Friday, August 18, 2006

UK Wi-Max: Spectrally Challenged?

from Warnham

Wi-Max is a mixed blessing. It's a fantastic technology, with great potential, but plenty of questions hang over the size of its potential success.

I've previously written about the generality of the technology: Wi-Max is not magic - it's subject to exactly the same trade-offs between range, capacity and quality which any system deals with, so that mobile Wi-Max is likely to achieve much the same range and practical throughput as 3.5G, despite higher advertised peak rates.

Nevertheless, Wi-Max (and similar technologies, particularly Wi-Bro) is showing great uptake outside of the UK, such as the recent announcement by Sprint Nextel in the US that they are intending to spend $3 billion to support 100 million WiMax users by the end of 2008.

In the UK, however, there is a limit on deployments due to the lack of available spectrum. The 5.8GHz band (just above 802.11a Wi-Fi) is available, but those frequencies don't propagate very far and don't penetrate into buildings very well. Additionally, the 'light licensing' regime in that band means that there is no certainty of protection against interference from other users.

Following some auctions and subsequent aggregation Pipex and UKBroadband have some decent spectrum at around 3.5GHz. UK broadband is operating using other technologies, but Pipex is certainly pressing ahead with WiMax plans via trials and have marked up the estimated value of their licence from zero in 2003 to £5m in 2004. There is reason to suspect this is a substantial underestimate now...

The really 'tasty' spectrum for Wi-Max would be the set of bands around 2.6 GHz. It propagates well, there's a decent amount of bandwidth available and equipment should be readily available as these bands (or nearby) are widely available in other major markets. Ofcom has announced its intention to licence these as part of its burgeoning spectrum awards programme, but plenty of roadblocks remain, including the fact that these bands are equally attractive for extra 3G capacity, and are currently designated for 3G alone at European level.

It could easily take until the end of 2007 before the relevant auctions take place, and there are many unanswered questions about the way the spectrum will be packaged and managed. All this adds up to considerable uncertainty for Wi-Max in the UK.

I've been asked several times how much this spectrum might be auctioned for. My crystal ball is far too cloudy to put any precision to that, but for an interesting data point we can look to the current auctions by the FCC in the US for spectrum for Advanced Wireless Services - basically 3G and related services. At the time of writing the price was standing at over $12 thousand million (being careful not to confuse transatlantic billions).

Crudely, if we weight that figure by the ratio between the UK population and the US population we might expect the UK auction to yield at least £1,300 million. In practice I think there are at least two factors which might increase the UK pricing. UK population density is nearly ten times that in the US, increasing the return for operators relative to the network investment. Additionallym the US already has spectrum suitable for WiMax, so we may see operators supporting competing technologies in a bidding war.

It's not quite at the same levels as the heady days of the 3G auctions in 199 (which produced around £23billion), but if Ofcom can move quickly to clear the remianing obstacles,it promises to be an interesting auction. On the other hand, if they don't, WiMax could miss its mass-market opportunity in the UK altogether.

No comments: