WiMax Still Viable Despite High Cost

By Chandra Devi

WIMAX technology boasts impressive features and functionalities as an Internet broadband tool. It has many advantages over fixed- line services running on copper wires, which are mostly used for broadband access today.

Besides offering broadband speeds without the need for cables, WiMax delivers dedicated bandwidth to each user, so the quality of service is high, even during high network traffic.

Also a key characteristic of WiMax is that it can be applied to fixed, portable and mobile usage.

The downside to this new technology is that it lacks economies of scale. Deploying the technology is costly, largely spiked by the cost of customer premises equipment (CPE).

Cost of access plays a crucial role in determining the adoption rate of the technology, says Esther Gan, market analyst, telecommunications, IDC Malaysia. This is especially so for Malaysia because consumers usually take a “wait and see” approach and are relatively slow to adopt new technology.

“CPE represents a significant cost component for service providers. So, to sustain a feasible business model, service providers like P1 have to impose a high subscriber fee for their WiMax services. It will take some time for mass adoption of WiMax services as the cost of the technology is still considerably high compared to wired technology,” Gan points out.

Nonetheless, she believes that WiMax offers a viable solution to address the digital divide issue in the country because accessibility of the Internet is magnified faster and made cheaper than laying out copper lines.

Although cheaper, proven and established technologies such as digital subscriber line (DSL) and Wi-Fi have their limitations that continue to cause the country’s digital divide gaps, she stresses.

According to Gan, a country like Malaysia should diversify the ways it provides Internet access across the country to avoid a monopolistic market in the telecommunications industry. As more competing technologies from various service providers are made available in the market, intense competition will continue to drive down pricing for Internet access and so meet the budget of the mass- market segment.

Although WiMax is costly at the moment, in the long run prices of CPE will decline as a result of competition and low-cost manufacturing in Asia.

“Pushing new and existing technologies is a good approach to bridge the digital divide as these technologies will complement each other over the long haul. Existing technologies like DSL are able to provide stable and high-throughput connectivity into areas where wireless technology capabilities are limited. This is especially so for indoor coverage.

“On the other hand, wireless technologies like WiMax are able to provide extensive outdoor connectivity to areas where copper infrastructure is not available,” Gan explains.

Be it global system for mobile communications, WiMax or code division multiple access, wireless broadband access is the best technology to close the digital divide, reckons Marc Einstein, senior industry analyst, Frost & Sullivan, simply because of the speed of deployment for wireless broadband access and the wide coverage area involved.

He is optimistic about the prospects of deploying both WiMax and High Speed Packet Access (HSPA) in the country.

“Just as expensive CPE is still very much a problem in the WiMax space, it is also very expensive to expand wireline infrastructure. New technologies offer promise, but do not have the economies of scale enjoyed by existing technologies, which can make it hard for rural consumers to afford. However, if new technologies offer a lower initial investment per subscriber, that can then make up for this disparity,” he explains.

To encourage greater uptake of broadband services, Einstein says the use of various technologies such as DSL, fibre, HSPA and WiMax must be maximised, which, in turn, will allow more operators and enable lower tariffs.

Meanwhile, Bill Chang, country director, Nokia Siemens Networks Malaysia, says there is a need for various technologies to co-exist in a geographically large country like Malaysia. In fact, WiMax is complementary to Wi-Fi, x-DSL, 3G/3.5G and later, 4G.

The introduction of new services such as WiMax, he believes, will play a role in increasing Internet broadband penetration and, in turn, help bridge the digital divide.

But he says the digital disparity will continue to exist between the urban and rural areas, as licensed operators will prove their respective business cases by providing the services in areas that show good yield on investment.

“From this perspective, WiMax rollouts will initially concentrate in the metro and more densely populated areas. In rural areas, the picture is a little different. Until such time when the business case demonstrates a profitable return on investment, the digital divide will continue to exist.”

The critical factor for success, Chang adds, is the sustainability of any initiative that allows access to technology and information, and more importantly, ensure that the local community adopts such technology and that local entrepreneurs continue to offer these services over the long run.

The impeded rollout of technology in geographically and financially “difficult” areas, he says, means that people living in such areas will be increasingly cut off from those whose lives are ever-advancing through greater use of technology.

“The challenge is getting the right services in an affordable manner to the people who need it most, in a way that is profitable for the industry.”

(c) 2008 New Straits Times. Provided by ProQuest LLC. All rights Reserved.