WiMax: Asia’s Last Mile Solution?

WiMax holds promising potential as an alternative technology to connect underserved rural areas that will never realistically receive fixed-line services. The sweet spot for WiMax is its ability to provide voice and data connectivity at speeds of up to 1Mbps in Asia’s emerging markets where such digital divide exists.

This massive untapped segment is expected to drive WiMax deployments in Asia-Pacific, despite competition from 3G technology and the regulatory issues in some countries.

New analysis from Frost & Sullivan, Asia Pacific WiMax Opportunity, finds that the region - covering 17 Asia-Pacific countries - can potentially boast of 43 million WiMax subscribers by end-2013, generating estimated revenues of close to US$11 billion, at a CAGR (compound annual growth rate) of 45 percent (2007-2013).

The emerging markets are expected to account for nearly 80 percent (or 34.4 million) of the total subscribers in 2013, collectively contributing 69 percent (or US$7.59 billion) to the region’s total WiMax revenues given their low-ARPU (average revenue per user) nature.

The Asia-Pacific region is home to the entire gamut of market characteristics - from the extreme emerging markets like Bangladesh and Pakistan with under one percent of household broadband penetration, to the world’s most wired and highly saturated markets such as Hong Kong and South Korea.

As at end-2007, Asia’s household broadband penetration stood at 3.4 percent. This translates to nearly 3.7 billion people in the region who have yet to adopt broadband access services - a figure significantly higher than the world’s entire mobile subscriber base. Asia-Pacific, as such, remains the best test-bed for WiMax in terms of subscriber uptake and network deployments.

“In such a diverse market, the business models for WiMax will depend largely on service level uptake, as operators in emerging markets will focus on enterprise users before catering to the mass market,” says Frost & Sullivan senior industry analyst Marc Einstein.

“Transition markets such as Malaysia will focus on the underserved pockets in urban areas, while operators in markets such as Japan and South Korea will drive new business models by embedding WiMax chipsets in a wide range of consumer devices including cameras and game consoles to pioneer WiMax-enabled mobile devices,” he adds.

WiMax adoption to-date however has been lukewarm and it still faces a number of challenges ranging from regulatory issues to weak operator support to high CPE (customer premise equipment) prices.

According to Einstein, WiMax clearly has the potential of bringing Asia’s masses online, “The real issue facing WiMax is not its technical capabilities, but whether it will get enough traction and stakeholder involvement to graduate from a niche application to a mainstream technology that can be profitably deployed at price points that will drive wider adoption.”

Of the 17 Asian countries in the study that were ranked for regulatory support and operator willingness to deploy the technology, Pakistan, Sri Lanka and India topped the list due to excellent incumbent support, favourable regulatory regimes, and considerable untapped growth.

“While the regulatory restrictions continue to ease up, some large Asian markets such as China and Indonesia have made very little progress in licensing WiMax,” notes Einstein, adding that China alone has the power to make or break WiMax service in the region if its government continues to delay WiMax roll-out as it did with 3G. Given a favourable government stance, China is forecasted to account for as much as 45 percent (or 19.35 million) of the total WiMax subscribers in 2013.

However, as large established operators such as Japan’s KDDI and India’s BSNL continue to pursue deployments, Frost & Sullivan believes that WiMax may just get a fresh lease on life in 2009.