New Revenue Models for Telecommunication Companies in Latin America using WiMAX
I. Introduction
WiMAX technology presents an exciting opportunity with potential to benefit consumers, hardware manufacturers, and telecommunication companies throughout the world. Capitalizing on this opportunity, though, is contingent upon the ability of telecommunication companies to find creative revenue and pricing strategies suited to WiMAX. In developed markets such as the United States and Western Europe, the challenges (and associated benefits) are incremental. In contrast, Latin American (and other emerging) markets pose greater potential challenges and benefits – both monetary and social. If telecommunication companies profitably deliver WiMAX technology to this market, their business will serve as a model worldwide.
II. Research Problem
Current telecommunication revenue models in Latin America are not suited to the expansion of WiMAX technology. Mobile service providers must rethink pricing and service models for phone users, and will need to design systems to serve PC and laptop owner who need internet service. For the mobile phone segment, the vast majority of Latin American consumers currently use “pay as you go” plans, making small incremental purchases. This model will not effectively capitalize on WiMAX technology. Consumers will need effective, economical solutions to access mobile internet and data intensive applications. VOIP applications (e.g. Skype and Google Talk) on mobile devices will make voice and data usage virtually indistinguishable. This will also lower price-ceilings for international and domestic calls. For the PC/Laptop segment, WiMAX’s broadband capabilities will open new markets (and introduce new competitors) for mobile providers now focused on delivering voice capability. Identifying strategies to enter this market and revenue models to maximize value is critical to the success of telecommunication providers.
III. Research Method
I anticipate this research will develop in a five-part process. First, I will need to work to understand the potential market and growth for Latin American WiMAX. This data will be available in existing academic and industry research. I will need to consider educational, geographic, and economic information to form a coherent portrait of the customer base. In addition, this research will inform me on the competitive and regulatory landscape confronting Latin American telecommunication companies. The second phase of my research will be to better understand WiMAX technology and its capabilities through a review of technical literature and white papers. Third, I will study the current business environment of telecommunication companies. I will use financial information to build profitability and cost benchmarks based on 2G and 3G implementations. Conversations with executives in the US and abroad, will uncover current trends in implementation and revenue generation. Service providers can supply information on WiMAX test rollouts and initial consumer responses. By collaborating with these stakeholders, I will indentify creative revenue opportunities and risk factors for the business. I will develop a specific hypothesis on how Latin American telecommunication companies can best exploit opportunities presented by WiMAX. The fourth phase of my research will test my hypothesis through financial models based on the data gathered in the first three phases. Lastly, I will refine and validate the recommendations based on the results of my models.
IV. Impact of the Research
This research has the opportunity to have a profound social, technological and economic impact for governments, companies and individuals in Latin America and around the world. Implementation of WiMAX technology will bring significant economic and social benefit to the people of Latin America. However, this implementation will only take place, if it will contribute to the bottom line of telecommunication companies.
Clearly hardware manufacturers selling WiMAX products will benefit financially as more telecommunication providers build WiMAX networks. Revenue will come from sales of base stations and other infrastructure products. Also, as network coverage and capabilities expand, so will consumer demand for WiMAX capable devices.
From the standpoint of the telecommunication providers, WiMAX in Latin America offers incredible revenue potential. Providers can sell more of their services to existing customers, sell to customers in new geographic areas, and sell in markets where customers now exclusively use substitute broadband access. Increased political and economic stability in Latin America has resulted in a surge of economic growth. Latin America has a large and growing population. If WiMAX service can be delivered profitably to this segment it would represent a huge opportunity for telecommunication companies. In the long-term WiMAX offers telecommunication companies the opportunity to capitalize on the growth of new products such as IPTV and cloud computing applications.
Lastly, but perhaps most significantly, this technology can bring massive benefits to consumers in Latin America. Consumers everywhere will benefit from increased flexibility and access offered by WiMAX. The greatest benefit will come to consumers living in areas currently without access to broadband internet connectivity, due to physical infrastructure constraints. WiMAX can provide internet access economically to more people in Latin America. Increased information access will improve social and economic conditions for this population. Education via the web – otherwise be unavailable – will become common. Free information transfer will be an effective tool to fight corruption and buttress democratic institutions. Internet access will lower transaction costs for existing businesses, create new business opportunities, and improve people’s access to microfinance via tools such as Kiva Loans. These positive externalities are so great, one could make a compelling case for governments to subsidize development of WiMAX networks.
V. My Qualifications and Interest
My interest in this project stems from my work with the United States Peaces Corps in Nicaragua. From 2003 to 2005 I witnessed firsthand as mobile phone coverage and internet service extended to the small town where I lived in the northern mountains of Nicaragua. This experience enlightened me to the opportunities and challenges that technology presents for governments, individuals and businesses in the developing world. Since that time, it my goal has been to help these businesses expand efficiently and responsibly.
In addition to my deep interest in the subject, my background makes me uniquely qualified for this project. My success at the University of Puget Sound gives me the necessary academic background. Through my work with Northern Trust and VeriSign I have extensive experience understanding and writing technical literature. At VeriSign I worked with backend architecture of telecommunication billing applications. While at M:Metrics, I studied the market trends of mobile device and content consumption. My travels, my work with the Peace Corps, and my experience as an election observer for the Carter Center have given me the language and cultural skills to communicate with people in English, Spanish or Portuguese. I look forward to using this unique skill set to develop effective, actionable research on a business problem that is both fascinating and important.
VI. Conclusion.
The end goal of my research will be to formulate a compelling business case and toolset for entry into the Latin American WiMAX industry. Aside from the direct applications for telecommunication companies, this case will have important lessons for any organization considering market entry into a new technological or geographical market. The final product of the research will be supported by financial models analyzing the profitability of different scenarios based on market size, market penetration, adoption rates, emergence of competing technologies, and non-market factors (government regulation, corruption etc.) Ultimately, this research will facilitate the deployment of WiMAX technology throughout the world.
