Feeling smart

Metawave, ArrayComm catch the attention of 3G network providers

High-priced spectrum auctions have produced many losers: carriers that didn't get spectrum and face uncertain futures; carriers that won spectrum but can't afford the debt needed to pay for it; and stockholders who have watched share prices of both groups plummet at alarming rates.

The biggest winners from the auctions may be manufacturers of smart antenna products. ArrayComm and Metawave recently announced deals with major wireless network equipment providers that reflect new interest in smart antenna technology.

Smart antennas allow carriers to increase their user capacities — and profits — by using spectrum more efficiently. Still, smart antennas were largely ignored in the past, according to Mike Callahan, vice president of technology licensing for ArrayComm.

That changed during the past year as wireless operators bid astronomical prices for spectrum (see figure).

“Even three years ago, I would talk to people about using smart antennas — to improve the capacity, and people would just look at us and go, ‘Well, I'm just going to buy more spectrum,’” Callahan said. “It used to be people actually wondered about that equation. Today, it's very obvious to them.”

Carriers are betting revenue-generating applications such as Internet access and multimedia downloads will augment ever-increasing voice usage to offset the costs of buying needed spectrum. However, this revenue potential comes with the significant challenge of ensuring that wireless networks can handle an unprecedented amount of traffic.

Smart antennas can help carriers meet the greater capacity demands — at least that's the belief of base station manufacturer Marconi, which recently partnered with ArrayComm, and Samsung, which has teamed with Metawave. Both deals involve developing solutions for next generation wireless networks and at least, tripling capacity independent of efficiencies inherent in the next generation architecture.

Expect more 3G vendors to employ smart antennas in their product arsenals as they seek lucrative contracts from carriers, said Christine Stasikowski, senior analyst with The Strategis Group.

“I would say [vendors] would be better off if they did,” she said, noting that Ericsson is developing a smart antenna solution. “It's a way to differentiate rather than through financing, which has not worked out well.”

For Metawave, developing embedded smart antenna technology with Samsung represents a significant change in its business model, which has been focused on “applique” boxes that bolster capacities of existing base stations by 50% to 70%.

“We need to provide these services at better cost points, and the way to do it, we believe, is to integrate the [smart antenna] technology into the base stations,” said Albert Jordan, president of Metawave's CDMA division.

ArrayComm's “smart” base stations cost about 15% more than traditional base stations, but the business case is compelling, Callahan claimed. Increased capacity means more customers — as much as 12 times more, he said.

The high price of spectrum

Top spectrum auctions of the last year

United Kingdom
April 2000	$35 billion
Germany
August 2000	$45 billion
United States
January 2001	$17 billion
Total	$97 billion

And smart antennas have significantly larger cell sizes, meaning fewer base stations are needed. As a result, fewer real estate deals have to be transacted and fewer backhaul connections to the landline network are needed. The latter characteristic means more money can be spent on the backhaul pipe, creating economies of scale for the operator, according to Callahan.

It's an argument that should persuade carriers that smart antenna technology is worthwhile, Stasikowski said. “[A smart antenna] is not cheap, but it's definitely less than spending $500,000 to develop a new cell site,” she said.