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Who, What, Where, When, and WhyMAX
WiMAX remains the biggest zero billion dollar market known to telecom. I’ve touched on this issue before (see Why does Intel Care About WiMAX?) and readers responded with a torrent of comments, none of which provided a convincing argument to me that WiMAX is substantially better than the evolution of existing 3G infrastructure.
In the absence of a conclusion, let’s turn to our friends in the marketing-research cabal.
Telephony magazine writes about a research report by The Yankee Group which projects 28M WiMAX subscribers in 2010 or 2011. That’s growth from around 250k to 28M in 3-4 years or 250,000 to 28,000,000 with all the zeros. Over 100x growth. In Less than 4 years. Bacteria aspire to growth rates like this.
Consider the following silliness (emphasis mine):
The Yankee Group and Rethink Research, the two agencies behind the three WiMAX World events scheduled this year, recently released new market research that says there will be 28 million Mobile WiMAX subscribers by 2011. What has been less certain is where most of these customers will be, who will be offering them services and how mobile operators will fit in to the future Mobile WiMAX market scenario.
How one can project growth from virtually zero, with the exception of a two hundred thousand Clearwire (CLWR) customers, to 28 million subs without knowing the answer to these basic questions!
The Yankee report goes on to project $4BB in annual equipment revenue (must have big revenue projections so you can sell your reports to someone) in 2011. This means Yankee’s hypothetical WiMAX carrier ecosystem has 28M subscribers with $4BB in annual capex, or $143 in capex per subscriber.
Clearwire’s average revenue per user (ARPU) in 2006 was $484 (Source: GigaOM). This is a pretty good revenue stream for a WiMAX subscriber considering cost is it’s most frequently highlighted strength. If the ARPU was any higher I don’t think WiMAX would qualify as a low-cost alternative to 3G+ technology.
According to Yankee, WiMAX carriers will have capex budgets of 30% ($142/$484) of revenue. And this is assuming an average WiMAX customer is paying $40 a month – the same price I pay Cingular for 3G access today. I’ll be gentle and call my pricing optimistic.
In comparison, Cingular Wireless (T ) had a capex budget of 17% in 2006. Now, will someone explain to me the Who, What, Where, When and most importantly WHY of WiMAX?
Until someone can provide a compelling case for why it’s an incumbent killer I’m going to start calling it WhyMAX.
Yet another example of why Market Research Firms Shouldn’t Forecast. And, no I do not own any Clearwire.
I don’t think that anyone – even the most optimistic prognosticators – are saying WiMax is going to be an incumbent killer. But I do believe that Intel sees WiMax as a way to push a new type of “nomadic tablet” type device powered by their processors, and Motorola sees WiMax as a way in which they can evolve from a tier 2 to a tier 1 mobile infrastructure vendor.
According to public information Sprint has released, they claim WiMax infrastructure operational and capex expenditures when measured in bits / Hz will be ~50% that of competing CDMA-based technologies (W-CDMA for GSM and 1xEV-DO rev 0/A/B for CDMA). Of course, its rather difficult to test this assertion, as they are still gearing up for trials in DC and Chicago as we speak.
Watching the rollout of Sprint’s WiMax network will certainly be fascinating. I suspect that their biggest challenge may not be technology (let’s just assume it works), but marketing.
For Internet access, how will they convince the general public to give up speed for mobility? Are Comcast and Verizon really worried that Sprint will steal Internet access customers away from their high speed PacketCable and FTTH offerings?
For mobile phone service, what is the compelling value proposition? WiMax will have faster upload speeds, granted. But how do you market that to your average handset user? What will you be able to do that is better than current Verizon / Cingular / Sprint 3G?
Albert
Perhaps sprint is not counting on consumers to make a choice between bandwidth and mobility. Perhaps Comcast will give it’s customers the option to use both Cable Modem and Wimax as a bundle.
Again the core issue is why a whole new protocol and infrastructure is needed. Verizon could bundle EV-DO with it’s FTTH offering using an installed base of equipment.
Andrew,
My complements. I was in the process of writing an article entitled “WhyMax, WhenMax or HowMax?” but just realized I was pre-empted. They say great minds…I was mostly critical of the hype and not the technology. So, I will now write in defense of WiMax (“Not WhyMax but HowMax”).
Regarding Yankee Group numbers, I was around when they missed ADSL deployment projections several years in a row (and by several orders of magnitude) but had no shortage of paying customers for the same. Even the numbers look pretty similar. I wouldn’t put it pass TYG to regurgitate those old numbers. After all, ADSL, WiMax; what’s the difference, right?
Bill – you don’t need to be the Bard himself to see the opportunity to phonetically exploit the term WhyMAX.
In the interest of full disclosure, I got the idea from the best magazine in the world…
http://www.economist.com/business/displaystory.cfm?story_id=8748628
Andrew,
I was only jausting..:)
I appreciate your position and typically agree with your commentary, but your argument on WiMAX is not sound. 2 points that I take issue with
1) Capex/Rev number for WiMAX versus Cingular today: There is a big difference between capex maintenance and building a new network. A better comparison would be McCaw in the 1980s or MetroPCS in recent history. To make your life simple, I’ve listed MetroPCS’s capex/rev below:
2002: 122.5%
2003: 31.7%
2004: 40.1%
2005: 29.2%
2006(Q1-3): 41.4%
Regarding your comments around bacterial growth:
GSM: 0.2m subs in 1992 –> 138m in 1998
CDMA: 1m in 1996 –> 111m in 2001
Broadband: >0.3m in 1999 — 28m in 2004 (and as you know, the growth continues unabated).
Is AT&T considering WiMax? just saw this evaluation report on their site for biz customers.
http://www.business.att.com/nx_category.jsp?repoid=Solution&repoitem=eb_enhancing_productivity&segment=ent_biz