Barron’s has an article by Bill Alpert:
Unwired communications will allow the emerging economies of Asia, Latin America and Africa to transport their masses into the age of the telephone and the Internet at prices affordable even to a low per capita GDP. But how much of the job will go to the cellular technologies promoted by the likes of LM Ericsson, Nokia, Motorola, Texas Instruments and Qualcomm, and how much to WiFi and WiMAX, the wireless networking technologies driven by Intel and a flock of smaller vendors like Broadcom, Atheros Communications, Marvell Technology Group, Alvarion and Airspan Networks? For now, my money’s on cellular.
I got to thinkin’ about this after hearing how Alcatel says communications firms in spots with low numbers of telephones per capita — places like Russia, Latin America and India — are more interested in WiMAX than in the latest 3rd Generation cellular products. WiMAX is like WiFi with a metropolitan reach. It’s faster than the fastest cellular, but the first WiMAX products won’t ship until this summer.
In Mexico, a proto-WiMAX wireless service from Axtel is growing impressively. Analyst Cary S. Robinson of Miller Johnson Steichen Kinnard reports that Axtel subscribers grew 8% sequentially in the March quarter, to 490,000. Robinson figures Axtel’s little supplier Airspan (ticker: AIRN)will reach profitability by the end of this year on sales of about $110 million.
While WiMAX is only at the zygot stage, cellular is full grown. Cellular handsets cost less than the computers needed for WiMAX. Service charges for WiMAX will exceed the monthly $10-$15 average revenue per user that cellular operators are getting in emerging nations.
At investor meetings this month, Qualcomm showed stats on the correlation of per capita GDP and the penetration of telephones and the Internet. As average income went from $1,000 to $10,000 — looking across nations in 2002 — the phone penetration went from about 5% to 40%. The same income difference corresponded to an increase in Internet penetration from a few percent to 20%. Each additional percent of penetration required twice the additional per capita GDP for Internet as for phone.