Feeds

WiMAX turns the screw on 3G

Cheaper networks a real possibility

  • alert
  • submit to reddit

Providing a secure and efficient Helpdesk

Broadband wireless gained a bad name in the US in the late 1990s when companies such as Teligent failed spectacularly. But WiMAX is ushering in a brand new economic picture for such operators. Not only will standardization push down prices by fostering competition and volume, but spectrum suited to the technology is being auctioned cheaply in many countries in a bid to stimulate broadband - plus there is an unlicensed option. Another key factor is the falling cost of fiber backhaul, with dark fiber now within reach of midrange service providers as well as some enterprises. All this combines to put huge pressure on the financial assumptions of the 3G community, especially in Europe.

It would cost $3bn in equipment, tower, sites, labor and set-up costs to build a national US WiMAX network reaching over 90 per cent of the mainland population. This is an estimate, and a credible one, from In-Stat, and indicates how far the promise of standards, and new spectrum and backhaul options, are shifting the economics of the broadband wireless last mile.

Last time we saw major plans to build out broadband wireless on a national scale was at the turn of the century, with ill-fated ventures by the likes of Teligent, NextLink and Winstar. Comparison of likely WiMAX projects with their cost structures and business models indicates how far the industry has developed, making it a real possibility to deploy wide ranging wireless networks for a fraction of the cost of third generation cellular.

Equipment costs

Three factors are key – the promise of lower cost subscriber equipment and base stations, driven by the greater competition and commoditization that standards engender; new spectrum options in many areas, especially Europe; and the falling cost of backhaul. None of these factors was in the operator’s favor in 1999, nor was the demand for broadband well established six years ago.

The impact on equipment prices of WiMAX will really be felt from next year, once gear is certified and starts to bed down in the market. But in anticipation of the greater competition, and the bigger opportunities, broadband wireless manufacturers are already driving costs down, as Motorola’s sub-$300 pre-WiMAX Canopy subscriber equipment illustrates. The average CPE prices for LMDS gear were $4,000 a unit and a base station was $100,000, while even pre-WiMAX gear is coming down to $500 per CPE and $15,000 per base station. Teligent spent $1.3bn in a year building its initial network in selected cities but only signed up 35,500 customers by the time it filed for bankruptcy in 2001.

Line of sight was a killer for broadband wireless because of the requirement for expensive and disruptive truck roll and the difficulty of creating effective coverage in urban areas. Another reasons why costs outran revenue potential was the lack of standards. Proprietary equipment costs were high because kit had to be made separately for each operator and so vendors never got the scale to reduce prices and so take on wireline infrastructure, especially in an immature market. Equipment makers had to create complete end-to-end solutions, so there was no potential for commodity subscriber units, nor would LOS technologies permit portability, limiting the scope of the applications and their usefulness to businesses.

Spectrum costs

In spectrum terms, WiMAX operators have the option of unlicensed 5GHz bands, though these bring some quality of service risks and make it impossible to exploit the mobile and non-line of sight potential of 802.16 in lower frequencies. A far more attractive choice is 3.5GHz (or 2.5GHz MMDS in North America), although the potential opening up of further, lower bands for broadband wireless could create still greater opportunities in the coming years. For US operators, the shortage of MMDS is a problem – although its once restricted usage is almost certain to be liberalized by the FCC, nearly all the spectrum is held by Sprint-Nextel, BellSouth and Clearwire. All three of these, however, have the financial and marketing resource to build a national network and hardly notice the $3bn bill, since the spectrum is already paid for (and was a low cost purchase to start with, unlike the LMDS licenses that Teligent and the others acquired).

In Europe, many countries are auctioning 3.5GHz licenses this year or did so in 2004 and, as regulators look to extend broadband access to most of the population in line with EC and national guidelines, the trend is to offer the licenses at relatively low cost. For instance, the national licenses for Austria cost about €700,000, compared to the €5m many bidders had originally built into their business plans. In other countries, such as Ireland and some of the new EU entrants, regional licenses can be had for five-figure sums. This has opened up the market to new operators, such as Altitude in France and WiMAX Telecom in Austria, which do not need to raise vast sums in order to become national telcos.

NextLink spent $695m purchasing LMDS licenses from WNP in 1999 and LMDS license costs are estimated to have been $40 per head of population at that time. By contrast, for WiMAX, unlicensed spectrum is free and 3.5GHz is going for under $5 a head, and sometimes under $1.

Choosing a cloud hosting partner with confidence

More from The Register

next story
Same old iPad? NO. The new 'soft SIMs' are BIG NEWS
AppleSIM 'ware to allow quick switch of carriers
Arab States make play for greater government control of the internet
Nerds told to get lost in last-minute power grab bid at UN meeting
Brits: Google, can you scrape 60k pages from web, pleeease
Hey, c'mon Choc Factory, it's our 'right to be forgotten'
Of COURSE Stephen Elop's to blame for Nokia woes, says author
'Google did have some unique propositions for Nokia'
It's even GRIMMER up North after MEGA SKY BROADBAND OUTAGE
By 'eck! Eccles cake production thrown into jeopardy
Mobile coverage on trains really is pants
You thought it was just *insert your provider here*, but now we have numbers
Don't mess with Texas ('cos it's getting Google Fiber and you're not)
A bit late, but company says 1Gbps Austin network almost ready to compete with AT&T
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Win a year’s supply of chocolate
There is no techie angle to this competition so we're not going to pretend there is, but everyone loves chocolate so who cares.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.