Taiwan's WiMAX dream slips away as reality kicks in

By Tony Brown

When Taiwanese telecoms regulator the National Communications Commission (NCC) issued six 2.5GHz WiMAX licenses in July 2007, it looked likely that WiMAX would play a significant role in the country’s broadband market. But the landscape has changed drastically in the intervening 14 months.

One WiMAX licensee, First International Telecom (Fitel), has already confessed that its serious financial problems could jeopardize its prospects of even making it to a commercial launch unless it can attract new investment.

Of the other five, only Far EasTone, the only mobile operator to receive a WiMAX license, looks to be in a strong enough position to launch commercial services.

The rest – Global Mobile, Wei Mai Si Telecom, Tatung and Vastar Cable TV – do not seem to be in as hazardous a position as Fitel but are still nowhere near being able to mount a serious challenge in the wireless-broadband market.

Given that the Ministry of Economic Affairs has earmarked WiMAX as a potential major revenue earner for the country’s electronics manufacturers and has already secured a huge investment from US giant Intel, the NCC must be getting seriously worried about the state of play in the WiMAX market.

In particular, it must be ruing its controversial decision to not award state-owned broadband- and mobile-market giant Chunghwa Telecom (CHT) one of the six WiMAX licenses, which are valid for six years.

The NCC has already blocked CHT’s attempts to acquire Global Mobile in January and Fitel in late August, saying that the WiMAX licensees are not allowed to sell stakes until they have launched commercial services.

But it looks unlikely that some of the greenfield operators will even be able to launch commercial services, which brings the debate back to CHT and the unfortunate truth of Taiwan’s telecoms market: Nothing major can happen unless CHT is on board – a fact that is coming back to bite the NCC with some vengeance.

CHT’s exclusion from the WiMAX market means that the market giant has no stake in WiMAX’s success, and it has incited the operator to play hardball on crucial issues, such as infrastructure sharing with WiMAX licensees.

The problem for the NCC and for the government’s aim of making Taiwan a global WiMAX manufacturing hub is that CHT says it has moved on since missing out on a WiMAX license and is setting its sights on moving toward 4G, notably LTE.

This development is significant for WiMAX’s prospects of being successfully deployed in Taiwan, given that CHT’s sheer market power in terms of infrastructure and financial clout make it an essential player in any WiMAX rollout.

When it handed out the six WiMAX licenses – three for the north of the country and three for the south – the NCC left a carrot dangling for CHT, saying it would offer a national WiMAX license in mid-2009, which most local observers assumed would be awarded to CHT.

But with new Chairman Lu Shyue-ching positioning the firm to move aggressively toward LTE, CHT is indicating that it has moved past its interest in WiMAX and will use HSPA as its core wireless-broadband technology until LTE comes on board.

This would be a devastating turn of events, because there is no realistic way that the five greenfield WiMAX licensees and Far EasTone could offer commercially viable WiMAX services if CHT sat out WiMAX and decided to follow the wrecking-ball strategy of offering cut-rate HSPA wireless-broadband services, most likely bundled with its fixed-line broadband and IPTV services.

Of course, CHT’s suggestion that it is no longer interested in WiMAX could be a negotiating ploy to enable it obtain a more favorable deal for a national WiMAX license when it comes up for grabs in mid-2009.

CHT can argue to the NCC that it should be offered a sweetheart deal on its national WiMAX license, given that it is helping the NCC and the country’s wider economic interests by launching WiMAX when it is not really interested in the technology.

It is hard to take CHT’s insistence that it is no longer interested in WiMAX entirely seriously, since a national WiMAX license would at least provide the operator with some crucial spectrum, giving it some additional backhaul capacity even if it did not aggressively launch customer-focused WiMAX services.

Although it might be bluffing in this high-stakes game of poker with the NCC, there is no doubt that CHT is the beneficiary of the NCC’s shortsightedness in denying it a WiMAX license in 2007.

CHT can pretty much demand its own terms for a national WiMAX license because of the parlous state of the WiMAX market and the heavy bet that the government has made on WiMAX as a potential export technology.

The NCC finds itself in a tight spot because although it clearly needs CHT on board in the WiMAX market to save the technology from an ignominious failure, it will face a serious backlash – and maybe even a legal challenge – from the six existing WiMAX licensees if it offers CHT a national WiMAX license on favorable terms.

The unfortunate reality is that the NCC might have to eat some humble pie and bring CHT and the six existing WiMAX licensees back to the negotiating table to hammer out some kind of solution to the impasse.

This might mean that the NCC has to broker a deal to allow CHT to form partnerships with the most-troubled WiMAX licensees, most obviously Fitel and Global Mobile, finally giving it a seat at the table from which it should never have been excluded.