There has been a significant amount of research done to calculate the ROI for building a WiMAX network. There are even expensive Excel spreadsheet/VB macro tools that you can buy to model the costs and revenues for deploying such a network. Looking at the prior research (and the output from a couple of those models - I certainly can't afford to buy a $4K Excel file) I think that I can work up a reasonable model for a region in LATM. I will obviously have to make some assumptions about how the costs and revenue will be different, but it should be doable.
That, paired with discussion about the barriers to adoption, and the lack of a killer app should put forth a pretty convincing case as to why WiMAX, as is will be a tough business in LATM. The example of what Bloomberg did in NY (see earlier post) will start to shed some light on possible solutions. I have a few other ideas that I can then add based on last year's research.
At this point, I'm thinking I will have one draft of the paper done in two weeks. I'll need to talk to my faculty advisor after the Holidays and then post a final version late January.
Sunday, November 30, 2008
Friday, November 21, 2008
ROI for building the network
Based on information that I have been gathering, I think that this week will be dedicated to calculating the Return on Investment for building a WiMAX network in LATM.
The key here will be to identify revenue that would not have been earned with existing infrastructure. In other words, I will need to look at 1) the increase in ARPU from the WiMAX network and 2) all the revenue from new customers (these will likely be the fixed users.) Lastly, I will need to subtract any revenue lost to cannibalization. That is, I'll need to make some assumptions about how much less users will be talking if they are sending IMs.
I have a lot of data that will help me estimate these numbers - Laptop penetration, smartphone penetration, total population, diffusion patterns - but I will also need to make some assumptions. How much will these new markets increase spending on service if given access to broadband data services? How will they react as prices come down? How will competitors behave? How long until these networks become obsolete? And many more assumptions.
Because of the assumptions I need to make, I do not anticipate my forecasts to be the be-all-end-all to the financial calculations on this business model. Instead, my hope is that I will provide a suitible methodology so that others can refine my assumptions and form a more accurate financial picture of this business.
The key here will be to identify revenue that would not have been earned with existing infrastructure. In other words, I will need to look at 1) the increase in ARPU from the WiMAX network and 2) all the revenue from new customers (these will likely be the fixed users.) Lastly, I will need to subtract any revenue lost to cannibalization. That is, I'll need to make some assumptions about how much less users will be talking if they are sending IMs.
I have a lot of data that will help me estimate these numbers - Laptop penetration, smartphone penetration, total population, diffusion patterns - but I will also need to make some assumptions. How much will these new markets increase spending on service if given access to broadband data services? How will they react as prices come down? How will competitors behave? How long until these networks become obsolete? And many more assumptions.
Because of the assumptions I need to make, I do not anticipate my forecasts to be the be-all-end-all to the financial calculations on this business model. Instead, my hope is that I will provide a suitible methodology so that others can refine my assumptions and form a more accurate financial picture of this business.
Tuesday, November 11, 2008
Recently (during one of many job interviews), I met someone who had worked on a project with many parallels to my research. This past summer, Diamond Technology Management Consultants conducted a study for the City of New York on the most effective way to increase broadband adoption by low-income residents (http://www.nysun.com/new-york/broadband-report-digital-divide-exists-in-city/82951/) The city asked Diamond to investigate ways to increase residential use of broadband internet service, including the potential for a municipal WiFi network. What the firm found, was that the problem was not lack of access to broadband (98% of the residents had access) but that 1) residents didn't have computers to take advantage of the internet, 2) residents didn't understand the benefits of using broadband, and 3) providers were not interested in marketing to low-income users, because the average life-time value of a customer would not justify the high customer acquisition costs.
This is bad news for WiMAX in LATM. This study says that even with access, and even in New York City (with presumably higher literacy rates and levels of technical expertise) low-income consumers were unlikely to take advantage of broadband service. In order to drive usage, governments (and possibly providers) will need to heavily subsidize consumer equipment and education. In addition governments may need to provide some level of guarantee so that telecos could recoup their customer acquisition costs.
I've reached out to one of the consultants who worked on this study. Hopefully he can provide some more insights into the findings and possible solutions.
This is bad news for WiMAX in LATM. This study says that even with access, and even in New York City (with presumably higher literacy rates and levels of technical expertise) low-income consumers were unlikely to take advantage of broadband service. In order to drive usage, governments (and possibly providers) will need to heavily subsidize consumer equipment and education. In addition governments may need to provide some level of guarantee so that telecos could recoup their customer acquisition costs.
I've reached out to one of the consultants who worked on this study. Hopefully he can provide some more insights into the findings and possible solutions.
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