Whither Mobile WiMAX Business Models?
Thinking Differently from 2G and 3G
WiMAX presents the first opportunity to extend a full-featured Internet experience at broadband speeds to the mobile economy. WiMAX delivers benefits--lower cost per megabyte; standards-based network design; and low-cost, small-scale chip sets--that promise a ubiquitous mobile broadband experience on a myriad of portable electronic devices. Capitalizing on this technology requires a radical rethinking of the existing mobile business model.
Previous wireless generations were focused primarily on ubiquitous voice coverage. 3G was supposed to be the generation in which data services became as widely used as voice. However, expensive spectrum acquisitions, which contributed to the delay of the build out of new networks and services, combined with limited availability of data-centric devices, has kept data revenues below expectations. Only now are operators deriving more than a quarter of their revenues from data services, due to the increased availability and penetration of 3G devices. However, the majority of these sales are still related to messaging services.
With voice as "king," network operators still control most areas in the value chain. In the U.S. and parts of Western Europe, device selection is still largely determined by the operator's pricing and subsidy plans designed to acquire or retain voice customers. Device manufacturers catering to an operator's requirements get more of their products into that operator's device portfolio.
As a result, most mobile devices are ill-equipped for a rich content experience, with the exception of Apple's iPhone and similar devices that incorporate full-featured Internet browsers. Even the most capable "smartphones" from Nokia, the BlackBerry, and Windows Mobile devices provide a limited set of applications centered on personal information content, such as email, calendar, and contact management.
For WiMAX to succeed, both new companies and the incumbent operators, equipment manufacturers, and content providers must decide where they want to play in the value chain, what new services to offer, and just how close to get to the consumers. To that end, they need new business models and the operational strategies to make these models profitable.
Innovative Business Models and Operational Strategies for Wireless Data
Operators can strike gold in a WiMAX world. For example, a billing platform could allow the operator to offer pricing plans for task-based transactions, individual network sessions, and time-phased or usage-based models. The operator could then collect revenue from both the content provider and the consumer upon delivering individual purchases--be they movie or television show downloads, or mobile payment transactions for lattes or subway tickets.
In this new model, consumers could potentially have multiple embedded access devices--e.g., a laptop, a mobile phone, a digital camera, and a gaming device--all under the same umbrella account, each with a different service and usage plan. The resulting increase of devices on the network will create additional opportunities for the operators to offer value-added services to the device manufacturers, such as device self-provisioning, user authentication, interdevice integration, and tiered service support.
The device manufacturers that embed the WiMAX chip set platform into new device categories will be well-positioned to cash in. Manufacturers should develop WiMAX-ready product portfolios to include televisions, digital cameras, home appliances, industrial equipment, medical devices, and automobiles for an expanding customer base. For example, Chrysler recently announced plans to embed WiMAX connectivity into vehicle fleets for remote maintenance and to provide mapping content, including satellite imagery and vehicle broadband access.
Some early movers are already ahead of the game. Amazon's Kindle electronic book-reading device includes a perpetual CDMA EV-DO service plan from Sprint bundled into the cost of the device. With this service, Kindle can access Amazon's device-specific portal to download desired content, such as books, newspapers, blog entries, and podcasts. In this model, the network and the operator are completely transparent to the consumer. Sprint never sends the consumer a bill, and Amazon is able to tailor the consumer's end-to-end content experience.
Digital camera manufacturers, including Nikon and Kodak, have also begun to experiment with an integrated service model by embedding WiFi antennas into their products. These cameras directly upload photos to a mail-order print service offered by the manufacturer or partner, but only when connected to a preferred wireless network. With WiMAX-enabled cameras, several new opportunities could emerge, including device-to-device photo sharing, direct uploading to sites such as Flickr or personal blogs, or geo-tagging with a combined GPS receiver.
Content and application providers can increase customer intimacy by leveraging mobile WiMAX. The technology's open-access foundation allows providers to create, optimize, and publish desired content on the network directly--instead of having to work through the operator. Data-intensive services, such as Skype, BitTorrent, and YouTube, may be able to extend their existing platforms and business models into new WiMAX device categories.
To support these business model innovations, the industry needs to address a number of technological and logistical challenges. Mobile WiMAX networks must be quickly built and deployed. All eyes are on Clearwire and its new partners, which will provide a mobile WiMAX reference model. Networks like Clearwire need to live up to the promise of ubiquitous coverage and consistent throughput capacity, both indoors and out. To that end, Clearwire and other mobile or broadband operators must address the issue of net neutrality. Significant traffic shaping in upstream or downstream networks will only diminish the WiMAX value proposition and slow consumer adoption.
WiMAX device and equipment certification processes should be streamlined. Operators must provide a standards-based open platform. This will create an even playing field and allow new and existing players to develop innovative services. At the same time, they will need to guard against creating too many consumer touch points, which may reduce their core service to little more than a data pipe.
The time to start focusing on business model transformation is now. The stakes are high, the partnership opportunities are vast, and the previous wireless business models no longer fit the bill. Owning the relationship with the consumer is still up for grabs--and early movers will undoubtedly capitalize on this opportunity.
About the Authors
Rodger Howell, a director in the Communications and Media practice of PRTM Management Consultants, leads the company's Wireless Solutions Team and helps clients develop growth solutions and supporting business models. He can be reached at firstname.lastname@example.org or +1 847.430.9022.
Philipp Muelbert, a principal in the Communications and Media practice of PRTM Management Consultants, works with companies to develop and implement innovative operational strategies. Previously, he was a principal with Adventis. He can be reached at email@example.com or +1 617.319.2900.