WiMAX - Cream Skimming or Bridging the Digital Divide

by Karen Coppock
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For all of the talk about WiMAX being the silver bullet for rural connectivity and bridging the digital divide, I have seen many announcements about WiMAX deployments in major urban areas.

This week MTN Uganda will start a national deployment of WiMAX across Uganda. According to a press release by Alvarion, MTN Uganda's WiMAX technology partner, WiMAX will first be deployed "in the capital and largest urban settlement of Uganda – Kampala, [and] is planned to be followed by additional network deployments in 30 other cities across the country."

A few months ago Saudi Arabia went live with a WiMAX deployment on Tahlia Street in downtown Riyadh as a part of its "SmartCity" program. Mohammed Saquer, CEO ITC states that, "this service will further our effort to enliven downtown and continue Riyadh's aim of being a city at the cutting edge of technology innovations." Intel is an active partner in this initiative to revitalize cities.

Even in the United States, WiMAX will be deployed in urban areas. SprintNextel selected ZTE to supply their WiMAX solution, which they plan to use to "cover 85 percent of the households in the top 100 U.S. markets."

Perhaps Ericsson's statement about the lack of a solid business case for WiMAX was referring to WiMAX in rural areas?

Addressing the Value of WiMax to Emerging Market Consumers

Late last week, Motorola announced an agreement with Vietnam Data Communications to launch WiMax testing in Vietnam later this year. This announcement came just days after Ericsson spoke publicly about their refusal to put their weight behind WiMax, claiming it lacks a business model. While Ericsson continues to remain focused on cellular broadband, building upon existing infrastructure instead of transferring over capabilities to WiMax, others like Motorola and Intel believe that WiMax is a cost-efficient way to boost broadband adoption in developing countries. Motorola, Intel, Samsung, and others are clear about their interest in this emerging technology. Yet, widespread WiMax adoption in developing countries is not guaranteed.

Investors bear the risk that governments may choose not to support WiMax in their spectrum allocation policies favoring homegrown technologies. In addition to spectrum policy issues, WiMax success or failure rests on its true addressable market and its value proposition against available options in developing countries. Once established as a viable technology, the addressable market for WiMax will depend on customers’ eagerness to have and ability to afford broadband access and devices. With price-sensitive consumers, the value (or net utility) of broadband has to be carefully weighed, and recent studies show that, for new users, access to high-speed connections is not necessarily a priority.

The opportunity for corporations banking on WiMax is to focus on the value proposition of the technology in this market. The technology alone will not automatically induce adoption. Essential to WiMax success are service offerings, devices and go-to-market plans that maximize the net utility offered by the technology to the price-sensitive customers of emerging economies. This can be done, in part, through the introduction of services and applications via strategic relationships. Key partnership areas will include financial institutions to facilitate electronic payments and remittances, health professionals for delivering and collecting health-related information, and advertisers who are willing to supplement WiMax service costs in return for access to these new markets. With a great value proposition for the customer and reliable market data about where to focus their efforts, MNCs will be better equipped to benefit from the potential of the WiMax market.

Also in the news:

• Cisco shows link between economic development and broadband penetration
• Laptop industry eyes emerging markets
• MNC business execs know little about business in emerging markets