Five Ways to Make WiMAX Work

By: By Ozgur Aytar, Pyramid Research
( 1 Jan 2009 )

Operators of different types, from fixed telcos and CLECs to quite a few mobile operators and new entrants, have embraced WiMAX, particularly in emerging markets. They generally employ the technology to deliver fixed or portable broadband services—the next frontier for growth. We highlight the following five best practices that have resulted in stronger customer uptake and higher revenue for the operators we have analyzed.

Time-to-market is critical.
Simply put, WiMAX is an opportunistic play. In most cases, the technology has a stronger competitive position in emerging markets due to limited 3G deployments, a lack of 3G licenses and low broadband penetration. There is pent-up demand for faster Internet access, and WiMAX operators can claim an early foothold if they can take advantage of the single most important proposition of WiMAX, which is speed to market.

A larger segment of the residential market can be adresed by lowering bariers to entry with flexible, innovative business models.
The reach of WiMAX has been hindered by CPE costs in its early days of limited deployments and volumes. Most operators go after the SME and high-end residential markets to make the financials work. On the other hand, some operators have been able to come up with business models that enable WiMAX to penetrate deeper into the residential segment.

Examples of these models include the following:
• Service bundling helps the operator play the value-for-money card. For example, Zain, a mobile operator in Bahrain, provides bundles of GSM and WiMAX, exploiting cross-selling and up-selling opportunities within its existing base of mobile customers. Max Telecom, a recent entrant in the Bulgarian market, provides a bundle of broadband and VoIP, with a limited TV offering thrown in for free.
• A simple, prepaid pricing scheme attracts customers. In Pakistan, Wateen provides a range of prepaid plans to let customers select a plan based on their usage needs. The operator reported more than 15,000 residential customers in H1 2008.
• Targeting multidwelling units and letting multiple households or businesses share a terminal for connectivity at a lower price has also proved successful in expanding the addressable residential market. In fact, Russian WiMAX operator Enforta¡¯s residential customer base has grown an impressive 70 percent since it launched this model earlier in 2008.

Successful differentiation is built around user experience.
The propositions that resonate the most with end users—both consumers and businesses—are built around experience. That is beyond pricing of course. For example, network availability and shorter service provisioning times go a long way, particularly in developing markets, where line digitalization may not take place in some areas for years or the waiting lines can be so long that a customer cannot get a connection for months.

In contrast, in Chile Telmex promises to install its WiMAX service in no more than five days, Jordanian Umniah does it within a day, and Max Telecom offers a self-installation plug-and-play scheme that takes less than 30 minutes. Portability is also a strong differentiator for WiMAX operators, since the other fixed broadband technologies cannot provide this. Operators tell us portability is a hit among mobile young professionals.

Network reliability and applications sell technologies in the business market.
Business customers are necessary for sustainable WiMAX business models, but they buy into technologies for the applications they can enable.

Applications such as mobility, VPN, video calling and IP Centrex can grow the relationship between a business and an operator from one based merely on the provision of access into one that is much deeper and lucrative. Indeed, WiMAX operators in emerging markets can generate upward of $500 per month from business customers, compared with $20 to $40 from consumers. Things that have worked to attract businesses include different levels of QoS offerings as well as network reliability and performance supported by SLAs, plus a strong customer care organization. By providing such services, Digicel reportedly acquired an 80 percent share of the large-business market in Jamaica within its first 15 months of service.

Cost optimization has to be at the front and center of any WiMAX strategy.
Ultimately, the key to success in emerging markets or as a market challenger is one of reducing the total cost of ownership of the network. Effective ways of making the most of your capex (capital expenditure) dollars include:
• A deep understanding of equipment capabilities, gained through trials conducted in your own environment for accurate cost estimates and a realistic launch schedule.
• Partnerships built around effective SLAs with vendors that share the risk of this new technology.
• A strategic network deployment plan that takes advantage of WiMAX's flexibility and synchronizes network expansion with demand for shorter payback times.

Operators should also find ways to bring down opex (operating expenditure) levels, specifically acquisition and maintenance costs, by providing lower subsidies, indirect distribution channels and self-provisioning tools. Those that can leverage existing assets—a brand, a distribution channel or billing relationships—will surely see operational savings. Moreover, they may have the opportunity to launch more competitive offerings and enjoy a head start.