News | November 15, 2006

Report: Few Opportunities For WiMAX Operators To Make Strong Financial Returns

Cambridge, UK -- Early business cases from the WiMAX community show attractive financial returns in a variety of deployment environments, but modelling with more realistic assumptions shows that there may be very few situations in which WiMAX has a secure long-term business case, according to a new report, The Business Case for WiMAX, published by Analysys, the global advisers on telecoms, IT and media.

According to the report's co-author, Alastair Brydon, "WiMAX operators and investors will have to select their targets with extreme care. Small returns in many situations, from low ARPU or take-up, make high up-front investments in network infrastructure, marketing and customer premises equipment (CPE) highly risky."

Key findings from the new report include:

  • Although emerging countries have low penetration of fixed network infrastructure and services, the business case for WiMAX will still be difficult. Low disposable incomes, low penetration of PCs and the growing strength of cellular services will limit the return.
  • In principle, there is an opportunity to make a healthy profit from WiMAX in rural areas of developed markets, unserved by DSL or cable services. However, with fixed operators rapidly extending the reach of DSL, these opportunities are likely to be few in number and limited in size.
  • Head-to-head competition with fixed broadband services in developed markets would require a spectacular performance by a WiMAX operator to overcome the growing capabilities and services on offer, such as IPTV. WiMAX would encounter fierce competition from DSL services offered by a wide array of major consumer brands using their own networks, wholesale services and local loop unbundling (LLUB).

"Developing markets are often cited as the prime opportunity for WiMAX networks, but voice telephony will be important to end users in these markets and cellular services have already gained a strong foothold, fuelled by the availability of cheap handsets," according to report co-author, Mark Heath. "Furthermore, WiMAX businesses in rural areas of developed markets will face serious difficulty if DSL subsequently becomes available."

This new report 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.

SOURCE: Analysys