Mobile network infrastructure spending in North America in 2008 is likely to be down vs. 2007. We expect Wideband-CDMA network investments to accelerate as AT&T Mobility continues to expand its coverage and capacity, and as T-Mobile USA Inc. and Canadian wireless operator Rogers Wireless introduce W-CDMA-based services. Growth in W-CDMA spending will help to offset declines in CDMA and GSM-based infrastructure. Sprint Nextel Corp.’s recent financial woes, and the dissolution of its network-sharing arrangement with Clearwire Corp., make it difficult to predict WiMAX spending over the next year. Nevertheless, in the past year we have seen certain very important developments related to network infrastructure that have the potential to change the way wireless services and applications are delivered to consumers.
700 MHz: Beachfront Property
The Federal Communications Commission will auction significant amounts of spectrum in the 700 MHz frequency range beginning this month. There will be enough spectrum offered to enable potential new entrants, such as Google Inc. and cable and/or satellite television service providers, to begin to offer nationwide broadband wireless services. Due to the favorable propagation characteristics of wireless signals at 700 MHz, strong coverage (both indoor and outdoor) can be achieved with relatively few base stations. This makes 700 MHz spectrum extremely desirable (hence the term “Beachfront Property”).
These potential new entrants could offer more competition for the incumbents, namely AT&T Mobility and Verizon Wireless, as well as introducing the promise of “open access” wireless that would allow third parties to offer applications, content, and services using the service providers’ networks. Given that the spectrum will not be available for use until 2009, related networking spending should not increase until that timeframe. We expect spending on 700 MHz-based networks to be largely incremental, since these networks will be used either by a new service provider or in addition to an existing network operator’s infrastructure.
Open Access
Open access is a term that is increasingly being associated with current and future wireless services. Verizon Wireless recently announced that it would open its network to third-party applications and devices that meet its technical requirements. Verizon Wireless hopes that doing so will open the floodgates of innovation and provide the killer application(s) that will drive data revenues as well as data traffic. We are curious to see how public and innovative open-access applications will be; however, we do agree that such an effort seems necessary to create a large increase in network spending related to data traffic and revenues.
The future of CDMA
Two recent developments may have signaled the end of the CDMA ecosystem in North America: First, Verizon Wireless’ recent announcement that it will begin trials in 2008 of Long Term Evolution technology, which is an extension of the GSM/WCDMA ecosystem; and second, Sprint Nextel (apparently) has chosen WiMAX as its next-generation radio access technology. While North America accounts for approximately three-quarters of the spending on CDMA-based network infrastructure, over the next couple of years, however, spending on CDMA-based infrastructure will continue largely undisturbed, as these operators begin the decade-long transition to alternative technologies.
Femtocells
Femtocells are small, low-power, low-capacity base stations designed to operate in a residence or small business. During 2008, service providers will conduct trials of these cells. Femto base stations offer network operators two opportunities. First, they allow network operators to improve coverage to the home by offering services designed to replace customers’ landline or Internet-based (e.g., Skype) voice services. Second, they may offer operational efficiency and cost savings for the network operator, because they may allow a network operator to lower the number of macro base stations.
Greg Collins is VP of Dell’Oro Group. Dell’Oro Group is the trusted source for market information about the networking and telecommunications industries. With in-depth, objective research and analysis from Dell’Oro Group, you can make informed strategic business decisions and maintain your competitive edge. For more information, visit www.delloro.com.
