Cities and companies across the U.S are showing interest in a new emerging technology known as WiMax, as a way of providing high-speed wireless internet services in areas much larger than the local WiFi coffee shop. But, some analysts say, making these services commercially viable may prove difficult.A potential thorn in the side for cable and other internet service providers, WiMax was developed to provide the internet across cities using much wider range radio networks than the typical WiFi system used in coffee shops.
While some broadband operators are eyeing WiMax as a way to expand their networks, city administrators are searching for a way to provide inexpensive broadband services to large areas including parks and low-income housing developments.
WiMax services could potentially erode the market for cable and DSL providers. However, according to a recent Reuters article, “the scarcity of suitable airwaves and wide availability of DSL and cable could stunt WiMax growth at least in the United States in the next few years.”
“The WiMax market in other geographies will dwarf that of North America,” said Forrester analyst Charles Golvin, who suggested that WiMax may be better suited for some parts of Europe and developing countries where broadband is not very common or well developed.
Companies including Intel Corp., Alcatel, Lucent Technologies and Alvarion plan to sell WiMax products. Early versions are expected to go on sale next year and will deliver wireless internet to fixed locations such as homes.
Analysts predict that U.S. WiMax providers will operate cautiously at first. If the WiMax service is added to an already crowded market, the fear is that both WiMax and broadband operators will suffer revenue losses.
“Increased broadband competition, price compression and high subscriber acquisition costs threaten to drive margins ever lower,” said In-Stat analyst Keith Nissen. He also suggested that “only 3 percent of broadband users around the world will use WiMax services by 2009, and it could cost about $3 billion to build a nationwide U.S. WiMax network.”
Broadband services are now available in roughly 85 percent of American homes, and about 70 percent have the choice between cable and DSL services, according to Yankee Group analyst Patrick Mahoney.
Mahoney also suggested that most commercial WiMax services may be limited to small scale markets such as rural areas or city neighborhoods that do not already have broadband access.
Administrators in as many as 100 cities or towns have shown interest in building wireless networks. The City of Philadelphia is considering building a network to interconnect Wi-Fi networks which could potentially use WiMax in about 60 percent of the city, said city officials.
Regional operators are also considering WiMax as a way of extending their services without having to lay new wires in the ground, but none have made commitments for service plans so far.
BellSouth Corp has suitable airwaves across nine states and is testing an early WiMax system which it hopes to have into place by next year.
“If it can save money and provide a high-speed broadband service and we can make a profit on it, then we’ll do it,” said spokesman Jeff Batcher, who remarked that WiMax should be cheaper to provide than other services like DSL, which BellSouth sells.
Sprint, the 3rd largest U.S. mobile provider, could be the biggest U.S. WiMax provider, with suitable airwaves in 80 of the top 100 U.S. markets once it buys Nextel Communications Inc. later this year.
Sprint has plans to test early versions of WiMax but will wait for a mobile version to better compete with established broadband providers.
