Who, What, Where, When and... WiMax: What's So Compelling?

Includes: AIRO, ALVR, S
by: Andrew Schmitt

WiMAX remains the biggest zero billion dollar market known to telecom. I’ve touched on this issue before (see Why Is Intel Pushing WiMAX? Three Theories) and readers responded with a torrent of comments, none of which provided a convincing argument to me that WiMAX is substantially better than the evolution of existing 3G infrastructure.

In the absence of a conclusion, let’s turn to our friends in the marketing-research cabal.

Telephony magazine writes about a research report by The Yankee Group which projects 28M WiMAX subscribers in 2010 or 2011. That’s growth from around 250k to 28M in three to four years or 250,000 to 28,000,000 with all the zeros. Over 100x growth. In less than four years. Bacteria aspire to growth rates like this.

Consider the following silliness (emphasis mine):

The Yankee Group and Rethink Research, the two agencies behind the three WiMAX World events scheduled this year, recently released new market research that says there will be 28 million Mobile WiMAX subscribers by 2011. What has been less certain is where most of these customers will be, who will be offering them services and how mobile operators will fit in to the future Mobile WiMAX market scenario.

How one can project growth from virtually zero, with the exception of a two hundred thousand Clearwire (CLWR) customers, to 28 million subs without knowing the answer to these basic questions!


The Yankee report goes on to project $4BB in annual equipment revenue (must have big revenue projections so you can sell your reports to someone) in 2011. This means Yankee’s hypothetical WiMAX carrier ecosystem has 28M subscribers with $4BB in annual capex, or $143 in capex per subscriber.

Clearwire’s average revenue per user [ARPU] in 2006 was $484 (Source: GigaOM). This is a pretty good revenue stream for a WiMAX subscriber considering cost is its most frequently highlighted strength. If the ARPU was any higher, I don’t think WiMAX would qualify as a low-cost alternative to 3G+ technology.

According to Yankee, WiMAX carriers will have capex budgets of 30% ($142/$484) of revenue. And this is assuming an average WiMAX customer is paying $40 a month - the same price I pay Cingular for 3G access today. I’ll be gentle and call my pricing optimistic.

In comparison, Cingular Wireless had a capex budget of 17% in 2006. Now, will someone explain to me the Who, What, Where, When and most importantly WHY of WiMAX? Until someone can provide a compelling case for why it’s an incumbent killer, I’m going to start calling it WhyMAX.

Yet another example of why Market Research Firms Shouldn’t Forecast.

Full Disclosure: Authors has no position in above-mentioned companies.

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