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Early WiMax vendors to face bumpy ride

Not only do they have products compliant with pre-WiMax standards, these players now have to compete against well-heeled rivals.
Written by Aaron Tan, Contributor

WiMax equipment makers that were early to the market will face some bumps as they compete with bigger rivals, with huge financial backing, that are now ready for a piece of the pie, an analyst says.

According to market research company In-Stat, the Asia-Pacific WiMax equipment market will rake in revenues worth US$1.9 billion in 2009. South Korea is expected to contribute more than 40 percent of that revenue, with China and Japan following closely behind.

Despite the lack of major developments in the global WiMax market over the last two years, In-Stat analyst Victor Liu told ZDNet Asia this is expected to change with the ratification of the mobile WiMax standard late last year. Mobile WiMax products certified by the WiMax Forum should ship by year-end, he added.

Liu noted that major vendors such as Motorola and Alcatel have already set their sights on mobile WiMax--widely believed to be the Holy Grail of the wireless technology.

Armed with bigger financial muscles, the established vendors have a competitive advantage over the smaller players, that were eager to enter the market with early fixed WiMax products, according to Liu.

These early-to-market vendors, such as Soma Networks and Aperto Networks, did so even before the mobile WiMax standard was ratified just so they have a headstart in the emerging WiMax market, Liu said

"They had to move first and move fast, but it's also getting tough for them now because the major vendors like Motorola and Nortel, are poised to gain a larger share of the market," he explained.

Furthermore, Liu noted that fixed WiMax products touted by early market players have not made significant inroads. "They have generated market awareness of WiMax technology, with almost every service provider talking about WiMax--though many are still waiting for mobile WiMax products [before deciding on their purchases]."

However, the analyst said that all is not lost for the early birds.

Liu said: "It depends on how strong they are, in terms of their in-house technical capacity as well as their financial support to cope during this tough period.

"They have to sustain their business for a while in order to continue with R&D (research and development), and come up with mobile-based WiMax products," he said.

"It's not too late to come up with a decent solution with certain promises of performance at competitive prices. Otherwise, WiMax service providers will choose the major vendors," he added.

Competitors from China
Apart from big-name WiMax vendors, smaller players are also face mounting competition from Chinese companies. ZTE, which enjoys a cost advantage by locating its R&D work in China, already has strong market presence among second-tier service providers in Southeast Asia, Africa and Latin America, Liu said.

"[Smaller players] have to be careful in identifying who their potential customers are, and invest in a smart way to tap on the business opportunities as soon as possible," he advised.

According to Greg Caltabiano, president and chief operating officer of Soma Networks, the company has already demarcated its playing field,.

"Competitive providers are looking to deliver DSL (digital subscriber line)-like services as well as voice, quickly and competitively to those that have never had broadband access," Caltabiano told ZDNet Asia in an e-mail interview. "In developed economies, our solution has a very favorable business case for 'in-fill' applications, where DSL may not be economically viable, such as rural markets or outlying urban areas."

"We have also made a point of ensuring that service providers can continually provide new and differentiated services to their customers by developing advanced software to handle high-bandwidth services, such as voice and video," he said.

In-Stat's Liu did not dispel the possibility that smaller vendors might be swallowed by the big market players, if the competition gets too hot to handle.

"I foresee that the [small players] might also go into some kind of alliance among themselves to cross-certify their products, or to engage in joint projects in some countries to help them survive for a longer time," he said.

Caltabiano said Soma's existing R&D partnership with Japan's Sanyo last year has "effectively doubled our development staff making it, arguably, one of the largest, dedicated WiMax development teams in the industry."

But even if small vendors can overcome the odds, Liu noted that "it's very hard for their voices to be heard by the major service providers because they have limited resources".

"It's also hard for them to prove that their products are good enough for implementation by the major telcos," he said.

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