Has wireless broadband become mainstream?

Penetration of mobile-only households, limited fixed broadband coverage and appropriate pricing help drive market share of wireless broadband. The success of wireless broadband is increasing the debate on how wireless is able to compete with the lower-cost, higher-bandwidth fixed services provided by fixed broadband.

Wireless broadband's success in selected markets is reflected in the market shares, which range from 6% to 21%, even where fixed broadband is readily available.

The cumulative share of net adds since launch - reflecting the market share since the launch of the service - shows an even more remarkable range of 8% to 40%, as summarised in Exhibit 1.

Exhibit 1: Market share of wireless broadband [Source: Analysys estimates, 2006 and 2007]

Analysys has identified key market factors and service proposition factors that are driving the success of wireless broadband. The key factors that enable the success of wireless broadband include:

• the presence of a large number of mobile-only households, either due to low fixed penetration in developing countries or termination of PSTN services (e.g. in Austria)

• limitations on the coverage of the fixed broadband network

• pricing for wireless broadband that is similar to, or lower than, fixed broadband services (e.g. in Austria, Singapore and Sydney).

The key challenge facing wireless broadband operators (WiMAX or HSDPA) is the choice of the appropriate technology to deploy in order to take advantage of the opportunity.

WiMAX has focused on urban areas, and this is expected to be a compelling proposition, particularly in developing markets.

• GDP per capital in urban areas tends to be significantly higher than national averages (20%–100% more), and as a result, urban areas in developing markets resemble middle-income emerging markets (e.g. Eastern Europe) rather than low-income developing economies.

• The WiMAX business case in urban areas of developing markets looks quite different to a cellular business plan in terms of cashflows.

Despite significant cash outflows in the initial years, the capex typically starts peaking in years five and six, due to increasing capacity demands rather than coverage demands. In that time frame, the business tends to be cashflow positive and therefore it is seen as less risky to make further investments.

Amrish Kacker is a principal consultant at Analysys.