Unwired & Austar: "spectacular performance" needed to succeed, says Analysys

Stuart Corner
Monday, 06 November 2006 16:36

IT Industry - Deals

In a new report, "The Business Case for WiMAX", UK based market researcher, Analysys, claims that a WiMAX operator in head-to-head competition with fixed broadband services in a developed market would require a spectacular performance 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)."

Unwired and Austar are both planning WiMAX broadband services and Unwired in particular has been aggressively promoting the competitive advantage it claims this technology coupled with its spectrum holdings will give it.

Analysys in only marginally more optimistic for an operator in developed rural markets, such as Austar. "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."

Analysys says it has reached these conclusions by modelling WiMAX business cases with "more realistic assumptions" which "show that there may be very few situations in which WiMAX has a secure long-term business case."

According to Alastair Brydon, co-author, of the report, "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."

Even in emerging countries have low penetration of fixed network infrastructure and services, Analysys believes that 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."

According to report co-author, Mark Heath, "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. Furthermore, WiMAX businesses in rural areas of developed markets will face serious difficulty if DSL subsequently becomes available."