Whether or not the business case is attractive for prospective WiMAX operators is dependent on a number of different factors. These include: the amount of spectrum available; the spectrum frequency on offer; cost of end-user devices; interconnect fees with other operators; broadband penetration levels; and scope for network sharing. Slight variations in any one of these variables could have an enormous impact—for good or for bad—on the WiMAX business case.
Research by the Yankee Group on WiMAX potential in India illustrates this all too clearly. In one scenario for an Indian operator with a large-scale WiMAX deployment (offering VoIP and broadband, and competing with the incument primarily on price), Yankee estimates free cash-flow not before year 7 (assuming a US$1 billion cash injection, 75 percent urban coverage, a monthly ARPU in the $10-20 range, and 60-80 percent adption rates through word of mouth). By ony altering the spectrum frequency and allocation, however, Yankee projects the WiMAX operator can be free cash-flow positive by year 4.
“India currently has non-standard frequencies [3.2-3.4GHz] available for WiMAX, which is divided into 12 slots [comprising 12MHz each] in each circle [region],” says Phil Marshall, vice president at the Yankee Group. “By using the standardized 2.5GHz frequency, there is better coverage and economies of scale. And if the number of WiMAX operators per circle can be reduced to three, then that brings about the shorter time to free cash flow,” he says.
Marshall adds that WiMAX CPE costs should be no more than $200. If these conditions can be met, then the Yankee Group raises its projection of WiMAX subscribers in India from 4.4 million to over 9 million by 2011.
Yankee assumes, however, that the WiMAX operator has some existing infrastructure (which lowers cost). But there is some good news for those without infrastructure, according to Marshall. “A tower industry has emerged, which is helpful to lower costs, particularly for the newer entrants.”
According to Yankee, one in five towers in India have at least two service providers using the facility. However, the incumbents are best placed to roll out WIMAX networks in terms of minimizing capex. Of the 180,000-200,000 towers in India, Bharti has 30 percent, BSNL 18 percent and Reliance 17 percent. (Last November, BSNL announced plans to spend US$750 million on rolling out a national WiMAX network.)
India has a population of 1.1 billion, but only around 3 million broadband subscriptions. Moreover, according to the Yankee Group, there are only 8 million copper loops suitable for delivering broadband.
The above is an extract from an article in the January/February 2008 issue of Telecommunications, entitled "The WiMAX rollercoaster ride."