Global Economic Downturn Takes Its Toll on WiMAX Growth

It was touted as the first next generation BWA technology that could change the face of mobile broadband access, particularly for the developing world, which is also a few years ahead of long-term evolution (LTE). And going by the growth it achieved over the past 12 months or so, it was expected to set another revenue record for quarter ended December 2208.

However, in just about a year following the point where it really took off globally, it seems that, contrary to the fortunes of its rival technology 3G, WiMAX mobile broadband rollout is already hitting speed bumps created by the global economic recession.
 
Over the past month at least three well known research outfits have warned that WiMAX rollouts had been hit by the recession and are already slowing down -- and slowing down pretty fast.

According to just-released study by Canada-based wireless technologies analyst firm Maravedis for instance, although BWA/WiMAX subscribers worldwide reached 2.68 million in Q3 2008 (a huge 91% increase over Q3 2007), when compared to the first quarter of 2008, the Q3 growth looks rather modest at 13%.

There's more: Although refraining from quoting numbers, last month the California based telecom market research firm Dell'Oro Group said that despite the strong growth of 2008 promising a bright 2009, the WiMax market has been "hit rather hard by the economic downturn, which is not good news for WiMax - a technology that's been also facing fierce competition from 4G technology -- a LTE."

Still earlier in December, yet another analyst outfit Infonetics Research, noted that worldwide sales of fixed and mobile WiMAX equipment and phones/Ultra Mobile PCs dropped 21% to $245 million in 3Q08 from 2Q08. And these are expected to continue slide down through 2009 as the economic recession puts the squeeze on this early market.

So what really is ailing this new technology all of a sudden, given that its arch rival 3G does not seem to be hit by the recession at all? "The problem is," says Adlane Fellah, founder of Maravedis, "unlike the 3G operators, very few WiMAX operators have deep pockets. WiMAX networks in general are in their infancy stage and thus require extensive capital expenditure which has to be financed somehow. But the credit crunch and economic downturn is impacting the ability of most service providers to garner funding for expansion and rollouts."

And those who do have deep pockets are playing it safe too. "For instance we have seen that a number of operators in Ukraine, Russia, Brazil, and even in India, which is the fastest growing and one of the biggest markets in the world still making good profits, are slowing down their deployments conserving their resources. All are waiting for the markets to open up again," says Fellah.

Admittedly, for a long-awaited technology that has been making a lot of noise for the past four years or more but only really managed to take off about a year back, the global recession is indeed bad news for WiMAX.

After all, if not for anything else, as says Scott Siegler, analyst at Dell'Oro, "With initial LTE rollouts coming in the 2010 to 2011 timeframe, these delays will shorten the time to market advantage WiMAX currently has over LTE."

Yet in a way, there may be a flip side. The down-turn could also create attractive investment opportunities for astute investors in the WiMAX communications sector.

"The leading trend going into 2009 is an accelerating shift in consumer spending toward wireless services and replacement of landline services," says Fellah. "The value of mobile data services will accelerate as consumers rationalize their communications services expenses. Smaller carriers will have room to differentiate themselves with innovative products and services, and operators will revise deployment strategies to remain profitable and increase efficiency with fewer resources. Finally, lower monthly subscription fees could accelerate the adoption of Personal Wireless Broadband like mobile WiMAX."

Nevertheless, according to Infonetics, even if WiMAX deployments are being hit right now, tough times are not expected to last for more than a year or so. "Revenue growth is expected to return to the overall WiMAX market-fixed as well as mobile- in 2010 as a growing number of WiMAX networks with fixed CPE-based broadband start rolling out 802.16e-based networks," says Richard Webb, wireless analyst at Infonetics Research. 

Photo WiMax on the Go by Brian Jepson. Attribution-Noncommercial-Share Alike 2.0 Generic