12 Jul, 2007
Business models: why WiMAX might be like Chipknip (and Chipper)
Posted by: Esme Vos In: Business models
I was thinking about business models today because my company, Muniwireless is releasing a study next week about the business models behind citywide Wi-Fi networks. Wi-Fi uses unlicensed spectrum and has the advantage of being in every laptop and increasingly more mobile phones. Wi-Fi chips are inexpensive and people keep squeezing more out fo the technology every year (higher throughput, better security, longer reach). What problem does Wi-Fi solve? It allows people to access the Internet everywhere and get broadband service without being tied down to a desk. Very useful for iPhone users who don’t want to rely on AT&T’s slow EDGE network. Citywide Wi-Fi networks allow municipalities to cut dramatically their telecommunications costs and enable workers to be more efficient. They can also deliver services in a cheaper way (wireless automated meter reading systems).
Now on to the WiMAX - ChipKnip discussion. WiMAX is supposed to be solving the problem of how to get wireless broadband everywhere. It’s supposed to be faster than Wi-Fi, have a longer reach, cover larger areas, using fewer wireless base stations. The problem is, along the way, WiMAX became the carrier’s version of Wi-Fi: it uses licensed spectrum and proprietary technology. That means there can be only one or two WiMAX providers in a particular region. That also means a tiny market for the WiMAX base stations (leading to very high prices). Smells like cellular service.
Who is asking for this? What problem does it solve? If it were unlicensed and using non-proprietary technology, I’d be very excited.
What is ChipKnip and why may WiMAX end up like it?
ChipKnip is a debit card paying method that no one in the Netherlands asked for or use. We already had debit (or PIN) cards before ChipKnip but someone up there in the ivory tower of banking decided that people really wanted YET another card, this time for making small payments (3 EUR here, 5 EUR there). In reality people just use cash or their PIN cards for micropayments.
But the ChipKnip folks spent huge amounts of money promoting ChipKnip, installing special readers and ChipKnip machines so people could top up their ChipKnip cards. Problem: few shops took ChipKnip. Also people did not want another card so they never topped anything up or paid using the ChipKnip card.
They were not asking for this!
As if things couldn’t get sillier, along came the Chipper, the competitor to ChipKnip. The municipality of Amsterdam installed ChipKnip (or is it Chipper?) slots in the parking machines so people could pay for parking instead of using coins. I have no idea how many people use this method of payment but that’s no longer an issue because today, you can pay with your mobile phone.
My ChipKnip and Chipper cards have been lying in a box since the day they arrived. I never used them. So the banks got smarter and now build in the chip into the PIN (debit) card. Now you can use one card to “chip” and make debit payments. I don’t see the difference. I have never “chipped”. I just pay whatever amount it is using the debit card. Such a hassle to top up the chip part of the card.
WiMAX = ChipKnip?
Like ChipKnip and Chipper, no one is asking for licensed, expensive proprietary wireless broadband service. There’s already Wi-Fi. It’s in all laptops, the iPhone and increasingly in mobile phones like Nokia’s. Soon the Blackberry will have Wi-Fi, too. We are all so used to Wi-Fi which is cheap, unlicensed and open to all providers (more competition, lower prices). And, when cities set up their muni Wi-Fi networks, this way of connecting wirelessly to the Internet and to one another, will be available everywhere. You can actually find a lot of Wi-Fi already in large cities, free at that, in many cafes.
WiMAX , like ChipKnip and Chipper, is a solution foisted on us by the big guys (operators). No one was waiting for it, expecting it or demanding it. WiMAX is already suffering from the same chicken-and-egg problem that bedeviled the ChipKnip. The WiMAX operators will have to spend a lot of money deploying networks in most large cities, but few will sign up along the way if the only place to get it is in another city. Moreover, very few people will throw away their iPhone, laptop or Nokia Wi-Fi enabled device to replace it with another device that’s got WiMAX unless the WiMAX networks are really everywhere and the price-performance ratio is attractive compared to Wi-Fi. You won’t see big IT departments throwing away nearly new PCs just so they can replace them with PCs that have WiMAX.
Indeed, Sprint, a US cellular operator with a WiMAX license, is already rethinking its WiMAX strategy because shareholders are complaining it is spending too much money on unproven (and I’d say, unwanted) technology. It’s spending lots of money rolling out the tech equivalent of the ChipKnip and Chipper.
Thinking of whether there’s a real pressing need for your product is absolutely essenting for any entrepreneur or large enterprise, especially when people are used to a product that does the job already, is non-proprietary and cheap. The top down big institution way of thinking that produced the ChipKnip, is now busy rolling out WiMAX. Its chances of success are small.
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