It's Not Killer 3G Applications But Economics

Instead of focusing on the revenue opportunities of 3G, a new Signals Research Group (SRG) study analyzes another key determinant in any business model - the cost side of the equation. According to Michael Thelander, the principal author of the report and founder of SRG, "much of the analysis and debate surrounding 3G focuses exclusively on the revenues associated with 3G without taking into consideration the impact on an operator's total cost of ownership (TCO). This type of analysis generally misses the point since if an operator is able to reduce its overall TCO by deploying 3G, the merits of the technology can also be justified."

Instead of trying to justify 3G by making grandiose claims about the impact that the technology can have on an operator's revenue, SRG focused its study on the principle cost drivers of an operator's CapEx and OpEx and the role that 3G can play in an operator's budget over a ten year time period.

SRG's research indicates that for a number of different circumstances, an operator can actually reduce the long-term network TCO if it deploys 3G versus remaining with a 2G strategy. Further, the consultancy discovered that these results can also occur in developing markets, such as India, where 2G networks are already reaching their maximum capacity.

"Although 3G radio infrastructure is generally considered to be 'expensive,' other technology-independent cost drivers, such as site preparation and leasing costs, typically far exceed the cost of the actual hardware being deployed on the site," commented Mr. Thelander.

"Thus, if an operator is able to reduce these costs by deploying a more spectrally efficient technology, such as 3G, the incremental higher costs associated with 3G can be offset by reductions in other areas of its capital expenditures," Mr. Thelander added."

Posted to the site on 21st July 2006