By Monica Paolini, Senza Fili Consulting
Often operators do not want to disclose too much about what they do. But one topic that is guaranteed to get even the most guarded operators to open up is the price of end-user devices.
In my latest report, Getting WiMAX in the Hands of the Subscriber, based on a detailed survey of 74 WiMAX operators, operators were eager to express their views on this topic. For over 80% of them, cost is a critical factor in the selection of devices, followed by technical performance, quality and time to market. (Surprisingly, in the age of the iPhone, design did not score very highly).
So what prices do WiMAX operators expect? They expect USB dongles to be about $40, which is in line with current volume-based pricing. For desktop CPEs, they are looking for a $75 price tag for an entry-level model. This is a price that many operators appear to be able to secure already, but it is well below the prices that others report, especially when using WiMAX-based products in non-certified spectrum bands. In these cases, volumes tend to be lower, so costs are likely to be higher.
Interestingly, WiMAX operators expect entry-level mobile phones to also be priced at around $75, excluding subsidies. This could be a reasonable expectation for a bare-bone phone (no cellular interface, limited functionality, small screen). In the same survey, however, operators indicate clearly their preference for powerful, feature-packed devices, with advanced data capabilities. It is not realistic to expect WiMAX to compete with GSM voice-centric services, so it makes sense for operators to show little interest for basic phones capable of only voice and texting.
WiMAX phones should support web browsers and audio and music streaming in addition to texting and email capabilities to make the service compelling to users, in developed as well as in developing markets. These requirements are going to make it difficult for device vendors to reach the target $75. Operators also overwhelmingly want devices with Wi-Fi and 2G/3G cellular interfaces. This is going to drive the price further up.
Will a higher price destroy the business case? It does not have to, especially since during the initial stages operators still focus on data-centric devices like laptops.
Furthermore, the rapidly growing market share for smartphones indicates that subscribers are increasingly willing to invest money in a powerful device. At Yota, the Russian WiMAX operator, HTC WiMAX smartphones are available for about $1,000 and the operator has sold thousands of them during the initial months of operations. This is clearly not a mass market device, but there appears to be definitely a market for it, in emerging markets as well as in developed ones.