Telecommunications equipment maker Nortel Networks is dumping its WiMax business to focus on a more popular 4G wireless technology.
The company said earlier this week that it's focusing its money and development efforts on Long Term Evolution, or LTE. Even though LTE hasn't yet been standardized, it has more support from major carriers around the world than WiMax.
The two largest U.S. operators, AT&T and Verizon Wireless, have already announced they plan to use LTE to build their 4G wireless networks. Vodafone, the largest worldwide wireless operator, also plans to use LTE for its next generation network.
Sprint Nextel is the only major U.S. operator using WiMax. The company earlier this year joined forces with Clearwire and several other companies including Comcast, Time Warner Cable, and Intel, in a $12 billion joint venture to build a nationwide WiMax network.
Sprint, which has already been testing its WiMax network in some places, did not choose Nortel as one of its major vendors to build the new network. This was a major blow for the telecommunications equipment maker, which instead has been forced to focus on carriers in emerging markets. Relative to LTE, this WiMax opportunity is much smaller, which likely contributed to the company's decision to ditch it.
Instead of sinking a lot of research and development into WiMax, Nortel plans to address this market through a relationship with Alvarion.
Alltel, the largest rural cell phone provider in the U.S., plans to use the same technology to build its 4G network that AT&T and Verizon Wireless have chosen, a move that should provide better coverage for next generation wireless users.
But don't expect a major 4G upgrade from Alltel overnight. The company said during its quarterly conference call on Thursday that it would likely take three to five years to deploy the new network.
Still, the fact that yet another wireless operator has committed to using Long Term Evolution or LTE, is a big deal. Since the cell phone operators deployed networks in the U.S., consumers have had to deal with two major cellular technologies: CDMA and GSM. Verizon, Sprint Nextel, and Alltel went the CDMA route. Meanwhile, AT&T and T-Mobile, along with a slew of regional carriers, deployed GSM.
This division in the market has resulted in cell phone manufacturers developing different products for each technology, which has led to delays in some products on certain networks. It has also meant that CDMA subscribers haven't been able to roam as much internationally. And it's resulted in fewer roaming agreements between major carriers domestically, which has led to some holes in coverage, especially in rural areas.
So it's significant that the two major CDMA players in the U.S.--Verizon Wireless and Alltel--plan to use the same technology that most GSM carriers throughout the world plan to use. With most major operators using the same technology, coverage should improve and so should the availability of cool new handsets. It should also make it easier for carriers to make their networks more open, allowing customers to take their phones or wireless-enabled devices from one network to another.
Alltel is the fifth largest carrier in U.S. with only 13 million subscribers, but the company covers some 34 states and has coverage in parts of Mexico and Canada. It also has roaming agreements in many markets throughout the U.S. and Canada.
"It is no surprise that Alltel chose LTE as its 4G technology, since the carrier usually mirrors choices made by Verizon Wireless," said Nadine Manjaro, senior analyst at ABI Research. "Alltel's choice of LTE will help to ensure greater rural coverage for small and mid-sized cities in the United States and Canada since the carrier already has data roaming agreements in place. This will complement other mobile operators' initial LTE build-outs in major urban areas."
Alltel's announcement that it will deploy LTE in some ways further alienates the Sprint-Clearwire WiMax network. Sprint and Clearwire announced last week they were combining forces to create a nationwide WiMax network. Even though these companies claim that their network will be at least two years ahead of any LTE deployments, it's clearer now more than ever that wireless operators are opting for that technology rather than WiMax. And that could mean a more aggressive and cost-effective ecosystem for LTE.
Several more companies on Monday agreed to sign their names to the Long Term Evolution (LTE) framework for the next generation of wireless technology.
The largest handset maker in the world, Nokia, was joined by Sony Ericsson, Alcatel-Lucent, NEC, and NextWave Wireless. Part of the agreement on LTE means the companies will agree to license their patents "on fair and reasonable terms," which means keeping royalties for handset patents below 10 percent of the handset sale price.
"Today's announcement is a step towards establishing more predictable and transparent licensing costs in a manner that enables faster adoption of new technologies," Nokia's Ilkka Rahnasto said in a statement.
These five are only the latest to join as the emerging LTE technology gains momentum. In November at the Mobile Asia Congress in Macau, the GSM Association threw its support behind LTE. A few weeks later, Verizon Wireless, the No. 2 wireless operator in the U.S., said it would use LTE for its 4G wireless network. AT&T, the largest mobile operator in the U.S., also has indicated it will use LTE.
News.com's Marguerite Reardon contributed to this report.
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