Nextel 3G opportunities open wide at 1.9 GHz

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If Nextel Communications Inc. takes spectrum at 1.9 GHz as part of the plan to solve interference at 800 MHz, the carrier finally might be able to extricate itself from the fringe of industry that its disparate spectrum holdings and iDEN network technology has placed it in today.

It may be months before the Federal Communications Commission releases details of the controversial plan in which Nextel would pay nearly $5 billion and give up spectrum at 700 MHz, 800 MHz and 900 MHz in exchange for 10 megahertz of clean spectrum in bands similar to where some of its competitors operate.

“Nextel was in a very defensive position regarding its plans to bolster its network and roll out a 3G network technology,” noted industry analyst firm Current Analysis in a research note. “However, now that Nextel has gained a huge swath of valuable spectrum in the 1900 MHz range, it can finally act on a network decision to become competitive in the long run.”

Nextel’s plans could include any number of technologies, including Flarion’s Flash-OFDM solution that the carrier is testing in North Carolina; a CDMA-based solution similar to what Verizon Wireless and Sprint PCS have announced plans to deploy; a Wideband-CDMA based service that could include the higher-speed HSDPA derivative similar to what Cingular Wireless L.L.C. wants to deploy; or any number of 802.xx-based standards making the news.

The leading candidate appears to be Flarion’s Flash-OFDM solution that Nextel Chief Executive Officer Tim Donahue recently said was performing better than expected in trials. The carrier initially provided the service to “friendly” partners, but recently opened the trial to a much larger customer base in an attempt to test its scalability.

Independent testing of the Flash-OFDM service showed throughput speeds of nearly 1 megabit per second, which was more than twice the speed produced by EV-DO networks, as well as a drastic reduction in network latency.

Roger Entner, program manager of wireless and mobile services for the Yankee Group, expressed some concern over a possible nationwide Flash-OFDM deployment as the decision could put Nextel back into its current position of having to rely on a single infrastructure provider. Nextel uses only Motorola Inc. for its iDEN-based network.

“They are in that situation already with Motorola and I don’t think they want to keep themselves obligated to one provider,” Entner explained.

A safer bet for Nextel could be a CDMA-based deployment using either 1x EV-DO available today or possibly waiting for its higher-speed EV-DV edition expected to be ready by early 2006. Nextel has had a close working relationship with CDMA developer Qualcomm Inc. in the past and was reportedly close to announcing a CDMA overlay for its iDEN network several years ago.

Deutsche Bank noted earlier this year that it believed Nextel was testing a GSM 1x/EV-DO solution provided by Lucent Technologies Inc. and Samsung Corp., but doubted the carrier would move ahead with the solution since it did not provide a competitive advantage to Verizon Wireless’ or Sprint PCS’ EV-DO deployments. Nextel’s Donahue told RCR Wireless News earlier this year that whatever Nextel selected for its next-generation network, it would leapfrog what was currently available.

Further broadening Nextel’s next-generation possibilities is its substantial MMDS spectrum holdings in the 2.5 GHz bands, which the carrier hinted it could use to launch a Flash-OFDM network for major markets. Nextel holds about two-thirds of the MMDS spectrum nationwide and has hinted that it could deploy multiple technologies using both its 1.9 GHz and 2.5 GHz spectrum that could distance the carrier from its competitors.

While Nextel may have access to the spectrum necessary to launch a next-generation network, analysts cautioned that the financial burden of such a launch should not be overlooked.

“It’s not just the $5 billion for the 1.9 spectrum that Nextel has to worry about,” Entner said. “They will have to somehow provide new handsets to what will be nearly 15 million customers by the time the network is deployed that could cost another $5 billion and still have to fund the build out of a nationwide network using the 1.9 spectrum.”

SG Cowen industry analyst Tom Watts projected capital expenditures to fund a nationwide deployment regardless of technology chosen would cost between $5 and $10 per potential customer covered, which would translate to between $1.2 billion and $2.4 billion based on Nextel’s current coverage.

Regardless of its technology choice, analysts note Nextel should move as quickly as possible in deploying a next-generation network as most of its competitors are moving aggressively in their deployments. Verizon Wireless and Sprint PCS have already announced plans to have EV-DO services launched across most of their networks by the end of 2005, while Cingular said it hopes to begin deploying W-CDMA and its higher-speed HSDPA derivative by the end of next year or in early 2006.

“If Nextel does not act quickly, much of its competition could have at least a one- to two-year lead in the deployment of next-generation networks,” Current Analysis added.

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