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WiMAX Forecast: The Next Iridium?

New York — Mobile WiMAX is the next Iridium, the global satellite-phone service that went bankrupt because it failed to anticipate cellular’s evolution into an inexpensive and widely available terrestrial service whose footprint extends to all but the most remote areas, according analyst Jane Zweig, CEO of The Shosteck Group (

Mobile WiMAX proponents ( are ignoring the growing maturity and evolution of existing mobile- and residential- broadband technologies that already enjoy a large base of users and scale, she contends.

On the other hand, if WiMAX delivers what it promises, says In-Stat analyst Daryl Schoolar, then cellular-data and Wi-Fi hot spot providers face serious competition for laptop users who want Internet on the road ( WiMAX providers such as Sprint, he added, would also be in a good position to offer wireless mobile and residential broadband service along with home VoIP service, he noted.

In the United States, Clearwire and Sprint plan to offer Mobile WiMAX, with Sprint targeting a rollout to 100 million users by the end of 2008 for advanced fixed- and mobile-data services and voice services. The company also envisions low-cost WiMAX chips embedded in everyday portable electronics to offer value-added services, such as Web browsing from a portable media player (PMP) to the transmission of images directly from a digital camera to photo-sharing sites or e-mail addresses.

Don’t bet on it, says Zweig. “Just as did the Iridium community before it, the WiMAX community is failing to take into account how established technologies will evolve and improve over time.” Motorola’s Iridium venture “failed to take into account the competitive environment in which Iridium would be operating. By the time Iridium could launch, conventional cellular would have captured almost all of its [Iridium’s] potential market,” she explained.

“Iridium’s biggest competitor was GSM,” she continued. “GSM terrestrial coverage was expanding while the prices of services and devices were declining. In the case of Wi-MAX, its biggest competitors are mobile and landline broadband providers who are investing in faster networks and ever improving coverage.” Mobile handset and device prices, she added, are declining to below what WiMAX will be able to offer.”

WiMAX can be successful only by “cannibalizing the revenues of others [wireless providers],” she continued. “This makes it hard, if not impossible, to create collaborative partnerships — the only possible route to realizing a return on investment. This makes the current business model for mobile WiMAX inherently undeliverable in the terms being discussed today.” Hardware pricing won’t be there to support rosy scenarios because WiMAX isn’t cost-effective, she said, in large part because different mobile WiMAX systems deployed around the world “are not interoperable.” Different frequency bands are being allocated [worldwide], she explained, so “devices will have to be multi-band as well as multi-mode (WiMAX and cellular) to provide the ubiquitous coverage that end-users have come to expect. This will contribute to complexity in devices as well as upward pricing — not downward.” Proponents contend WiMAX users will take a fixed-line-DSL experience with them, creating a wave of revenue streams such as music downloads and mobile TV, Zweig continued. “But much of this experience is already becoming available, or will be, over cellular networks, Wi-Fi and other broadband technologies. What then is the advantage of a separate WiMAX device with what will be limited network coverage?”

If WiMAX delivers what it promises, however, it stands to win over a plurality of people who want to connect their laptop wirelessly to the Internet when they’re on the go, according to an In-Stat survey of more than 1,220 early adopters. The survey did not cover WiMAX-equipped handsets or WiMAX-embedded consumer electronics because “they’re still a few years away,” but “WiMAX’s ability to support nomadic services with laptop cards and USB devices will become a reality this year,” Schoolar said.

For the survey, In-Stat described the current or soon-to-be-deployed geographic coverage and bandwidths of Mobile WiMAX, Wi-Fi hot spots and cellular data services. Respondents were asked about their technology preferences, first without price in mind and then with price in mind.

When price was excluded as a factor, 50.8 percent said they were extremely or very interested in using WiMAX with a laptop, while 29 percent were interested in cellular data and 19.6 percent were interested in Wi-Fi.

When service pricing was described to the respondents, WiMAX still came out on top with 35.8 percent saying they were extremely or very interested, but Wi-Fi was close behind at 30.9 percent, and cellular data dropped way back to 13.2 percent.

Wireless Laptop Connections: Gauging Consumer Interest
Extremely or Very Interested

Source: In-Stat, Scottsdale, Ariz.
Online survey of 1,220 early adopters in February 2007

WiMAX coverage was described as being available in a respondent’s town and in about a third of U.S. cities, per Sprint’s year-end 2008 deployment plan. Cellular was described as being in all cities and everywhere in those cities, and Wi-Fi hot spots were described as being in all cities but only in selected areas. Pricing was described as $40-$50/month for unlimited use, $20-$30/month for unlimited Wi-Fi hot spot use, and $60-$70/month for unlimited cellular-data plans, although carriers cap usage to about 5GB/month, Schoolar said.

Bandwidth was described 2Mbps to 4Mbps for WiMAX, 500Kbps to 2Mbps for Wi-Fi, and 400Kbps to 800kbps for cellular data.

Although cellular carriers can always drop their prices to match WiMAX prices, Schoolar said, it’s not certain whether cellular carriers will have the capacity to support all the new users and all the applications that WiMAX promises.

WiMAX also has the potential to make inroads into the residential market, the survey found. More than 50 percent of home broadband users said they would consider switching to a broadband carrier that bundles mobile and home broadband service, and they’d be willing to pay $5 to $10/month more than home-only service, Schoolar said.