Hong Kong snubbing WiMax raises questions over technology’s role

Posted by Nicole McCormick Wednesday, January 28th, 2009

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The fact that mobile WiMax will not become a commercial reality in Hong Kong should not come as a surprise given there is 99% WCDMA/HSPA network coverage in Hong Kong.

The country’s five mobile operators steered clear of bidding for the 100MHz of unpaired spectrum that was auctioned recently at 2.3GHz and 2.5-2.6GHz, which would have been suitable for rolling out mobile WiMax services.

Instead, the country’s incumbents opted for Long Term Evolution for 4G with Telstra-controlled CSL, Genius Brand – a joint venture between PCCW and Hutchison Telecom - and China Mobile Hong Kong, winning 2×15MHz apiece of paired spectrum at 2.5-2.6GHz for HK$523 million (US$67.41 million), HK$518 million and HK$494.7 million respectively.

The country’s remaining cellco SmarTone-Vodafone pulled out of the paired 2.5-2.6GHz spectrum auction when it deemed the bidding to have become too pricey, preferring to rollout LTE using its existing spectrum bands of 900MHz and 1800MHz.

Meanwhile, the WiMax suitable spectrum at 2.3GHz and 2.5-2.6GHz was overlooked by new entrants as well, and even the country’s fixed line incumbents without mobile plays, such as Wharf T&T, chose not to partake in the auction of spectrum for WiMax services.

Hong Kong’s high fixed broadband household penetration rate of 95%, coupled with the country’s high WiFi connectivity and growing HSPA penetration – makes the business case for WiMax in Hong Kong unviable.

What does this mean for WiMax throughout the rest of Asia?

In short, mobile WiMax will likely struggle to find any traction in similar high density urban markets where HSPA, fixed broadband and WiFi competition is high. Singapore, with a fixed broadband household penetration of 73%, comes to mind as a market where WiMax will struggle to find success, and South Korea’s extensive fiber, fixed broadband, WiFi and HSPA networks have certainly created major headaches for WiBro operators KT and SK Telecom carving themselves out a high speed data niche. South Korea’s household fixed broadband penetration rate is 92%, second only to Hong Kong in Asia.

Further, there could also be no gap in the market for WiMax in some large cities, such as Taipei and surrounding large cities, and even Tokyo could struggle to become a feeding ground for WiMax because of its high fixed and mobile broadband penetration and aggressive 3.9G launch plans by all four operators.

Of course, this still leaves a huge untapped potential for WiMax in semi-urban and rural areas, in countries such as Thailand and Indonesia. WiMax could also be the primary means of broadband access in India, Pakistan and Paksitan.

But WiMax operators had better be quick to market as operators in some of these markets are moving fast on 3G deployments, including outside the main metropolitan areas. For instance, Philippines mobile market leader Smart Communications aims to have rolled out its HSPA850 network on a nationwide basis by end-January.

Smart only began deploying its HSPA850 network in October and is mainly targeting the service at areas that have poor DSL service as a broadband replacement service.

In Thailand, the country’s no. 2 and 3 operators – DTAC and True Move – also intend rolling out HSPA at 850MHz to cover the country’s vast rural regions, in addition to using 2GHz for HSPA in metropolitan areas.

In India, 3G will be rolled out comprehensively on a nationwide basis and Indonesia and the Philippines are experiencing strong HSPA growth.

The window of opportunity for WiMax thus is thinning in the region and its case is not helped by the fact that in some countries its main champions are not operators, but second-tier operators that quite simply don’t have the money to see it through to commercial reality, especially in Malaysia and Taiwan.