In a new Analyst Insight the Pyramid Research firm concludes that WiMAX is staggeringly less expensive than 3G – stating that in some cases WiMAX spectrum has been less than one-thousandth of the cost of 3G spectrum for a given geographic area.

As evidence of the sharp price differential Pyramid cites the example of the UK's 3G spectrum auction of 2000 in which mobile operator Vodafone paid an eye-watering US$9.4bn for a 30MHz national licence. This is in stark contrast to what was paid for a regional 3.5GHz licence in a Fixed Wireless Access (FWA) auction three years later. The most expensive licence in this auction (US$3.2m) covered Greater London, one of the denser regions in the UK. Pyramid calculates that the price per MHz per population for the 3G licence was about 500 times higher than the price per MHz per population for a Greater London WiMAX licence. The company says that similar differentials apply in other Western Europe markets, where 3G spectrum was sold at high prices.

“Deep pocketed MNOs have long felt that owning 3G spectrum was central to their strategic future. Few feel the same about WiMAX or are willing to enter yet another expensive auction,” says Pyramid Research analyst Dan Locke.

Pyramid offers two main reasons for the expensiveness of 3G. One is that WiMAX licences have primarily been issued on a regional basis, and the players with the deeper pockets will typically focus on the more attractive areas, impacting country level averages. The second is that bidders for WiMAX spectrum to date have mainly been smaller-size players, with large MNOs remaining faithful to the cellular technology roadmap.

However, cautions Pyramid, WiMAX spectrum is about to get a lot more expensive as more regulators release lower frequencies to be used for mobile WiMAX, because those bands enable an increase in traffic capacity without the need for additional base stations.

Nor is it the case that 3G spectrum holders are likely to give up on their on-going investments according to a new report from ABI Research. ‘UMTS Long Term Evolution’ reckons that Long Term Evolution (LTE) of 3G technologies is about to benefit from Rel-8 of the 3GPP standard, planned for the Q3 2007. This, says ABI, will be the trigger for development of components and systems to provide 100Mbits/s download speeds to mobile devices. According to the company network operators will invest a total of almost US$18bn in LTE capital infrastructure over the period to 2014. This will yield a significant payoff, both in reduction of operating expenses and in the creation of new revenue from IP-based services.

“LTE faces competition from other broadband wireless technologies and it will need to demonstrate clear technical and economic advantages to convince network operators,” reasons ABI Research analyst Ian Cox. “WiMAX has a two-year lead over LTE but suffers from not being backwards-compatible with current 3G technologies. LTE will not only be backwards-compatible with UMTS but is likely to be used to upgrade CDMA networks as well. But the industry is also working on HSPA+, which could offer the same performance in a 5MHz bandwidth. Without additional spectrum, operators face a difficult choice.”

Cox adds: “The industry is also making progress in avoiding intellectual property rights issues in the new standard. Next Generation Mobile Networks (NGMN) has been set up by leading operators to ensure a level playing field.”
John Williamson