Thursday, March 8, 2012

US Leads Way in Telecom (LTE) Innovation

There is a transformation occurring in the telecommunications industry, particularly in the United States, thanks to consumers' movement to smartphones and tablet PCs. These popular new phones and tablets, like the iPhone and iPad from Apple (Nasdaq: AAPL) and various devices powered by the Android operating system from Google (Nasdaq: GOOG), are forcing telecoms operators like Verizon (NYSE: VZ), AT&T (NYSE: T) and others to upgrade their networks.

As evidenced in 2007 with AT&T's network problems due to the launch of the iPhone, carriers need to upgrade their networks to cope with the tidal wave of mobile data unleashed by data-hungry advanced smartphones and now tablets. Unlike the first generation of such devices, today's gadgets have fueled a surge in mobile data usage thanks to their ease of use, ultra-fast processors and a proliferation of 'cool' third-party apps.

This need for U.S. carriers to upgrade their networks over the next few years was pointed out by the recent market and traffic data report from telecommunications equipment company LM Ericsson ADR (Nasdaq: ERIC) which predicted that global mobile data traffic will expand tenfold by 2016. Even the Federal Communications Commission chimed in saying that the country's wireless carriers will face a 275 megahertz “spectrum deficit” by 2014 if no new spectrum is opened up for use.

Not only that but it's well known that wireless carriers are losing a good amount of money on a growing number of subscribers that are heavy data users. The solution for U.S. wireless carriers?

At least a partial one is 4G or LTE (Long Term Evolution) technology which uses scarce spectrum much more efficiently than older 2G or 3G technologies and thus allows companies like Verizon to better handle the massive and growing data loads. It gives wireless firms a scalable technology that will drive down the cost of delivering data to subscribers for them.

U.S. telecoms companies have wisely already begun the shift towards LTE technology. All four leading US mobile firms including Sprint and T-Mobile are spending billions of dollars toward having LTE networks up and running by the end of 2013, several years ahead of schedule. In a few years, LTE networks will be absolute necessity for telecom operators since more and more smartphones on the market are LTE smartphones.

This move toward LTE technology is sure to continue in the years ahead. Several months ago, Juniper Research released a report which forecast that the number of LTE subscribers would reach 428 million by 2016. An impressive number, but that is only 6% of all global subscribers. Juniper expects a sharp bump in consumers' use of LTE to begin in 2013 as LTE networks are rolled out by the phone companies.

As telecom companies do so, it will allow them to free up some 2G and 3G spectrum which they intend to use for the next generation of technology. Current LTE technology in a few years time will be followed by the next generation of LTE technology called LTEAdvanced. This technology is projected to deliver average download speeds in the range of 100 megabits per second which should no doubt make smartphone and tablet users very happy.

And as these new technologies lower the cost of delivering mobile data to subscribers, it will also give a payback to the likes of Verizon and AT&T on their multi-billion dollar investments into LTE.

This article was originally writeen for the Motley Fool Blog Network. Check out my daily articles for the Motley Fool at http://blogs.fool.com/tdalmoe/

1 comment:

  1. The advancements in technology are breath taking and a little scary.

    ReplyDelete