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WiMAX truly disruptive if marketed well, study says

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A new study by two industry veterans states that WiMAX technology, if deployed and marketed correctly, is a truly disruptive technology that could unseat the telco-cable duopoly and provide consumer choice in broadband services and devices.

The study, The WiMAX Explosion!, is a 267-page report from the Boschulte Schnee Group LLC, comprised of Alfred Boschulte, former CEO of Nynex Mobile, and Victor Schnee, founder of Probe Research and well-known telecom forecaster.

Through a careful dissection of current market conditions, including competitive service providers and technologies, the report concludes that WiMAX represents a way for IT/Internet companies such as Google, Yahoo! and others to get the broadband path to the consumer they seek without going through either cable or telecom networks.

The WiMAX Explosion! went to press in mid-June, just before WiMAX service provider Clearwire announced partnership agreements with DBS providers DirecTV and Echostar to market each other services, and it had already been distributed before last week’s 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.

“[The Clearwire-Sprint partnership] reinforces the conclusions of the study, in terms of the strongly positive potential of WiMAX in the U.S. and of the potential of that in turn to trigger adoption throughout the world at a much faster pace and for more types of carriers including legacy carriers to be drawn into WiMAX much sooner than they expect,” he said in a telephone interview. “This doesn’t surprise us at all – in fact, we discussed the fact the two companies had cooperated. Once they announced the deal with DBS guys, the Sprint agreement was the next thing on Clearwire’s agenda.”

The BSG report holds Clearwire up as the best example of what WiMAX can do. To date, the company has offered a broadband wireless service based on pre-WiMAX OFDM-based technology, but announced a year ago that it is converting to WiMAX. Through agreements with major vendors including Intel and Motorola, and a deal with Bell Canada Enterprises to provide VoIP, Clearwire has been steadily laying the groundwork for a robust WiMAX offering, which now will be sold in partnership with DBS providers to create the total service bundle.

In its first 25 markets, Clearwire has been able to achieve a 10.4% average household penetration, and has seen gross margins rise to 72% before adding mobility to the mix, which it will do in late 2007.

Adding mobility is a critical factor, the report concludes, if WiMAX is to reach its potential as a post-convergence technology, handling both fixed and mobile broadband services.

“It is a technological platform that supports converged services,” Boschulte said. “WiMAX is post convergence because it is possible to offer a service that doesn’t require two networks – wireline and wireless. 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,” he added. “You can run a profitable WiMAX business at far, far less. This business can make a lot of sense at ARPUs [average revenue per user] that are within the $60 to $70 range.”

WiMAX also can break the stranglehold wireless network operators currently maintain on wireless devices, enabling consumer choice and device innovation to flourish as it has elsewhere in the consumer electronics industry, the report says.

That plays well into the desire of Internet/IT companies and fits into the FCC’s plans for its auction of the 700 MegaHertz wireless spectrum that broadcasters are surrendering. FCC Chairman Kevin Martin has already proposed an open device structure, much like what the Carterphone decision imposed on the wireline network, and AT&T has even endorsed that idea.

The critical thing for WiMAX, Schnee and Boschulte stress, is that it is marketed correctly.

“What we need to see from players is that WiMAX, as they always say, needs to be all it can be,” Boschulte said. “Service providers need to offer this bundled package, with nationwide advertising and nationwide retail sales. It needs to be cost-effective rather very high cost.”

What Clearwire and Sprint announced last week, which at this point is an intent to form a partnership, can be a major step forward for both companies, Schnee said.

“A partnership to build a national network is very useful for both of them, because it takes down their capital spending requirements,” he said. “It takes a lot of pressure off of them because it reduced their overall build. The second thing is, it appears to put Sprint in a position where their conversations with the cable guys are quite different. They are not up against it as much, needing money, which is one of the things the cable guys bring to the table.

“This accelerates a lot of thinking on various parts,” he continued. “If I’m Comcast, this whole WiMAX thing becomes a much bigger issue. Of course, they announced a letter of intent – they haven’t signed agreement yet. A lot of stuff could change.”

Coming next: How WiMAX threatens both cable and telecom service bundles.

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© 2014 Penton Media Inc.

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