Encouraging signs for WiMAX price points

One of the ongoing concerns of investors weighing up the WiMAX opportunity has been that the price of base stations and CPE is too high to get an attractive return on their investment. This is particularly true in emerging markets, of course, where consumers don’t have the means to pay much for broadband access.

In Russia, wireless broadband operator Enforta focuses on the less price-sensitive markets of SMEs and corporates. The operator says fixed WiMAX equipment price points, while coming down, are still not low enough to make what it would believe to be a profitable play for the broadband consumer. (The average broadband consumer in Russia’s regions typically pays around $20 per month, while it is around $17 per month in Moscow and St Petersburg.)

In an industry yet to achieve significant economies of scale, the lower volumes are bound to create higher prices.

But there are signs that the price points on WiMAX equipment are not as a formidable barrier to the business case as they once were. In the 2.5GHz frequency band, the promise of large-scale mobile WiMAX rollouts by Sprint/Clearwire in the US and BSNL in India – along with on-going device development from the likes of Intel, Nokia, Samsung and no doubt Motorola – will inevitably drive prices down further.

Although there is a long way to go before the WiMAX community can come close to matching the device diversity and varying price points offered by the HSDPA camp, it can take heart from the success of its distributed IPR regime and the work done by the Open Patents Alliance to lower supplier royalties.

Xohm president Barry West, in conversation with WiMAX Vision last week, points out that the WiMAX eco-system – which includes more than 20 chipsets vendors – is delivering chipsets at around the $20 mark and that non-subsidised WiMAX USB devices will be available at Xohm launch (still scheduled for this month) at under $50, which looks impressive.

In the 3.5GHz frequency band, Onemax, which runs a mobile WiMAX network in the Dominican Republic (DR), reports that CPE is nearing the $100 per unit mark (a price point typically cited by WiMAX operators as the highest starting point to make a successful mass-market service proposition).

Onemax, however, is not aiming to increase market share by offering lower prices than DSL and cellular alternatives. Its monthly tariffs for consumers currently range from RD$1,090 ($32) per month – for a 256Kbps downlink and 128Kbps uplink service – to RD$2,990 ($86) per month for the 1.5Mbps/256Kbps package. The charges look expensive, particularly for an emerging economy, even allowing for the fact that each broadband plan includes VoIP and fixed /nomadic access within its coverage area.

It remains to be seen how far Onemax and other WiMAX operators in emerging markets can be successful by charging consumers a premium for their service on the grounds of higher speeds, better quality of service and quicker installation times than incumbent broadband competitors.

A decline in WiMAX price points does at least give them more room for manoeuvre on retail pricing, if they need it, without sacrificing margins.