WiMax Potential

Barron’s Online writes that WiMax could be the new Wi-Fi — better for consumers than investors:

WiMax has been designed to attack a storied problem in the telecommunications business: finding a cheap alternative for “last mile” access to homes and businesses.

At the highest level, it’s a pretty simple idea: a service provider puts up a WiMax transmitter on a tower. You install a WiMax receiver. Plug the receiver into the PC, and — Voila! — Internet access, without any help from your local phone or cable companies. In theory, at least, the transmitter can be 10 miles or more away. (A Wi-Fi access point, by contrast, can’t generally transmit more than a few hundred feet.)

Initially, the issue WiMax will address is this: while we’ve already got plenty of bandwidth in the heart of the network, it’s not always easy to get high-speed access to the average Joe — particularly if he lives in the boonies. Most high-speed Internet access comes via a DSL or cable line but what about places which lack access to either? WiMax could be the answer.

What’s less clear is whether WiMax is the answer to several other nagging questions. For instance, what if I live in a city, but want an alternative to getting access from my phone or cable company? WiMax could be the answer. And perhaps most interestingly, what if I want to get the same high-speed access outside my home or office — in the park, or on a bus, or even in my car? WiMax enthusiasts expect the technology to solve that one, too.

The most obvious application of WiMax will be as broadband infill, an alternative for places where it’s not cost-effective to lay the wiring for cable or DSL connections. That’s a considerable market: about 20% of the U.S. population lacks access to wired broadband connections. And there is an even bigger potential market overseas, in developing markets like China and India.

“The fundamental value proposition of WiMax is not that different from existing fixed broadband wireless technologies which have been in existence for many years,” says Michael Cai, an analyst with Parks Associates, a Dallas-based market research firm. “But the industry has been too fragmented. They needed a standard so that operators can have interoperable equipment from multiple sources. Costs will come down faster, and larger service providers will be more confident.” At least that’s the theory: the first WiMax equipment won’t appear on the market until early 2005.

For investors, Wi-Fi was a slam-dunk technology that proved a difficult investment proposition, as hardware and components quickly commoditized and prices fell. Good for consumers, not so much so for investors. With the exception of a few smaller companies that could become acquisition bait, the same thing could happen again with WiMax.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.