When you are riding a wave, it is time to look for the next one. This is very much the case now for service providers in the Middle East and Africa (MEA). Although the region has played a key role in the global growth of mobile connections, currently running at a staggering million a day, competitive pressure is increasing.
With this trend in mind, and with a view to 'what is next', Noel Kirkaldy, director wireless broadband for Motorola MEA, outlines the business case for wireless broadband, showing how the technology, through its rich range of data and voice services, has the potential to dramatically impact the data market, similarly to the dramatic impact GSM technology has had on the voice market.
The potential for growth in mobile subscribers across the Middle East and Africa region remains positive: there is exceptional demand; the policies of market liberalisation have triggered significant investment in networks; and, in GSM, a proven, cost-efficient and interoperable technology can be quickly provided across wide geographies.
Mobile services have already been widely embraced of course in the Middle East while in emerging countries connections are growing at a phenomenal rate. For example, in April The Mobile World 2007 alone, 2,8 million new subscribers were recorded in Pakistan. Africa offers huge potential too: in Nigeria, mobile users are expected to rise from over 40 million in 2007 to over 90 million.
But, behind the figures, ARPU is under pressure. The cost of voice has traditionally been low in these markets; customers have preferred to use prepaid tariffs; and customer churn is common as service providers have been chosen purely on a cost basis. Add in the fact that liberalisation has created highly competitive markets across the region and it is clear that operating conditions are tougher than they appear to uneducated observers. So what can be done in the face of the changing competitive dynamics? The answer is to look to wireless broadband technology.
Wireless broadband: a success technology
Wireless broadband has the hallmarks of a 'success technology'. Similar to GSM, it has three inherent factors in its favour: there is an increasing requirement with the potential for a solid and increased market size, the technology is coming on line to deliver cost-efficiencies.
Demand: there is strong demand from end-users for wireless broadband. Businesses recognise that the technology will immeasurably improve communication, enhance operations and open new channels to market; it is no coincidence that countries with high degrees of broadband penetration are among the best-performing in terms of gross domestic product (GDP) per head of population.
Consumers in emerging markets like those of the Middle East and Africa see the services available to their counterparts in mature markets, from telecommuting to web surfing on-the-go to video streaming, mobile gaming and music downloads, and want a slice of the action. Then there is the education benefit - broadband can support distance teaching to enhance skills across dispersed communities - a benefit that encourages governments to embrace the value of wireless broadband, which can quickly and efficiently bridge the digital divide. Indeed, many countries are now considering or are implementing policies to enhance broadband availability - with strong incentives for service providers.
Wireless broadband technology: wireless broadband systems are available or are coming online that deliver a rich new revenue channel by providing broadband over-the-air. These include: enhanced GSM and CDMA data, Wi-Fi (generally applied for LAN applications) offering high-speed access across metropolitan areas, and WiMAX (worldwide interoperability for microwave access), which provides advanced wireless broadband access in fixed, portable, and mobile Motorola's WiMAX solutions are based on the IEEE (Institute of Electrical and Electronic Engineers) 802.16e-2005 standard adopted in 2005, which are designed to support fixed, portable, nomadic and mobile applications.
WiMAX can be used as a highly cost-efficient method to deliver broadband data to Wi-Fi hotspots - connecting service providers with the millions of Wi-Fi enabled devices already in use. However, service providers are very interested in the potential for the technology to imminently offer wireless broadband over wide areas to provide a rich range of both voice and data services.
As with Wi-Fi, WiMAX devices, laptops and data cards will soon become available so that users can interact with the technology while mobile.
All WiMAX certified equipment will be designed to be interoperable too - at the recent WiMAX Forum PlugFest in Malaga, Spain, 35 companies from across the infrastructure spectrum showcased equipment that will go through the interoperability certification process.
Cost-efficient: interoperability creates the competitive market to drive down equipment costs. But on a more fundamental level, wireless is much easier to implement - and therefore more cost effective - than investing in wired services. Proof of this point is found in Saudi Arabia. Its mobile market matured rapidly, yet in 2007, there was only 1.1 broadband subscriber line per 100 people, according to the Economist Intelligence Unit. Saudi Arabia's Communications and Information Technology Commission has placed the lack of broadband infrastructure as a key issue to be addressed via the issuing of new fixed-line licenses.
When and how? So how will service providers begin to tap into the opportunity presented by wireless broadband? In the immediate future we see the major investment in data services being focused on enhancing cell networks. Anywhere there is coverage, operators can provision 2G or 3G high-speed data technologies (such as GPRS/EDGE/UMTS/HSxPA). These technologies deliver the capability for consumers to surf the web and access a range of advancing and proven applications such as gaming and music downloads. Business users too will value new services including remote e-mail access which is to be provided largely on 2G systems and checking corporate applications such as stock information.
Complementary to these systems, service providers can offer broadband over the air pretty much anywhere. Clearly, the business case is strongest in major cities and urban sprawls and this is where investment will begin. WiMAX and WiFi systems will provide the primary means to offer coverage and we expect momentum behind the provision of coverage in urban areas to build in mid-2008. At the same time, more devices and laptops will become available, offering WiMAX and Wi-Fi connectivity to build momentum behind the technology. And as this grows we expect to see networks, over the three-to-five year period, expanding broadband access into more remote geographies.
The business opportunity
Where there is cell coverage, data services can be provided. And where operators see an opportunity for 'broadband anywhere' it can be easily and cost-effectively delivered. Look at Wateen Telecom in Pakistan. In just nine months, the network was deployed in 17 cities.
With robust demand, industry analysts predicted that users will buy into wireless broadband services. And with broadband, it is important to remember that the economics change. Whereas people see voice as a commodity service, broadband is highly valued. Subscribers are prepared to pay significantly more for their access. Moreover, they will do so on a contract basis, so off-setting the perceived business risk of investing in new systems by introducing stability to the subscriber base.
Based on industry forecasts, Motorola is confident that wireless broadband technology like WiMAX solutions will contribute to the growth of the regional telecoms sector by enhancing the range of services and applications available and extending customer loyalty. In fact, over the mid to longer term, wireless broadband could well follow where GSM has led in terms of the number of users accessing services over the technology.