Packet One (P1), a 2.3GHz mobile WiMAX licence holder in Peninsular Malaysia, has become the first operator in the country to launch commercial WiMAX services.

The initial promotional offer is RM99 ($30) per month for customers signing up to a 12-month contract for a 1.2Mbps service. A 2.4Mbps service is available at RM299 ($89) per month for a one-year contract. P1’s WiMAX tariffs are pitched just below the combined price of an equivalent-speed ADSL service and PSTN connection offered by Telekom Malaysia.

Green Packet, which owns Packet One, has invested around RM300m (just under $100m) in its WiMAX operations to date. 

According to analysts at local investment firm Aseambankers, P1 will need at least 350,000 subscribers paying an average of about RM92 ($27.5) over the course of five years before it can break even. P1 is aiming to acquire 100,000 subscribers over the next 12 months.

The Malaysian Communications and Multimedia Commission (MCMC), the country’s regulator, has stipulated that all four 2.3GHz WiMAX licence holders – the other three are Redtone (for East Malaysia), Bizsurf and Asiaspace (both serving Peninsular Malaysia) – should have 25 percent population coverage of their respective WiMAX licence areas by the end of 2008. P1 has said it will meet that target and subsequently increase its population coverage to 35 percent and 46 percent in 2009 and 2010 respectively to meet MCMC requirements.

At first glance, Malaysia looks a promising place for WiMAX to make an impact. Broadband penetration is low (around five percent at the end of 2007) and GDP per capita is reasonably high at around $6,500.

One potential drawback, however, is that the regulator has awarded WiMAX licences in the 2.3GHz frequency band, which does not enjoy the same level of vendor support as 2.5GHz and 3.5GHz. Lack of economies of scale, of course, pushes up prices.

Although WiBro in Korea uses 2.3GHz and is supported by local vendors such as Samsung, the system is based on 8.75MHz channels. WiMAX operators in Malaysia use 5MHz and 10MHz channels, which means they can’t turn to the Korean vendors to supply kit.  

According to a recent report in ‘3G Wireless Broadband’, a newsletter published by Informa Telecoms & Media, MCMC has not ruled out issuing WiMAX licences in the 2.5GHz frequency band. Spectrum at 2.5Ghz was originally handed over to several triallists for pre-WiMAX technology in 2003, but not much progress has been made. If WiMAX licence awards did happen at 2.5GHz, it would clearly put the 2.3GHz business case under more strain.

Earlier this year, Intel invested RM50m ($15m) in Green Packet with a view to speeding up WiMAX development in Malaysia.