Editor’s Note: RCR Wireless News asked wireless industry analysts and executives to provide their predictions for what they expect to see in 2012 across their areas of expertise.
Although smartphones seem like old news, their impact on the wireless industry is only beginning. In 2012, as these phones become truly mainstream consumer devices, sales volumes and data network traffic will skyrocket, forcing the wireless industry to completely rethink how it designs, sells, deploys and operates wireless services.
Over the past few years, smartphone adoption has proved a boon to the wireless industry, enabling operators to grow revenue, stave off declining average revenue per user and increase customer retention. PwC research shows that more than 80% of North American wireless operators now get at least a quarter of their mobile contract revenues from smartphone users. More than three quarters of carriers also now offer smartphones as an option for cost-sensitive subscribers who prepay for wireless service, with 8% of those subscribers already adopting smartphones.
By the end of 2012, the landscape could look radically different, with the installed base of smartphones possibly more than doubling. This rapid growth has implications for three major areas of the wireless industry:
–Device volume and pricing: Smartphones will be in demand at diverse price points, especially at the low end. Many operators are targeting a sub-$100 price point for their purchases of low-tier smartphones from original equipment manufacturers. This presents an opportunity for new OEM entrants, as evidenced by the recent release of several Chinese-made smartphones in the United States. It also presents a challenge for incumbents who must redefine their product development, manufacturing, and supply chain strategies to support lower price points and higher volumes, much as operators did during the transitions to digital and data-enabled devices over the past fifteen years.
–Network technology and band diversity: As data network demand continues to increase, wireless operators may be venturing into new territories. Whereas spectrum used to be a primary means to enhance capacity, most common bands are now exhausted, requiring operators to deploy capacity in new, sometimes non-standard, bands. Further buildout of more spectrally-efficient LTE networks will provide valuable relief. But although these networks are likely to become mainstream in 2012, spectrum constraints mean that they will not be an option for everyone. Furthermore, increased band diversity projected for LTE could result in fragmentation of device supplies, slowing adoption. Perhaps more radically, operators are seeking to provide greater capacity and flexibility by deploying heterogeneous networks of macro, pico, and femtocells, as well as alternative solutions like Wi-Fi. But according to PwC research and analysis, they may need to determine how to design, deploy, backhaul and manage as many as ten times the number of sites that exist today.
–Offering definition and pricing: In developed economies, as smartphone adoption increases and wireless subscriber growth declines, continued innovation will be useful in attracting and retaining subscribers. Recent announcements indicate that mainstream operators will begin rolling out more flexible pricing mechanisms that encourage the connection of multiple data devices, including smartphones, tablets and data dongles. While this development will continue to place greater pressure on network capacity, such innovations will contribute to the industry’s continued growth and competitiveness.
