Wireless Looks to Conquer the Broadband Market

Consumers in the market for broadband Internet access have sat by and watched as cable and DSL efforts have been slowly but surely rolled out, have heard all the advantages and disadvantages of each technology, and in the end may end up going wireless, according to reports by Ovum and eMarketer.

Ovum’s report, “Broadband Access: New Business Models,” found that the business plans for most early broadband access operators were overly optimistic, resulting in delayed deployment plans.

“Technology costs are only the tip of the iceberg for operators and new entrants,” said Ovum analyst Yum Petkovic. “The cost of interconnection can often form the biggest expense, even leaving aside the cost of rolling out a new network. So despite all the regulatory work needed to unbundle the local loop, countries which have achieved unbundling may find that new entrants are not queuing up to take advantage of the new rules.”

xDSL, wireless local loop, fiber to the home, and cable modems are all viable broadband access technologies, but each has its own capabilities and restrictions. xDSL is unable to cover long distances because of noise distortion. It also suffers from bandwidth restrictions that shorten its overall life cycle. Fiber to the home is gaining ground in the US, according to Ovum. Deploying fiber is expensive, but improved methods of deployment that do not require digging could change that.

Ovum’s report found that wireless local loop is fast becoming the favored option for new entrants to the broadband market. It allows operators without an existing customer base to build a network without paying interconnect fees or digging. Wireless access providers should be able to bring their consumer offerings to market and recoup rollout costs quickly.

“Wireless is definitely a good short-term strategy, because the revenue generated will soon outstrip cost margins,” Petkovic said. “The wireless approach is being encouraged in Hong Kong, for example, as it represents the quickest way to foster competition. Nearly 20 licenses have already been awarded.”

European countries, such as the UK, France, and Switzerland have held or are holding auctions to award wireless local loop licenses this year.

According to eMarketer, the number of fixed wireless subscribers will grow to 3.86 million by 2003, a 1,500 percent increase from the 230,000 users projected at the end of 2000.

“Where DSL and cable modem access had once been touted as the most efficient means of broadband access, the speed and cost-effectiveness fixed wireless provides places them in prime position to gain market share,” said Brian Gilman, senior analyst at eMarketer.

Fixed wireless availability will result in a swift transition by residential and business consumers to wireless services over the next few years. By 2003, small and medium-sized businesses will represent 80 percent of the total fixed wireless market, where in 1999, business share was at 66 percent. Fixed wireless revenue will reach $3.35 billion, up from $230 million forecasted at year-end 2000, according to eMarketer.

“While fixed wireless services will be targeted to the business market, many residential users will be swayed by the system’s easy access and pricing models,” Gilman said.

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