By Bob Perez
Consumers around the globe are adopting mobile data services at an incredible pace. This is evident by the skyrocketing popularity of smartphones and feature rich phones with browsing capabilities in more developed regions. Furthermore, preliminary reports from some operators are showing an increase in ARPU from 2007 to 2008. As this bandwidth demand increases, network operators will need to stay ahead of the curve by investing in upgrades for their existing 3G networks as well as new, more spectrally efficient next generation networks. The desire for consumers to be "always connected" via the onslaught of multimedia social networking applications on sites such as Facebook, MySpace and YouTube is not likely to wane any time soon.
The question now though is, "How will the current economic climate impact the uptake of mobile data services and consequently, the market for infrastructure equipment?" IMS Research is forecasting the installed base of mobile data users will be relatively insulated from the downturn as many consumers will opt to keep mobile service and cut costs elsewhere. However, the downturn is expected to impact the infrastructure markets with revenues predicted to experience a significant decline in 2009. Coincidentally, this economic downturn has come at a time when many operators are outlining plans to either upgrade their existing 3G network or migrate to a next generation network. Before the economic crash, many thought 2009 would be a year defined by aggressive expansion of mobile data networks and large investments in 4G. For some operators, this may still hold true. For example, the case of Verizon Wireless where it is actually accelerating its LTE plans. For many others however, the lack of available capital and an extremely volatile global economy will likely result in the delay of 3G upgrades and next generation network rollouts.
Large-scale commercial LTE deployments are now expected to take place in 2011. The economy will likely serve to slow LTE and mobile WiMAX roll outs as operators focus on deploying networks in select cities, mainly in developed areas such as North America, Western Europe, Japan and South Korea. Even after the economy recovers, many operators, especially those with HSPA networks, will opt to follow along the upgrade path through HSPA+ en route to LTE. Many operators are just now beginning to see a return on their 3G investment and are in no hurry to roll out a 4G network. The story is a bit different for EV-DO operators as their networks will not be backwards compatible with LTE or mobile WiMAX, thus diminishing the business case for continuing upgrades to the existing EV-DO network.
Mobile WiMAX may be hardest hit by the economy as many of the smaller WiMAX-only vendors count on greenfield operators deploying networks in underserved broadband markets as some of their most important customers. As a result of the credit crunch, many of these operators may find it increasingly difficult to raise the necessary capital to deploy a new WiMAX network or upgrade an existing one. In addition, many operators currently running fixed 802.16d networks are expected to delay upgrading to mobile 802.16e networks.
Following an economic recovery, initial roll outs of LTE are expected to focus on developed regions of the world with very high cellular penetration rates. Although there are a number of developing countries with fixed WiMAX networks, IMS Research believes that the transition to mobile WiMAX for these regions will be relatively slow due in part to the lack of widespread mobile WiMAX networks in other parts of the world that would help create economies of scale and drive down the cost for mobile WiMAX CPE and infrastructure equipment. In addition, many of these fixed WiMAX networks operate in the 3.5 GHz band which does not bode well for mobile services. However, rapid adoption of mobile WiMAX services in developed regions of the world would help to accelerate the transition of these networks from fixed to mobile.
IMS Research is forecasting that Japan and North America will spearhead the market for LTE with networks coming online in 2010 with Western Europe quick to follow. LTE deployments are not expected to take place in developing regions before 2013. However in the long term, LTE services may be used to offer fixed wireless broadband to developing regions as the price of infrastructure equipment and CPE begins to fall as a result of economies of scale.
The market for mobile data infrastructure equipment, including RAN and core network components for EDGE, UMTS/HSPA, EV-DO Rev. X, TD-SCDMA, LTE and mobile WiMAX, is expected to see a decline of approximately 10 percent in 2009, compared to the previous year. However, the market is expected to quickly recover in 2010 and continue to grow with revenues in excess of $35 billion in 2013.
Bob Perez is an analyst with IMS Research's Broadband & Networking group. He focuses on the wireless broadband communications market. His recent report, "Mobile Broadband: 4G Network Evolution" analyzes the market for mobile data infrastructure equipment. For more information, contact Bob at bob.perez@imsresearch-usa.com.