InterDigital Inc (IDCC)

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REPORT: Wireless Infrastructure Spending Surge Ahead


Jan 23, 2003 (NewsFactor.com via COMTEX) -- Spending on wireless and mobile
network infrastructure is heading for a rebound, despite expectations for
continued sluggishness overall in the global economy and the tech sector in
particular, according to a report from IDC .

Citing a 22 percent decline in such equipment investments in 2002 and
anticipating an additional 6 to 7 percent drop this year, IDC nonetheless
projects that a strong desire for mobile access to voice and data services among
both corporate and consumer users soon will cause spending to soar.

Fighting Over a Shrinking Market

Annual spending on wireless and mobile network infrastructure will grow to some
US$49 billion in 2007 from $38.3 billion in 2002, IDC reports, boosted largely
by the much-hyped, yet often criticized, third-generation (3G) networks.

Increased competition in a shrinking market has been the key factor affecting
reduced spending in wireless infrastructure in recent years, report author Shiv
Bakhshi told NewsFactor. "The price of products has eroded over time as
companies such as Nokia (NYSE: NOK) , Lucent (NYSE: LU) and Intel (Nasdaq: INTC)
all try to gain a foothold in as many markets as possible," he said.

After 2003, those prices will start to rise -- along with the rollout of 3G
networks -- but not as dramatically as they did during the heyday of the 1990s,
said Bakhshi, noting that the wireless markets in Europe and the United States
are approaching the saturation point.

Voice Still Rules

"Revenue for operators will come from more network usage by individual customers
rather than from adding new subscribers," Bakhshi said, "which in turn will
drive demand for more network capacity."

The rationale behind 3G networks is to gain spectrum efficiency, ease capacity
constraints and expand revenue through data services, and that remains intact,
Bakhshi said. At the same time, voice remains the killer app, especially in
developing countries, such as India and China, with demand for second-generation
services expected to explode in the next four or five years among huge
populations that are currently underserved.

The so-called 2.5G mobile networks will enjoy a longer shelf life than
originally argued by infrastructure suppliesuppliers, IDC also reports.

"The shift from voice to data in the developed markets takes time, because you
are developing a new type of consumption," Bakhshi said. Making that transition
requires billing engines, authentication, advanced handsets and pricing models
that are affordable and understandable.

Culture of Data Consumption

Carriers are beginning to address these concerns, and they will take an even
greater interest as all the pieces of the 3G puzzle come together. "Operators
realize their bread and butter is still voice, but they have to look at the long
term and invest in data," said Bahkshi.

Factors that will boost infrastructure investment in the future are the growing
popularity of multimedia messaging and picture messaging, as well as rapid
growth of public wireless local area networks (WLANs). "These legitimize the
culture of wireless data consumption in a mobile environment," Bakhshi
commented. "The more they are available, the more people will get used to using
them."

WCDMA Drives Spending

Concerning competing 3G technologies, Bahkshi said WCDMA (wideband code division
multiple access), which is an evolution of GSM (global system for mobile
communication), will invite more spending than CDMA. "GSM is more widely
deployed throughout the world, and the costs of upgrading and deploying WCDMA
are higher than they are for CDMA 2000," he said.

Because both are based on code division technologies, Bahkshi projected a
significant shift in spending from time-related technologies (TDMA, or time
division multiple access, for example) to code-division infrastructure.
Consequently, North American companies -- such as Lucent and Motorola (NYSE:
MOT) -- that focus on code division will have an advantage, he added.



By Jay Wrolstad
URL: http://www.idc.com
http://www.nokia.com
http://www.lucent.com
http://www.intel.com
http://www.motorola.com

Copyright (C) 2003, NewsFactor Network. All rights reserved

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