WiMAX will be a catalyst for broadband convergence but also needs to diverge from existing broadband systems in several key respects, according to WiMAX Broadband Convergence: Emerging Fixed, Portable & Mobile Revenue Opportunities, a new strategic report from Informa Telecoms & Media.

WiMAX is a natural convergence technology in that the single 802.16e-2005 platform can support fixed, portable and mobile broadband services. In addition, WiMAX is based on a flat IP architecture and thus may have an edge over other wireless and mobile systems in its ability to integrate with wired broadband systems to deliver converged broadband services. These unique features will help WiMAX gain traction in an increasingly competitive and converged broadband marketplace.

However in some ways WiMAX will also drive broadband divergence, largely because WiMAX is a new broadband platform and will have to differentiate as strongly as possible relative to incumbent systems-including DSL, cable, EV-DO and HSDPA-in order to justify operator deployments. Incumbent wired and mobile broadband systems already account for a total of some 350 million subscribers worldwide and will be complementary to WiMAX in some cases but directly competitive in others, particularly in developed markets where penetration of existing wired and mobile broadband systems is already high.

New devices, no subsidies

One way WiMAX aims to differentiate from existing services is by bringing broadband connectivity to a host of new devices, starting with new computing devices such as Ultra Mobile PCs (UMPCs) and Mobile Internet Devices (MIDs), and then branching out into consumer electronics devices such as digital cameras, as WiMAX chipsets become small and cheap enough to be integrated into relatively small mass-market devices.

WiMAX will continue to support its traditional device classes - namely outdoor and indoor customer premises equipment (CPE) - while also expanding to new segments such as notebook computers and handsets. However as it does so WiMAX will increasingly compete head-to-head against systems such as HSDPA, which has a reasonably strong position in notebooks and a very strong position in handsets. This helps to explain why Intel is integrating WiMAX with Wi-Fi, which will build on the scale economics of Wi-Fi to reduce the cost of adding WiMAX to devices. This in turn could give WiMAX a chance of equaling and even overtaking the penetration rates of EV-DO and HSDPA in notebooks, despite the fact that notebooks with EV-DO and HSDPA launched in 2006, around two years ahead of the launch of Mobile WiMAX notebooks.

However, one aspect of the mobile market that WiMAX operators hope to avoid is device subsidies. Although they have helped to speed takeup and increase overall penetration of mobile services, they have also significantly reduced operator profitability. Thus major operators such as Sprint Nextel are looking to equipment vendors such as Intel to reduce the cost of WiMAX chipsets to the point where they can be integrated into a wide range of devices without significantly increasing the price of those devices. The only catch is that silicon prices only decrease as volumes increase, so WiMAX vendors or operators (or both) are likely to have to continue either to subsidise devices or accept relatively slow takeup, at least until the WiMAX market benefits from scale economics.

New operator business models

Many WiMAX operators are currently using conventional broadband or wireless broadband business models, in that they are offering broadband access enabled by a specific device for a set monthly fee and, typically, a minimum contract period. Operators such as Clearwire in the US and Irish Broadband have started to offer double play services of broadband and VoIP but they operate in advanced markets where rival operators have long offered triple-play bundles of broadband, VoIP and TV. If that's the case, how are WiMAX operators going to differentiate their services? The answer will vary dramatically by country and operator. For operators launching in developing markets with low broadband availability and penetration, offering 128-256Kbps wireless broadband services at an affordable price can be a compelling and differentiated service. For operators in markets with high broadband availability and penetration, differentiation will often come by focusing on the flexibility of wireless - at a basic level, this can mean providing rapid service initiation, given that some wired broadband providers can still take weeks rather than days to initiate services.

Another area of focus is mobility, of course. WiMAX backers hope that the freedom and flexibility of wireless will enable smaller and more personalised devices, which in turn will shift the focus to personalised broadband services - and spark a new wave of broadband growth in the process. In fact, the industry has coined the new phrase 'wireless personal broadband services' to highlight this trend. The ambition is that wireless will do for broadband what GSM and CDMA have done for voice - that is, to make it mobile and personal, and to create a new industry in the process.

One major barrier to mobile Internet takeup has been the price of both devices and services, which has led the WiMAX industry to target major advances in both segments. For example, Intel notes that mobile Internet usage is only likely to take off when devices such as a PC card cost US$30 and services cost US$30 a month. Wi-Fi devices and some Wi-Fi services currently meet that target, and the goal is for WiMAX devices and services to do the same. However WiMAX is not the only technology with these targets - some HSDPA operators are already offering broadband services for less than US$30 a month.

There is no doubt that WiMAX faces a host of challenges including IPR uncertainty, technology immaturity, and a lack of scale and end-user devices. However WiMAX now has enough worldwide momentum and investment to overcome these hurdles in a number of major developed and developing markets. The end result is that the number of WiMAX subscribers worldwide will jump from 4.2 million at the end of 2007 to 65.6 million by 2012, when most subscribers will be in Asia Pacific followed closely by the Americas. 

For more information on WiMAX Broadband Convergence: Emerging Fixed, Portable & Mobile Revenue Opportunities, please visit www.informatm.com/wimaxreport.