technologies offer PCMCIA cards allowing connectivity directly to a customer's PC. HSPA and EV-DO offer the added advantage of mobile handsets which are already on the market and provide fully mobile voice connectivity.

WiMAX is specifically designed for data and will have lower CAPEX requirements when the network is predominantly used for nomadic internet connectivity. It also benefits from the ability to start as a purely fixed technology and grow into a nomadic offering, where an operator can captitalise on key market segments for revenue growth.

Due to the high cost of 3G licenses and the technologies used for mobile data services, it is unlikely that any 3G deployments would be targeted solely for nomadic offerings. This would mean that 3G start-ups would incur higher CAPEX to cover large areas for ubiquitous mobile services from the beginning of operation.

Operators with existing 3G deployments will be unlikely to switch to WiMAX, opening the space to fixed operators or new entrants looking to capitalise on new spectrum allocations. Nomadic deployment is also a natural evolution for WiMAX operators who started as fixed providers.

Mobile deployments of WiMAX are not to be expected over the next few years. The technology is still undergoing testing and lacks the capacity to saturate a coverage area necessary for ubiquitous mobile coverage. Instead, it is more likely that dual-mode WiMAX / GSM devices will fill the space in the medium-term.

This will be seen in both developed and emerging markets where mobile operators will face increasing competition and need to diversify and find new revenue streams. New services such as video on demand, peer-to-peer gaming and video conferencing will become available as devices mature, allowing additional revenue streams for WiMAX operators. In this setting, WiMAX will compete against HSPA and EV-DO, and later against LTE and Rev B.

Delta Partners is a Dubai-based integrated advisory and investment firm focused on telecoms, media and technology in high growth markets.

Unleashing the broadband revolution

For Federico Membrillera, a partner at Delta Partners, WiMAX gives operators a new cost efficient way to provide broadband services to end-users, and it is a development that he thinks could be a big hit in the Middle East.

We believe this technology will be very attractive to operators in the region since it will allow them to un-tap portions of the market that so far have not been served because their business case was not profitable," says Federico Membrillera, a partner at Delta Partners.

"In addition, Wimax will bring new competitors to the fixed line space and will unlock nothing less than a true broadband revolution. It will put the Middle East right up there with western markets - in the same way as it happened with mobile telephony."

The region has recently seen established fixed and mobile players, as well as new entrants analysing this new technology, asking themselves the question: "threat or opportunity?

It is not only a new technology that allows players to tap the broadband opportunity more profitably. WIMAX represents a business opportunity that fits right in with some of the main strategic questions the telecom industry is dealing with, like the convergence between fixed and mobile services.

Eventually it will also facilitate competition with mobile operators as full mobility on Wimax will become a technical and regulatory reality. "Having a clear vision on these topics right from the beginning will separate winners from losers," Membrillera adds.

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