Nortel is pulling in-house research and development funds out of WiMax and concentrating on LTE (Long Term Evolution), the next generation of cellular mobile broadband.
WiMax development has been consigned to a joint venture with WiMax equipment maker Alvarion.
Nortel had been developing products for both technologies side by side. Although LTE standards have not been finalised, the demand for LTE is growing much faster in developed economies than expected, according to Nortel.
"The LTE market is coming up at us quicker than we thought, so we are putting our foot on the pedal for LTE," said Gerry Collins, director of wireless at Nortel EMEA.
LTE has the support of the world's biggest carriers, such as Vodafone, Verizon, AT&T, NTT DoCoMo and China Mobile.
WiMax, on the other hand, has the support of one major carrier, Sprint Nextel, which recently chose Clearwire to supply WiMax equipment over Nortel.
"The increasing demand for mobile data is driving traffic far faster than operators had anticipated," said Dr Phil Marshall, vice president at analyst firm Yankee Group.
"Operators have realised that they need to get to 4G faster than originally anticipated."
Under the agreement with Alvarion, both companies will develop and sell WiMax equipment, with Nortel concentrating on its strength in core network technologies.
"We have realigned [in-house] R&D funding in favour of LTE but I do not want to give the impression that we are slacking off on WiMax," said Collins.
"With Alvarion we believe we have a strong WiMax offering for our customers. We see two different but complementary markets for these technologies."
Nortel will concentrate on supplying WiMax equipment in developing economies, such as Eastern Europe, where demand is greater than for LTE, according to Collins.
"The WiMax market also continues to be very dynamic, with the underserved broadband markets and disruptive wireless operators in mature markets rapidly emerging as key market segments for that technology," said Dr Marshall.
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