Flying without wires

The sky’s the limit for wireless broadband but some players are tipping major market consolidation.  

Budget airline Jetstar this month launched a Ballina-Byron operation complete with wireless broadband. Jetstar’s plan to have the technology save up to two-thirds of its IT costs at regional airports symbolises a major move towards acceptance of wireless broadband by the mainstream.

Various advances are now clearing the way for a cable-free world of bandwidth-crunching applications and, hopefully, recurrent revenue for resellers.

The category includes the better-than-dialup consumer ISP data speeds of 256Kb/s and 512Kb/s and pricier, more specialised pipes that can pump 10Mb/s.

Market analyst IDC says US wireless carriers generated US$1.6 billion in data service and application revenue from 178.2 million customers in the fourth quarter of 2004. Thirty million US wireless subscribers will be accessing commercial video or TV content and services over their wireless devices by 2009.

Warren Chaisatien, research manager for wireless and mobility at IDC Australia, says the market dynamics until 2009 look promising for wireless broadband here too. "The wireless broadband market has been around in a big way for about 12 months now, popularised by Unwired and Personal Broadband Australia (PBA)," he says. "They’ve done a lot in terms of market awareness and education."

Chaisatien says wireless broadband was being used by 70,000 people in Australia by late 2004 and nearly 390,000 are expected to take it on board by 2009. Rival technologies like cellular 3G may find it hard to keep up -- at least as far as data is concerned. "There’s pretty substantial growth. But in terms of services revenue, it’s still small," he adds. "[Some] 28,000 users generated services revenue of $13.6 million [last year]." That figure may swell to $57 million for the year to December 2005, Chaisatien says.

Voice is the big challenge so Chaisatien tips Telstra and Optus to invest ‘heavily’ in wireless broadband to maintain their edge. When WiMAX is finally ratified -- giving some certainty as to preferred technology -- the market could explode, he says.

The 802.16d-standard products will likely become available in Australia about 12 months from now, and 802.16e offerings should be here by 2007 or 2008, making WiMAX broadband a formidable contender for the hearts and minds of consumers and businesses. "It will be a genuine alternative," he says. "It will compete not only with DSL, but with dial-up."

Voice-over wireless broadband, he adds, is happening, but mainly in the business market. In Australia, consumers have not been keen to pick up on phenomena like Skype, for example.

Wireless broadband providers are at a critical juncture and must get economies of scale to progress further into the mainstream.

"So far, they haven’t had that, because all of them are very small startups, mostly concentrated in Sydney and Melbourne and some elsewhere," Chaisatien says.

Devices and operating systems also could become less exclusive. Proprietary technology might slow things down, he warns, until WiMAX encourages more collaboration between providers. Then the ball may get passed to players like Telstra and Optus, Chaisatien says.

Shara Evans, managing director at telecommunications analyst Telsyte, says 117 wireless infrastructure owners and resellers are operating in Australia. "By every measure, wireless broadband services are on an upswing: the number of providers is growing, the number of users is growing, and revenues are growing," she says.

Evans says it is as a ‘last mile’ connection that wireless internet access is really winning. Wireless local loop services make many times the revenue of hotspot services, diverse providers and a more sustainable business model.

"There are nearly 900 locations in Australia illuminated by Wi-Fi hotspots, but they’re only generating around $1.5 million a year in carrier revenues for the full year 2004 to 2005. Even the most successful providers are only averaging around $150 per hotspot per month," she says.

Evans says fully mobile 802.16e, proprietary mobile wireless and 3G/4G cellular may pretty much snuff hotspots out, partly by pushing prices down. The competitive landscape for wireless broadband is thus changing rapidly, Evans suggests.

David Spence, chief executive at Unwired, has already started partnering to increase coverage and get those elusive economies of scale for the wireless broadband consumer market. He does not rule out future partnerships with the big guys, either. "We do a little bit through Exetel, Veritel and People Telecom [for example], but most of what we do is direct and to retail," he says. "But [we would consider] future deals with AAPT, Telstra, Optus, those guys."