In March, Channel 7 will launch its latest in a line of telecommunications ventures when vividwireless starts selling WiMax broadband to the folks of Perth.
It’s a bold move. Perhaps too bold. Can they really break into the telecommunications market with a new network, however strong the technology?
WiMax has been used successfully in Australia and around the world as an effective way to reach regional markets, but there are few examples of it being used to take on existing infrastructure in major markets. Howard Wilcox, an analyst from Juniper Research in the UK, points to Clearwire in the US as one example, but they are a long way from turning a profit.
So what sort of payback can Channel 7 expect from its investment? I do some basic sums in this week’s podcast. The cost of the new network for Perth has been reported to be around $50 million, but on top of that are the acquisition costs and support costs. The last half-year report from Hutchison (PDF) shows its acquisition costs are around $200. You could argue it will be higher for a start-up with no brand equity. Add the figures together and I find it hard to make them stack up.
I’m not alone in doubting the merits of the venture. Analyst Paul Budde thinks vividwireless will struggle to do well and believes ego might have something to do with the plan. Others, like Ovum’s Nathan Burley, isn’t alone in questioning the overarching strategy from Channel 7.