Study: Differentiation Key To Mobile WiMAX Success

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Mobile WiMAX carriers will have to differentiate their services from cellular services if they are to survive, and even then, they will face many technical, cost, and competitive challenges in the United States, a study by In-Stat concludes.

However successful Mobile WiMAX (Worldwide interoperability for Microwave Access) carriers turn out to be, they will create downward price pressure on incumbent cellular carriers, In-State noted.

“When WiMAX competes with cellular, cellular operators will be forced to decrease their prices for wireless data services over cellular,” said In-Stat’s study. “Even if WiMAX fails after that point, it is unlikely that cellular carriers will ever again be able to charge the amount they currently do for wireless data services.”

Mobile WiMAX , based on the Internet Protocol, promises to accelerate wireless-data speeds well beyond what’s offered by current 3G cellular networks and deliver basic voice service. Voice service will be based on the technology’s Voice-over-Mobile WiMAX spec, a VoIP technology that In-Stat says isn’t likely to be used much before 2009 in the United States.

Because WiMAX carriers will offer voice and data services like cellular carriers, they’ll have to “differentiate WiMAX from cellular data and offer each for a different purpose,” the study said. One way would be to promote WiMAX for wireless internet access from laptop PCs and PDAs, while cellular data will be used for cellular handsets.

However they position their service, startup Mobile WiMAX providers “will need to undercut a cellular service provider’s price for service if they are to have any chance of succeeding,” the study said. Such price cuts, however, “will make it more difficult for that WiMAX provider to pay back his network,” In-Stat noted. “In addition, if the cellular operators in the area start to see significant movement to WiMAX, they will reduce their service prices to compete.”

Cellular carriers that build Mobile WiMAX networks, such as Sprint, will likely succeed by using the cellular network for data and voice and WiMAX for data-only service targeted to PDA and laptop users. In fact, it is Intel’s intent to incorporate WiMAX in laptop chips, In-Stat said. The differentiated dual-network strategy “gives the [cellular] company more flexibility because it can deploy WiMAX when it likes, and it can shift its wireless data load between
WiMAX and cellular however it pleases.”

Mobile WiMAX faces many other challenges, including competition by well-established cellular carriers whose networks will likely be more reliable than startup Mobile WiMAX networks. Other challenges include the lack of a
single worldwide WiMAX standard or frequency band that would drive down end-user device costs through economies of scale, said analyst Allen Nogee. The WiMAX standard, he explained, is an umbrella that covers several “profiles,” each of which has a unique channel width, frequency band, and sometimes different duplexing forms to fit into various countries’ existing spectrum allocations, In-Stat explained.

Current 3G cellular devices cost under $250, and some are starting to drop below $100, In-State noted. At these levels, “WiMAX devices will have a difficult time competing on price, and it’s unlikely that the number of WiMAX devices produced will reach just this year’s cellular 3G numbers for many years to come,” Nogee said.

As for infrastructure, when backup power and similar additions such as backhaul are taken into account, WiMAX base stations are roughly equal in price to smaller cellular base stations, he said.

WiMAX’s key advantage over cellular is 20 percent to 30 percent greater spectrum-efficiency than current cellular technologies. Down the road, however, CDMA2000 1X EV-DO Rev. C technology will greatly accelerate cellular data speeds “and allow cellular to directly compete with WiMAX.”2007

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