Introduction

The basic theme of UMTS revolves around providing extensive features such as video call, high bandwidth rather than just voice calls and short text messaging on GSM cellphones. According to a rough estimate, around 125 billion dollars are being spent by operators in Europe to buy UMTS licences. Because of this and other cost issues discussed below, some analysts think that this huge investment might be risky !

UMTS Cost Issues

Most of the operators that bought UMTS licences already have their GSM/GPRS networks, while some are new to the business. After paying billions to get a licence, almost same amount will cost them in building the network. As, GSM/GPRS cant be upgraded to UMTS, instead UMTS network should be built from scratch. This is causing each company in the deep ditch of debt from which they can't come out early.

As the early stages of UMTS, it is followed that hybrid handsets should be built. Hybrid handsets are those which can support both GSM and UMTS networks depending upon the availability. The cost issue gets worse when you come to know that hybrid UMTS handsets will initially cost lot more than a normal cellphone. Hence, to attract customers, operators have to subsidise handsets to reduce the prices.

It can be clearly said that it will take around a decade to make a UMTS network profitable. This huge time could easily sink an operator in debts more or could delay the expansion of UMTS networks.

Some measures have been designed to reduce cost issues. e.g. Vendor Financing, in which vendors could lend operators money to buy their equipments to develop UMTS networks, relaxation in licence terms, concessions from Governments that got huge licencing amounts in their pockets etc.

Conclusion

This seems to be a very uncertain period that requires lot of patience and tackling to get out of it. From other side of the picture, a UMTS network can handle twenty times more calls than current digital networks. Installing a UMTS network is one seventh of a GSM network of equal voice capability. UMTS can reduce the operating cost for normal voice and messaging services. In my opinion, UMTS will pay-off and a time will come when there would be no way of survival other than UMTS. But this will definitely take time in years rather than months.