The cost of building 3G network infrastructure is falling as the price of 3G processors fall, and operators revive their spending plans, according to a study published by IDC on Tuesday.
IDC's Worldwide Base Station Semiconductor 2004-2008 Forecast and Analysis indicates that after a few years of sluggish activity, network operators have started investing in their infrastructures and are using standardised products to help reduce costs. The study estimates that spending on base station semiconductors alone will reach $1.9bn in 2004 and grow to $2.4bn within four years.
Sean Lavey, programme manager at IDC, said organisations such as the Open Base Station Architecture Initiative (OBSAI) are helping 3G equipment vendors create standardised products which in turn are helping push costs down.
"We believe further cost reductions delivered at the chip level for key 3G networking products [baseband, transceiver, and power amplifier subsystems] will help jump-start expansion and upgrades to data-enabled cellular networks," Lavey said.
The UK's first 3G network was launched by Hutchison's 3 last year and targeted consumers by offering video calls and football highlights. Just over one year later, both T-Mobile and Vodafone released their 3G offerings, but they decided to focus on data services and launched 3G notebook adapters that are designed to fill the connectivity gaps between Wi-Fi hot spots. The UK's fourth mobile operator, O2, is expected to launch similar offerings later this year.
Dean Bubley, founder of analyst firm Disruptive Analysis, said that 3G infrastructure costs have been influenced by alternative wireless technologies such as Wi-Fi and WiMax, which have created pressure to offer 3G more cheaply.
"There is a lot of pressure on the infrastructure providers to look for ways to cut costs. Operators have got their infrastructure vendors to discount the prices or go out hunting for standardised silicon to bring the prices down," Bubley said.