It is shaping up to be a very interesting 2015 in the world of wireless infrastructure. As operators and investors evaluate how to play their cards this year and beyond, there are several key areas that need to be factored in to business management, expansion and investment strategies connected to U.S. wireless infrastructure.
Evolving end-user pricing dynamics vs. cost of service delivery
With the U.S. wireless industry locked into a constant state of pricing pressure, costs are facing greater scrutiny than ever as operators look to sustain bottom line results. This means constant evaluation of customer acquisition and service costs in order to evaluate each user for profitability maintenance. While these cost evaluations will encompass all areas of the business, look for operators to specifically zero in on network, where more efficient methods for deploying dense coverage by leveraging technologies – such as centralized radio access network – have the potential to drive significant shifts in expenditures. Since cost efficiency must be balanced against customer experience, this discussion will be a focal point of 2015 and beyond.
LTE coverage vs. densification deployments
Among the top four U.S. operators, deployment plans will differ significantly in 2015. With their LTE coverage builds mainly wrapped up, Verizon Wireless and AT&T Mobility are now clearly in densification mode. The focus of both carriers will center on adding capacity in areas that are weak or strained. Operators will leverage a mix of macrocell strategies with small cell, distributed antenna systems and C-RAN deployments that play emerging, but important, roles in these densification efforts. The critical factor driving deployment types will be cost.
As for T-Mobile US and Sprint, both players will continue to expand their LTE coverage as they seek larger footprints. With network competitiveness being critical to customer retention today and with coverage set to become a key differentiator for customer acquisition going forward, both carriers will continue to pursue expansion plans. Look for continued focus on macrocell deployment to drive near-term coverage increases, with that focus shifting to densification after initial coverage builds are complete.
Spectrum auction impacts
The completion of the most recent AWS-3 auction yielded significantly higher operator spends than expected. This reality raises key questions going forward:
• Will operators monetize unused spectrum to take advantage of current valuations and make investments elsewhere in their businesses?
• Will this level of spending on spectrum continue into the upcoming broadcast auction? And, if so, how will operators fund their participation?
• How will operators cost-effectively deploy newly acquired spectrum to drive increased capacity after spending big on AWS-3 spectrum?
Decisions will be driven by deep understanding of the potential financial impact on the business. Look for operators to pursue a tight balance of financial efficiency combined with high-quality network deployment.
Offload opportunities
The role of Wi-Fi has been long discussed, but as spectrum costs continue to rise almost in lockstep with network demand, alternative technologies of supporting traffic growth become more intriguing. Look for investments in technologies and methodologies that improve interaction between Wi-Fi and cellular networks. Additionally, look for cable operators, which have built out deep networks of Wi-Fi hot spots with no clear end game, to leverage those assets for new business opportunities. This realization could come in any number of forms – mobile virtual network operator arrangements, partnerships, over-the-top platform plays, etc. By the end of 2015, expect Wi-Fi’s role in supporting network traffic growth to be more clearly defined.
The bottom line
All in, the key themes in 2015 will be more financially driven than ever before. As the top line gets pressured, everything else must come in line. From both an ongoing capital and operating cost perspective, operators will put more focus on efficiencies than they have historically. Infrastructure firms seeking business opportunities in this changing environment will need to develop deep understandings of these industry shifts and well-formulated strategies to navigate them.
Aaron Blazar is a senior partner at Atlantic-ACM, a Boston-based strategic consulting firm that serves telecom operators, infrastructure providers, vendors and investors. Blazar has led a wide range of engagements with a focus on opportunity identification, market entry, expansion, go-to-market strategy, competitive positioning and investment due diligence. Blazar’s market analyses have appeared or been quoted in The Wall Street Journal, Crains Business Journal, Bloomberg, Boston Globe and Capacity Magazine. Blazar has also moderated and participated in C-Level industry thought leader panels. Blazar has a Bachelor of Arts in economics from Colby College. In his spare time, Blazar enjoys skiing, trail running and sailing.
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