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June 27, 2010

New research recently performed by In-Stat suggests that WiMax broadband technology is facing increased competitive pressure that could impede its long term growth for the next few years.

In its survey, “Global WiMAX Subscribers, Base Stations and Revenues,” In-Stat notes that the future for Wi-MAX technology is a mixed bag as other wireless technologies all compete for the same market share.

In-Stat further reported that while it expects global Wi-MAX subscription revenues to represent a little over $30 billion in about four years from now, major hardware vendors have announced they planned to stop WiMAX product developments nevertheless.

A separate report from Maravedis also detected some worries as to the future of WiMAX. The company noted that while WiMAX wireless operators served about 7.2 million customers at the end of the first quarter, recent mobile service carrier defections from the standard have caused issues.

Russian wireless carrier Yota recently said it planned to abandon its WiMAX deployment plans in favor of LTE technology, while in the U.S., Clearwire Corp. has said it was looking at possibly deploying other technologies outside of WiMax.

“It appears that as one door opens for WiMAX, another one simply closes,” said Chris Kissel, an In-Stat analyst.

“In the past year, there have been some positive developments in consumer devices, including smartphones that use WiMAX for data but revert to 3G airlinks for voice. But in many other regions, regulators are postponing spectrum auctions. And several major digital communications firms are lowering their commitments to WiMAX or leaving the segment altogether,” noted Kissel.

“Overall, wireless carriers are very concerned about the perceived lack of commitment towards 802.16m,” said Maravedis Research Director Adlane Fellah.

“But even despite the hype surrounding TD-LTE, we still don't see much of an ecosystem in the near term,” said Fellah.

The research firm added that wireless carriers that have recently acquired spectrum licenses in markets like India may be forced to move ahead with WiMAX due to a lack of options in the short-term, but that eventual migration to the TD-LTE standard could prove a “significant challenge regarding how to manage the millions of Wi-MAX device users already deployed in some major markets.”

But to some industry obeservers, the wireless spectrum auction in India didn't exactly go as planned. In fact, some say it was almost a complete disaster, and there was not to be much coordination in the effort.

By the time the auction ended, a wireless spectrum slot in India ended up costing as much or even more than a 3G spectrum slot because the broadband wireless access spectrum holds tremendous significance for the future of market players. Others disagree.

After more than a week and no less than 62 rounds of bidding, the price for a pan-India spectrum slot – across all 22 operating areas was almost 5 times the reserved base price of INR 1750 crores, or roughly US $390 million.

In comparison, the price of a pan-India spectrum slot after eight days and 46 rounds of bidding was only 1.7 times the reserved price of $780 million.

In the case of 3G, there were three paired spectrum slots and nine contenders, while for BWA, there are two unpaired spectrum blocks and 11 contenders. Equally significant, one 3G slot consisted of 2 X 5 megahertz spectrum in 2.1 GHz band, while one BWA slot consists of 20 megahertz spectrum in 2.3 GHz band.

Confused? You're not alone...

At the end of eight days of bidding, the price of a pan-India spectrum slot was considerably higher in absolute dollar amounts than the price of a pan-India 3G slot – $1.91 billion, as compared to $1.35B for the 3G spectrum slot.

The fact that there are more contenders and less spectrum slots only partly explains the intensity of bidding which will most likely continue to drive up prices. Some think it will get worse before it gets better.

But there are other market forces and competitive dynamics that could also serve to fuel the bidding even more. Some of these would be the outright scarcity of the wireless spectrum, the imminent deployment of mobile number portability and the struggle between TD-LTE and WiMAX technologies.

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Source: In-Stat Research.