Mobile Service Provider Capex Will Shift to Small Cells by 2014

Joe Madden of Mobile Experts thinks the global mobile service provider industry is about to enter a period where capital investment shifts to smaller cells. To be sure, 2012 seemed to see a waning of capital investment, with 12 percent lower RF transceiver shipments than 2011.

Madden says that fits a pattern of investment in transmission facilities that has been typical of second generation and third generation networks.

He calls the pattern a "two hump camel.” The first hump reflects the initial build. About four years later, those initial systems are upgraded with additional radio capacity and additional towers, and the second "hump" begins.

Of course, many service providers globally are on the cusp of major investments for Long Term Evolution. But global economic uncertainty appears to be causing a delay in capital investment, either in the form of additional 3G base stations or new LTE base stations, Madden argues.


The next big upsurge in investment will occur about 2014 or 2015, when consumers start to complain about performance. At that point, mobile service providers will turn to small cells for their 3G and LTE networks. Madden predicts more than nine million carrier-grade capacity small cells will therefore be deployed during 2017. 

How Much Mobile Traffic Can be Offloaded to Wi-Fi?

How much smart phone traffic can be offloaded to Wi-Fi is uncertain, at this point, though it already is clear that perhaps a majority of at-home smart phone usage routinely is shifted to Wi-Fi access. 

The bigger question is how much "out and about" usage might be shifted to Wi-Fi, particularly in urban areas. That might affect the deployment of small cells that also support Wi-Fi. 

Softbank in Japan has tested the offload potential of dense Wi-Fi deployments and apparently has concluded that less than 25 percent of mobile data traffic can be offloaded to public Wi-Fi in the long term.

Those estimates correspond with figures Boingo suggests. Boingo believes about 22 percent of mobile traffic will be offloaded to Wi-Fi by about 2016.

Others might disagree. Cisco analysts say as much as 30 percent of mobile traffic could occur on Wi-Fi networks. And analysts at Juniper Research think more than 60 percent of mobile device traffic could be offloaded to Wi-Fi means by about 2015.

Others say studies show as much as 70 percent of smart phone traffic uses a Wi-Fi connection.

Service Providers Don't Always Pick Technology Winners

For those who can remember widespread cable operator interest in "interactive TV," dating back to the 1980s, there is a lesson. Service providers are not always "right" about what consumers want, or how to supply the demand.

The early thinking was that people wanted, and would use, interactive features built around the video experience, using the TV, remote control and cable box as enablers.

As it turns out, people do "interact" or "augment" video programming, but in a way not foreseen: they use their PCs, tablets and smart phones to multitask. In other words, they "do other things" while watching TV. 

But they do not really want to interact directly with video content. The lesson is that suppliers do not always understand what it is that people might want to do. So the instinctive response is to ask people what they want, what they might pay for experiences and how they want those experiences delivered. 

But consumers nearly always have a tough time figuring out how they might use a product they never have seen. In such cases, asking doesn't help. Steve Jobs, former CEO of Apple, perhaps was the foremost practitioner of a skeptical approach to asking people what they want. 

Android, Apple iPhone: Key Mobile Shopping Differences

IBM’s Digital Analytics Benchmark reported U.S. Black Friday sales and the news is reasonably good. Overall online sales grew by 17.4 percent while mobile sales grew to make up 24 percent of traffic. That probably does not come as a surprise. 


The study suggests 75 percent of the activity was from PCs. Of the mobile activity, a highly disproportionate share was conducted by owners of Apple iPhones. That is more notable. 

Apple iPhone owners were nearly four times more likely to conduct transactions using their devices, compared to Android owners. 

What nobody can tell, at this point, is whether those differences are due to some key difference in user interface, activity preferences or are more related to differences in end user personal wealth, or something else. 

Google Rumor: 13-inch Chrome OS Touch Notebook?

The launch of a rumored touch-enabled Chrome OS touch notebook might suggest Google is tiptoeing even further towards offering its own branded devices, as Microsoft has done with its branded "Surface" tablet. 

As always, the move would increase the odds of channel conflict for both Google and Microsoft. 

European Smart Phone Penetration Hits 54%

Smart phone penetration in EU5 (France, Germany, Italy, Spain and UK) is now at 53.7 percent, with nearly 130 million people using smart phones in the three month average ending September 2012, according to comScore.

Out of this smart phone audience, 15.5 percent also own a tablet, compared to 9.3 percent last year.

Deutsche Telekom Faces Same Challenge as Many U.S. Service Providers

Most telecom executives, especially those facing growing competition from cable operators, have had to ask hard questions about their options for upgrading access networks. The simple fact is that a full replacement of the network to fiber to the home technology is expensive. 

Japan's Bank Nomura estimated the cost of a digital subscriber line upgrade, in areas where Deutsche Telekom needs more speed to counter cable operator high speed access offering, at around 4 billion euros ($5.1 billion), while a full upgrade to fiber to the home, across Germany, could cost around EUR80 billion, or perhaps $102 billion.

So Deutsche Telekom plans to selectively upgrade, using a faster form of digital subscriber line technology, in those areas where competition is most fierce. The vectoring approach provides a dramatic boost in speeds. 

Some would argue that Deutsche Telekom should simply rebuild its network using fiber to the home, essentially creating a "future proof" network. 

The problem, some would say, is that the financial return from doing so is questionable, at some level. Mobile substitution is one issue. The bigger problem is that the basic business case, overall, is much tougher. 

A shift of end user spending to mobile services means less potential revenue from a mix of services, ranging from voice to high speed access to video. Also, incumbent market share is far lower than it once was. In many cases, established operators have 30 percent to 40 percent market share, where they once had virtually 100-percent share. 

That means a complete upgrade is bound to "strand" a significant portion of those assets, which will not have revenue attached to the lines.