Telecom Giants Stake Out WiMAX Turf For Broadband On Horizon

November 23, 2006

While mobile broadband is mostly "a business of tomorrow," some early consumer response is quite promising. Clearwire, a startup with $2 bil. in financing including investments by Intel and Motorola, says it has achieved penetration rates of 10%-15% in seven areas where it has offered its wireless broadband service for at least 11 months.

"This low-double-digit penetration rate from Clearwire is about double expectations of a mid-single-digit penetration," notes Kagan Research senior analyst John Mansell.

Telecommunications giants are scrambling to carve out a beachhead in wireless broadband either with their own proprietary systems or aligned with the WiMAX Forum, an industry group setting standards. Broadband wireless will require billions of dollars for spectrum licenses, technology development and infrastructure to deploy nationally; current cell phone technology and infrastructure is inadequate.

"The holy grail is true mobility in wireless broadband that would be analogous to today's cell phone service but with faster speeds," says Mansell, who will moderate a Dec. 7 audio conference on WiMAX. "But we're not there yet. Service providers today are offering at best just portability that is experienced in 'hot spots.'"

WiMAX aims to drive down costs by standardization, which also will facilitate roaming capability allowing customers to be handed off between different carriers.

"While there's a growing consensus WiMAX faces a significant set of financial, technical and regulatory challenges, there's also tremendous upside," Mansell writes in a Kagan Research report, JupiterKagan Concept Report: WiMAX: Friend or Foe to Incumbent Carriers? "At mid-year, of the 400 mil. with Internet access worldwide, there were about 100 mil. dial-up and 300 mil. broadband subscribers. Only 1%-2% of the broadband subscribers were wireless."

The leading cell phone carriers are evolving already established standards, notes Mansell, while WiMAX has strong support from rural carriers and new entrants.