“WiMAX will only be a niche in emerging markets” - Ovum

Friday, 23 October 2009 09:57

Ovum, the advisory and consulting firm, has conducted new research investigating WiMAX in emerging markets. The study, a WiMAX in emerging markets: the opportunity assessed, reveals that in Ovum’s opinion WiMAX will be only a niche technology in emerging markets due to a series of factors such as technology cost, coverage, vendor support and service provider choices.

In fact, a senior commentator, Angel Dobardziev, comments: “WiMAX will play a role, but it will be a far smaller one than many WiMAX players would accept today. WiMAX will fall short of the grand hope of being a mass market broadband technology in emerging markets...We forecast that overall WiMAX will account for less than 5% of the 1.5 billion fixed and mobile broadband access connections in the emerging markets in 2014.”

For Ovum, WiMAX has struggled to establish a foothold in the mature broadband markets of Europe, North America and Asia; there is both hope and expectation that the emerging markets, with their low fixed-line penetration, will be key hunting ground for WiMAX. And yet, Ovum asks whether there really is a big market for WiMAX in the emerging markets?

Ovum’s new report finds that the confluence of several factors - including technology cost, coverage, vendor support and service provider choices -  will limit WiMAX to only a niche technology in the emerging markets, forming part of established fixed and mobile operators’ broader broadband access portfolios.

Angel Dobardziev stresses that there will be lots of WiMAX networks but a low uptake: “Two thirds of the 300+ WiMAX networks globally are in the emerging markets of Africa, Asia, Eastern Europe, Middle East and Latin America. Yet, most emerging market WiMAX operators currently have thousands, or tens of thousands of subscribers, rather than the hundreds of thousands of subscribers that they planned to have at this stage.”

"Scartel in Russia", Ovum notes, "is the first WiMAX operator in the emerging markets to reach the 100,000 subscriber mark...Most emerging market WiMAX players are behind their initial rollout and subscriber targets. The global financial crisis has also made access to finance difficult for greenfield WiMAX players."

The report points out that WiMAX is not competitive against both fixed and/or mobile broadband alternatives in most urban areas of emerging markets (where virtually all existing WiMAX rollouts are) on either coverage or price, and it remains unaffordable to the mass market. Angel Dobardziev adds, “On a non-subsidised basis, it is currently priced and positioned as a broadband option only for businesses or wealthy consumers....The cost of Customer Equipment (CE) remains the key stumbling block for WiMAX operators, where both DSL and HSPA outperform WiMAX with significantly greater economies of scale”.

Ovum is highly critical: “WiMAX coverage will remain mostly in large urban centres where it will compete against DSL, HSPA/EV-DO and in some cases fibre (FTTx) services...Cost and population coverage constraints will lead to very few WiMAX rollouts in rural areas, and most of these will be with public subsidies.”

Mr Dobardziev concludes, “We expect DSL and HSPA/EV-DO to remain more cost- and price-competitive against WiMAX in the next five years in terms of infrastructure, and particularly CE...In turn, coverage and cost issues will result in WiMAX appealing only to a relatively small user base of wealthy consumers and SMEs based in urban areas. This is a small and intensely competitive customer segment in every market”.

Ovum expects the growth, funding and margins pressures to lead to large-scale consolidation among WiMAX service providers in the next two–three years. Most independent WiMAX players will either be acquired by an established fixed or mobile player, or will go out of business. Fixed and mobile players with legacy or newly acquired WiMAX assets will manage these as part of a portfolio in addressing customer reach, coverage, and capacity issues within their existing access-network portfolios.

Ultimately, WiMAX will play a role, but it will be a far smaller one than many WiMAX players will want to accept today, and the grand hopes of it being a mass market broadband technology for the emerging markets are set to come short in reality.

* Ovum includes the following regions under its definition of emerging markets:  

• Africa;
• emerging Asia-Pacific (all these countries except Australia, Hong Kong, Japan, Korea, New Zealand, Taiwan and Singapore);
• emerging Europe (all of Eastern Europe except Czech Republic, Slovakia and Slovenia);
• South and Central America; and 
• Middle East.

 ** Developing Telecoms appreciates that this is a controversial view of the future of WiMAX in the new markets. We welcome any comments on this report.

More info:

• www.ovum.com.

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