Fixed wireless broadband too pricey for ISPs

Few internet service providers (ISPs) have the enthusiasm or cash to roll out further residential wireless broadband services, according to analyst Ovum.

Even the lure of a low reserve price for the 3.4GHz wavelength, previously used for telephony services, may not be enough to tempt many smaller independent ISPs.

And rather than use the frequency to roll out broadband access to consumers, as the government hopes, larger telecoms operators could take advantage of the removal of many restrictions to snap up the licences while continuing to use the frequency as extra bandwidth for their existing services.

"In the financial climate who has got the hunger left to deploy new networks? This means fixed wireless is still struggling to sell," said Michael Philpott, a broadband market analyst with Ovum.

The most likely outcome could be that licences are sold to major players such as BT, according to Philpott.

"They could buy the spectrum and create more than one source of revenue for themselves by offering both retail and wholesale services."

On paper the 3.4GHz spectrum is perfect for broadband deployment to rural areas where cable and Asymmetric Digital Subscriber Line (ADSL) is too expensive to roll out.

It has a similar bandwidth offering to DSL but with a greater reach, and the equipment is cheaper to install than for higher frequency wireless spectrums.

But the main drawback of fixed wireless access is the cost to the ISP and the consumer. Economies of scale mean that ADSL prices are dropping all the time, whereas fixed wireless asset prices are largely standing still.

Peter Freeman from the ISP Freeclix in Norwich said: "Investment costs to ISPs for fixed wireless services are enormous.

"There is the investment in hardware that is needed and the bandwidth has to come from somewhere. This usually means linking to a local BT exchange.

"We charge businesses £750 for installation, then £350 per month for a 2Mbps leased line. We couldn't charge this to residential customers so would never get the cost of investment back."

But the Radiocommunications Agency and the Department of Trade and Industry have had a difficult job pitching the licences at the right price, argued Rob Mortimer at wireless DSL equipment vendor Alvarion.

Removing restrictions that would force operators to provide broadband access would not necessarily backfire, he said.

"While companies such as Vodafone and Orange could be interested in the 3.4GHz spectrum for backhaul services, there is a lot of interest from rural ISPs to provide broadband services."