Article

3G, 4G services advance, but old telecom pecking order still stands

Michael Morisy
By 2013, 3G and 4G services will be used by only 30% of wireless subscribers, but these next-generation networks, with higher subscription costs and more available ARPU-driving features, will bring in half of wireless carriers' revenues, according to new research from In-Stat.

This is a major jump from the end of last year, when only 11% of subscribers were using these higher-speed services. The expansion of this market means telecoms

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will build out more infrastructure to support subscribers, giving a significant boost for next-generation network equipment providers like Alcatel-Lucent, Alvarion and Motorola, although beleaguered Nortel appears to be losing still more ground.

"In the media, there was a lot of talk about 3G, and now it's about 4G, but we still have a whole lot of edge still out there," said Daryl Schoolar, senior analyst with In-Stat. It's only now, particularly in North America, Western Europe and parts of Asia, that 3G services are starting to mature, he said, as shown by affordable, consumer-oriented phones hitting the market in greater numbers.

Another sign of maturation is that tier 1 carriers aren't the only ones deploying 3G networks. For example, Leap Wireless, which targets lower-income users with contract-free plans, just signed an agreement with Huawei to purchase 3G CDMA equipment for its U.S.-based Cricket Wireless brand, which has fewer than 4 million subscribers.

"It's working its way down [market]," Schoolar said.

While smaller players are starting to make 3G and 4G inroads, Schoolar cautioned against early, optimistic signs that these next-generation networks could launch new wireless players.

The Clearwire deal -- backed primarily by Sprint but including a diverse cast of part-owners ranging from Comcast and Intel to Google -- promises to change some dynamics of the wireless market and allow cable companies a quadruple-play inroad, but Schoolar said more independent ventures are unlikely.

"These are such expensive undertakings," he said. "You need capital that's hard to raise [and] expertise, and one of the challenges is that LTE isn't going to be everywhere and you need a fall-back network."

Nortel is also likely to miss out on the 4G boom.

Being passed over by Verizon for its LTE network may just be the tip of the iceberg, Schoolar said, partly as a result of the company's own mixed messages on next-generation networks: Nortel announced that it would leave the WCDMA market to focus on WiMAX, only to announce later that it was exiting the WiMAX market to focus on LTE.

"Right now, I think [4G] is a lost battle for them because of bankruptcy issues," Schoolar said. "In terms of people going with them for 4G deployments, you just don't see that."


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