Is WiMAX poised to disrupt?

Marketed properly as a truly converged service, combining voice and data with both fixed and mobile options, WiMAX can provide the third form of access to the mass market and potentially disrupt both cable and telecom bundling plans, concludes a study released this summer by two industry veterans.

“The WiMAX Explosion!” study is a 267-page report from the Boschulte Schnee Group LLC, composed of Alfred Boschulte, former CEO of Nynex Mobile, and Victor Schnee, founder of Probe Research. Schnee has been a well-known telecom forecaster since the 1970s, when he predicted the breakup of AT&T.

Through a careful dissection of current U.S. and international market conditions, including competitive service providers and technologies, the study concludes that WiMAX represents a way for Internet/IT companies such as Google, Yahoo! and others to gain a broadband path to consumers without going through either cable or telecom networks. Combined with the upcoming 700 MHz wireless spectrum auction, WiMAX poses definite threats to incumbents, Schnee and Boschulte say.

“The WiMAX Explosion!” went to press in mid-June, just before WiMAX service provider Clearwire announced partnership agreements with satellite providers DirecTV and Echostar to market each other's services. In addition, the study was distributed before the July announcement by Clearwire and Sprint Nextel of their intent to form a partnership to create a national WiMAX broadband network. Both events confirm what BSG believes to be true, Schnee said.

BSG identifies Clearwire as having the best business plan among current players because the company is already bundling voice over IP and is looking to mobile WiMAX once that equipment becomes available. Conditions are especially favorable now that the company has teamed with the satellite players to create a service bundle and is working with Sprint to build a national footprint.

The two analysts said the best strategy is one that uses WiMAX as a true convergence service. According to their models, the technology could be used to displace DSL and capture 20% of the consumer broadband business; used for wireless data and capture 16% of that business; or best used to deliver both wireless and fixed voice and data, achieving a 42% share of the broadband households.

“WiMAX is post-convergence because it is possible to offer a service that doesn't require two networks: wireline and wireless,” Boschulte said. “It is a platform that can serve you in your home, deal with your desire for nomadic behavior onto the patio, handle your mobile phone and iPhone and other things. If you look at what people are paying right now for broadband Internet access and for voice and for mobility, you quickly get to ranges of $90 a month to $120 to $130 a month. You can run a profitable WiMAX business at far, far less. This business can make a lot of sense at [average revenues per user] that are within the $60 to $70 range.”

The upcoming 700 MHz spectrum auction also plays to WiMAX's strength, opening up the possibility that new players could bid on spectrum and use WiMAX technology to deliver service. While FCC rules for the auction, announced in April, have made it likely that AT&T and Verizon can bid up the cost for pieces of that spectrum and make it harder for a single national network to be created, the report states that there is still an opportunity for Google, Microsoft or others in the Internet/IT community — separately or allied with others, including DBS companies — to acquire at least 10 MHz of spectrum for national coverage.

PROJECTED NATIONAL WIMAX ROLLOUT

In millions of U.S. dollars; subscribers and revenue-generating units (RGUs) in thousands.