Capital spending on wireless infrastructure throughout the world is projected to reach $40.3 billion in 2011, up 6.7 percent from $37.8 billion in 2009. This will reverse the downward trend that first occurred in 2009 and is expected to continue this year. Expenditures dipped 5.7 percent in 2009, and in 2010 will tumble by an additional 2.3 percent to $37.8 billion.
“The upturn in 2011 signals renewed commitment within the wireless industry to move on expansion plans that had been delayed or put on hold because of the global recession,” said Dr. Jagdish Rebello, senior director and principal analyst for wireless research at iSuppli.
“Starting in 2011, wireless carriers in industrialized countries will start to deploy 4G in order to attain faster speeds and to unclog the heavy data traffic generated by the exploding use of smart phones. This 4G-driven growth in capital spending will continue at least through 2014.”
The figure presents iSuppli’s forecast of worldwide capital spending on wireless infrastructure gear from 2008 to 2014.
Source: iSuppli, USA.The level of expenditures on infrastructure equipment represents a telling metric for the health of the entire wireless industry, Rebello noted. Infrastructure capital spending accounts for approximately 30 percent of total wireless capital outlay—with the remaining portion spread out between spending for software upgrades and maintenance on one hand, and capital costs on site procurement on the other.
Carriers to favor LTE over WiMAX as choice of 4G
Carriers the developed world in 2011 will start to deploy 4G, with most expected to choose Long Term Evolution (LTE). Over the next decade, LTE will become the dominant technology, while WiMAX will be relegated to the status of a niche 4G technology, iSuppli believes.
Already, a number of wireless carriers have announced support for LTE, including NTT DoCoMo and KDDI in Japan, as well as Vodafone and Orange in Europe. In the United States, Verizon Wireless has announced it will roll out LTE by the end of this year, with AT&T and T-Mobile expected to follow suit in 2011.
“The transition in the developed world to 4G networks, designed to support wireless mobile access with very high data transmission speeds, comes in the wake of build-outs that are winding up for outgoing 3.5G networks,” Rebello said.
“While carriers are regulating capital expenditures this year to maximize mileage from their remaining 3.5G investments, the starting launch next year of 4G services, with their faster speeds, might help unclog the heavy data traffic now weighing down carrier networks.”
Overall, carriers will work to establish viable business models to achieve greater revenue growth in light of the capital expenditures needed for network upgrades, iSuppli believes.
It means that in all likelihood, carriers launching 4G will implement tiered pricing plans based on data access rates. As a result, data traffic in access networks will be prioritized, and customers will be required to pay higher access fees when using high-bandwidth services like mobile video or peer-to-peer mobile video gaming.
3G reigns in developing economies
While wireless carriers in Japan, the United States and Western Europe contemplate launching 4G services in 2011, their counterparts in the developing world will continue to invest in 3G network enhancements.
For Latin America, China, India and the rest of the developing world—where wireless penetration has yet to extend to many rural areas—4G is not considered a feasible proposition at this point. Instead, carriers will focus on expanding the geographical coverage of their networks, or seek network-sharing agreements with infrastructure providers to help reduce total capital outlay.
Source: iSuppli, USA.
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