LTE Capex Shifts to Software

The cost of mobile site hardware has become almost irrelevant to operators deploying Long Term Evolution, argue analysts at Maravedis-Rethink. Not only are base station costs crashing, but investment is shifting to software and operating expense.

Spending on radio hardware equipment by the top 100 LTE operators will only rise by 4.2 percent to $22.4 billion in 2013, according to Maravedis-Rethink.  

By 2018 base station costs will have fallen to just 15 percent of mobile operator network capex, compared to about 33 percent in 2012.

In part, that change will be propelled by the shift to small cells, which are expected to help mobile service providers reduce the cost of delivering data by 75 percent compared to conventional macrocell networks.
That architectural shift will affect capital investment as well. Small cell radio investments will account for $12 billion in spending in 2018, while servers to run cloud-based radio access networks will add $2.63 billion, according to Maravedis-Rethink.

Software defined networking (SDN) will be a growing investment driver as well. By 2018, 62 percent of tier-one Long Term Evolution carriers will be supporting virtualized networks.
Software already represents as much as 70 percent of modern communications network capex, and SDN will further that trend, potentially allowing mobile service providers to reduce costs by running more functions in software, rather than in network elements.
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