A Comprehensive WiMAX Operator Business Case Process

By Haig Sarkissian and Randall Schwartz of WiMAX20/20, LLC

In Part 1 of this three part series article, we outlined the process of gathering the input parameters for a comprehensive WiMAX business case.  In Part 2 we discussed how to define a variety of service plans and marketing plans in order to build the top line in a WiMAX business case.  Here we will focus on the process of selecting the key performance indicators that have the greatest effect on a WiMAX business case, the process of performing sensitivity analysis, and the process of optimizing a WiMAX business case.

Part 3 - Optimization and Sensitivity Analysis of a WiMAX Business Case

In order to examine a WiMAX business case and perform sensitivity analysis as well as optimization, a complete business model of a WiMAX network deployment has to be developed.  This model has to take into account all of the input parameters we discussed in Part 1 and Part 2 of the WiMAX Operator Business Case Process in order to generate all the necessary financial outputs needed to evaluate an investment and the return on investment (ROI).  

Example Business Case Model

The business case model must account for all of the necessary costs, fees, and licenses to build and run the network, and generate a revenue model to build a complete financial picture.  An example of such a tool is WiROI, short for WiMAX ROI.  This is a comprehensive business case model of a WiMAX network that takes into account more that 250 input variables that affect a WiMAX operator business case.  The tool models every aspect of a WiMAX network: from CPE devices, to the air interface, to the antenna technology used, to the cost of installation and the price of base station and core network equipment.  Coverage and capacity calculations are driven for the geographical target area and take into account the addition and subtraction of subscribers over a 10 year period.  Additions in the access network and backhaul are made due to the penetration assumptions and traffic usage patterns over time.  The tool also models the WiMAX Core Network as outlined in Part 1.  In addition to modeling the hardware and software elements of a WiMAX network, WiROI includes a financial model of a WiMAX network which takes into account the CapEx and OpEx assumptions. 

As outlined in Part 2, the tool takes into account the operator service assumptions, which include SLA pricing for residential and business customers, as well as VoIP, Mobility and value-added services.  For each of the proposed service, the tool accepts a set of penetration assumptions over time. The figure below represents a high-level block diagram of an example business case model inputs and outputs.

Once all the inputs of a WiMAX business case have been specified and entered into the WiMAX business model, a series of standard financial outputs can be generated.  The financial output could include an income statement showing revenue, network operating expenses, marketing expenses and SG&A. 

In addition, the following financial outputs would be of interest: 



Once an initial business plan output has been generated that includes a complete set of financial and investment parameters, a well designed model should now generate a rich set of performance data that allows an operator to analyze the various coverage, traffic and financial metrics.  The following is a list of the key performance indicators (KPI's) of interest for a WiMAX business case.

The Need for an Easy-to-use GUI

The WiROI GUI has a dashboard style user interface that allows the user to easily visualize a list of the critical inputs and output of a WiMAX business case.  It incorporates animated selectors, sliders and buttons that allow the user to vary key input parameters and visualize the output immediately. Answers can be seen instantly to questions like:

• What would the effect of a link budget be on my overall WiMAX business plan?
• How will the cost of backhaul affect my OpEx?
• How would the core network affect my CapEx and what might the impact be on my 10 year business plan?
• How would using a 2.5 GHz spectrum vs. a 3.5 GHz spectrum impact my business plan?
• How do the costs of base stations and CPEs affect my business plan?
• How can the service agreements be optimized for my business plan?
  

These and many other critical questions should be answered instantly, interactively and easily by using a well designed tool.

Figure 2 - The WiROI Dashboard GUI.  (For the interactive version of WiROI Tool, kindly visit http://www.wimax2020.com/wiroi.html)

Sensitivity Analysis of a WiMAX Business Case

A good business modeling tool also allows an operator to produce sensitivity analyses based on certain input parameters for a particular deployment. As a result, operators can quickly understand the critical issues that affect their deployment plan. In addition to estimating the number of cell sites, the tool may include various options for selecting the WiMAX network infrastructure required to support specific coverage and capacity requirements. The user should build their model based on a selection from a variety of core networks, access networks, base stations, and backhaul options. The business model can be used to provide answers to a variety of "what if" scenarios in order to help identify the most important variables influencing the specific WiMAX business plan.

Conclusion

Developing a WiMAX business case could be a complex and time-consuming process. Quickly choosing among over 250 different input variables and assumptions, the ability to instantaneously modify these variables, test key assumptions and instantly visualize their impact on your WiMAX business plan are invaluable capabilities.  Without using a comprehensive WiMAX business planning tool, the task of performing sensitivity analysis and optimization becomes a tedious exercise of running various scenarios one by one and reviewing a multitude of output reports.   Because of the iterative nature of the process, many business managers tend to either avoid optimizing their WiMAX business cases or are unable to confidently answer "what if" questions to their investors.  This may very well be one of the primary reasons why many prospective WiMAX operators have not been able to obtain the necessary funding to move from trials to full commercial deployments

Contact Information: www.wimax2020.com
The authors can be reached at info@wimax2020.com

© Copyright 2007 WiMAX20/20, LLC, all rights reserved. WiROI is a trademark of WiMAX20/20, LLC.  Information subject to change without notice.