Research Notes

The largest competitor to WIMAX – Is WIMAX

Today there are many operators around the world that have either launched – or are ready to launch – various versions of WIMAX. If you take a closer look at this market you will see a number of players doing business on markets with low broadband penetration and limited DSL access.

Likewise there are also some WIMAX operators doing business on markets that already have many operators focusing on WCDMA and LTE as their mobile broadband technology. Some of these markets have a high broadband penetration and additionally a well-developed DSL network.

In Strand Consult’s new report How can a Wimax operator survive in a world full of WCDMA  we have analysed the different markets and scenarios and concluded that it is very clear that the largest threat to WIMAX operators is the WIMAX industries ability to launch devices and find strategic partners that can help create traffic in the operators’ networks.

The main problems for WIMAX operators
The biggest problem that the industry currently is facing is that a majority of today’s WIMAX networks around the world consist of different technological solutions with limited interoperability – it is not possible to use equipment abroad and with other operators. Each operator uses their own standards and has their own technology provider.
Likewise the possibilities of roaming are very limited. In the GSM/WCDMA world, roaming has been a natural service for many years and even prepaid customers can roam across a number of countries and operators using Camel 2.

But the WIMAX world has only recently launched their first roaming cooperations, that are limited to a few operators that all use the e WIMAX standard. Simply put, roaming possibilities in the WIMAX world are very limited.
Regarding devices, the industry has a number of problems that can be divided into two main areas; the number of devices that support WIMAX and the brand of the devices that are WIMAX compatible.

In the mobile world, customers are used to having a wide selection of devices and enjoy choosing between strong brands like Nokia, Sony Ericsson, Motorola, Samsung, LG and HTC. All these manufacturers have a wide selection of both GSM and WCDMA handsets and all WCDMA handsets support GSM in a number of frequencies.

Is this a problem we have seen before and who came out the winner back then?
If you examine the battle between WIMAX and WCDMA, it is very similar to the battle already fought between GSM/WCDMA and CDMA on a number of markets around the world.

In a country like Brazil, the GSM operators were making life so difficult for VIVO – a CDMA operator – that VIVO chose to convert from CDMA to a combination of GSM/WCDMA.

The battle in Brazil was not decided by who could deliver the fastest broadband, but by who had access to most handsets and who could acquire the handsets at the cheapest price.

In reality there are many examples of GSM winning over CDMA and the conclusion from a number of markets is that the company with the lowest acquisition costs will be the company that has the largest probability of creating a successful business case.

What is the solution to the WIMAX operators’ problems?
There is no doubt that the WIMAX industry has not been very good at getting the handset industry to develop, market and sell devices that support WIMAX. In reality a number of market players have either chosen not to support WIMAX, or alternatively launch a very limited selection of handsets.

In the GSM world, the GSMA has been very focused on reducing handset prices, in order to offer inexpensive handsets on emerging markets, thereby making it affordable for ordinary people to use the new mobile networks.

Basically the GSM world has been very focused on how to make a customer that has an ARPU of 5 USD a month into a profitable customer. Today it is no secret that there are many handsets that cost under 20 USD and that mobile telephony in many developing countries is a commercial success.

Regarding mobile broadband, there is no doubt that the WCDMA operators around the world have gained momentum and that mobile broadband is a success. In countries like Denmark and Norway, mobile broadband connections now have 15% of the broadband market, in Finland and Sweden this figure is 20% and Austria now has over 35% of their total broadband customers using mobile broadband connections based on WCDMA. Today, mobile broadband via WCDMA is the fastest growing product in the mobile industry’s history and customers are choosing personal and mobile broadband connections, rather than fixed line DSL connections, that are as a result now receding on a number of markets.

If you examine the laptop and netbook market there is no doubt that the various hardware manufacturers view the WCDMA operators as fantastic partners. This is a new channel that can be used to increased demand for their products.

Today you can purchase a netbook with built-in WCDMA/HSDPA for 356 euro and the current demand for mobile broadband via WCDMA is in practice resulting in many PC and netbook manufacturers focusing more on WCDMA than on WIMAX. Most of the focus on WIMAX from that part of the industry is centred around what Intel are currently working on.

In the WCDMA world, the GSMA have created a label that clearly shows whether a new PC supports WCDMA and there is a great deal of focus on emphasising products that have built-in mobile broadband. If you look at the WIMAX world, it appears that also here the WIMAX industry is 2 to 3 years behind the WCDMA industry.

The path forward is using the correct strategy, the alternative is…
There is no doubt that the WIMAX operators have a justification for their existence on many markets, but they do need to increase their level of knowledge about their markets and especially whom they are competing with.

In the report, we have examined the challenges that the WIMAX operators are facing on a number of markets. We have examined the market players they are competing with and we have described the many possibilities available for a serious WIMAX operator in a world full of WCDMA operators.

We believe it is the WIMAX operators that will ultimately not survive, and that will have to give up. On the other hand we believe that a strong strategy and ability to attract partners is more important than the competition from other broadband players that have based their solutions on WCDMA.

We have found and described many solutions and we believe that those WIMAX operators that understand how to navigate the complex telecommunication world will be able to create a business case. The question is whether the right strategy in itself will be enough, or whether the lack of professionalism we are currently seeing among many of the WIMAX market players will make it difficult for the few really professional players?

We will have to wait and see what happens.

In our report , we put forward our suggestion of how the future will be for the successful market players.
More information: How can a Wimax operator survive in a world full of WCDMA

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