WiMAX cheaper than 3G, but for how long?

WiMAX spectrum is significantly cheaper than 3G bandwidth and in some cases has been less than one thousandth of the cost of 3G for a given geographic area, according to figures from Pyramid Research.

The analyst notes that a correlation exists between the price per MHz per person and the GDP per capita of the country in which the license is used.

In India, Brazil, and Ukraine, where GDP per capita is low, the price per MHz per person is less than $0.01. By comparison, in countries with high GDP per capita, such as the UK and Germany, the price per MHz per person is slightly over $0.01, while in the US it is greater than $0.03.

Dan Locke, analyst at Pyramid Research, said that bidders for WiMAX spectrum to date have been smaller players, with large mobile operators remaining faithful to the cellular technology roadmap.

“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,” he said.

And Locke believes that WiMAX spectrum is about to get a lot more expensive as more regulators release lower frequencies to be used for mobile WiMAX.

These bands are attractive because they enable an increase in traffic capacity without the need for additional base stations.

In the UK, expectation that the 2.5GHz UMTS Extension band might be opened to other technologies has caused a stir and could be the starting gun for WiMAX in the UK.

The move has also drawn interest from leading cellular operators, with Vodafone believed to have registered an interest.

Heavyweight interest could well push up the price of WiMAX spectrum, as operators are not averse to competitive bidding if they believe they will achieve a worthwhile return on investment.

Pyramid also comments that the market potential for applications that are enabled by WiMAX is higher in more mature markets, so the spectrum is valued that much higher.

At the 3GSM world Congress in Barcelona earlier this month, Vodafone boss Arun Sarin warned that operators need to pull together more efficiently to avoid the threat posed by WiMAX.

He called on the industry to work faster on its plans for Long Term Evolution (LTE), the next generation cellular technology but also hinted at the need to consider new technologies.

“LTE is still at the standards stage, while WiMAX is a commercial reality,” he said, adding that the technology “is still some distance away from being prime time.”

But Sarin also said that operators “need to compete with adjacent industries, embrace new communications technologies and create new revenue streams.”