From experimentation to citywide rollout: real options for a municipal WiMax network in the Netherlands

The paper undertakes a techno-economic analysis of a WiMax network in the unlicensed band (5 GHz) based on a network design for a medium sized, sub-urban community. WiMax (Worldwide Interoperability for Microwave Access) networks based on IEEE802.16 group of standards have been heralded as "serious competitor" and even as a disruptive technology in the local loop at a time when commercial field trials and initial deployment of these technologies unfold throughout Europe. As traditional net present value (NPV) calculation taking the current European regulatory and legislative framework into account showed that high technical and market uncertainty would delay the implementation of a municipal WiMax network, a real options analysis has been undertaken to examine these uncertainties. An expanded NPV calculation, which included the option to expand, provided positive results. Due to licensing fees and coverage performance of base stations, differences in profitability emerged between WiMax networks operating in the unlicensed (5 GHz) and licensed band (2.5/3.5 GHz). The entry of commercial wireless providers in 2008 in the licensed WiMax band is expected to have repercussions for the viability of municipal WiMax networks.