WiMax is regarded as the Holy Grail for telecoms operators and value-added network service providers seeking to provide voice and data services to underserviced areas – but it might not be as suitable to this discipline as many believe.
Dr Alapan Arnab, innovation manager at T-Systems South Africa says that the high costs associated with building a WiMax network coupled with the low average revenue per user (ARPU) in underserviced areas and the inherently exorbitant costs of providing Internet services in South Africa have raised questions around its viability.
"In particular, while WiMax may make economic sense in areas with high population density, the economic fundamentals are more challenging in areas with low population density, such as rural areas.
"The business case for low population density locales only exists with cross subsidisation (either from the operator's business case in other locales or from other sources such as the government).
"In our opinion then, cheaper, alternate technologies are more suitable for areas with low population density and WiMax should be seen as one of a range of technologies for developing countries," Arnab explains.
Tackling the first set of challenges for WiMax, Arnab says telcos can conservatively expect to pay in the region of R75-million for a 50 base station WiMax network.
"They will furthermore have to contend with maintenance and operational expenses of about R35m per annum, for this 50 base station network," he says.
"These costs are in line with reality, since covering Gauteng for example, would take a minimum of 50 base stations spread out across the three major municipalities in the province – Ekurhuleni, the City of Johannesburg and the City of Tshwane."
When it comes to providing Internet services, Arnab says its safe to assume the operator would use a 1:50 contention ratio for Internet access and provision roughly 1Mbps (contended) to each user.
"Add in all of the overheads, such as call centers, marketing, management or the cost of running and maintaining Internet gateways, email servers and the likes, and the cost to the consumer will end at the R999.00 per user mark," he says.
Unfortunately, notes Arnab, at this price, it is probable that the maximum potential market for WiMax will be much lower than originally anticipated – it will quite simply be too expensive to appeal to the mass market.
"And this will naturally have a significant impact on the economics involved with providing such a service," he says.
"We therefore don't foresee a financial success for regional network operators in deploying WiMax as the technology for primary network infrastructure.
"Alternative technologies will be required to provide more universal, affordable services – specifically in less dense, rural areas of South Africa," he adds.