LTE: An Introduction

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The Economics of WiMAX

The benefits, from an access perspective, of WiMAX, are evident — it brings a new combination of access, mobility, speed, and reliability to the game. As with any technology, however, the question, now that that the WiMAX standard has been defined and is being implemented by providers and equipment vendors, is what is the value proposition? Who will pay for it, and how much will it cost? How will WiMAX costs compare to other broadband access services?

First, initial WiMAX deployment costs are going to be substantially reduced, since there is no fiber to be run to each subscriber, as there is in xTTH deployments. DSL providers have the inherent advantage of having the access lines already laid, so the difference there is a bit less — WiMAX deployment will cost between one-eighth and one-quarter the cost for DSL deployment per home passed.

As for other wireless alternatives, like 3G, 3.5G, and 4G, the number is similar — WiMAX will cost about 16 percent of the cost of other cellular-based broadband, largely because it will require fewer towers. Those are the closest comparisons. When compared to cable and FTTH deployments, WiMAX costs should come in under one percent of either alternative.

These deployment economics alone should be cause for concern for landline operators that could see WiMAX providers enter the market with considerably lower CAPEX. That is, of course, assuming they can get subscribers to pay for the service — after all, they’re not about to build WiMAX towers without a plan for revenue generation.

There are several models.

For instance, in a municipal WiFi-style deployment, a city might install a single tower to provide service to an entire downtown area. Businesses might be provided access free of charge, providing an enticement for new enterprises. Cities are already doing this with WiFi, but WiMAX allows them do provide access to a wider area from a single access point.

Residents, of course, can also be granted access, free or fee-based, depending on the specific model. And visitors can use the service by paying an hourly or daily rate, as they now do with WiFi services. However, guests and residents, alike, should see much lower rates than the do with their existing service, given that subscriber rates should reflect deployment costs, and by not having to run physical lines to each home and business, providers can offer lower access rates.

There’s the subscriber attraction plan — higher speed access, mobility, lower rates. It’s a pretty simple sell.

On the CPE side, by the end of this year, integrated WiMAX receivers for portable devices, like laptops and PDAs, are expected to cost as little as $100. So, just as WiFi-enabled equipment comes with a price tag for the user, so, too will WiMAX. But, given the prevalence of WiFi networks in businesses, homes, and municipalities, it isn’t hard to imagine much pushback from users, especially in areas with limited or no broadband access to speak of. At the end of the day, $100 is a small price to pay for the benefits WiMAX promises.

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