LTE Infrastructure Spending to Hit $28B by 2014

Mass deployment of long term evolution (LTE) wireless infrastructure is beginning in 2011 as many carriers in the United States and Europe seek to migrate their networks to 4G over the next three years. During this time, spending on LTE infrastructure gear will expand to $27.9 billion globally, up from just $1.5 billion in 2010, according to a new IHS iSuppli research.

Initially, LTE infrastructure spending will occur in North America, which accounted for $90 million out of $97 million in global LTE spending in 2009 and nearly half of worldwide spending in 2010. This year, North America will also make up $1.7 billion of the projected $3.8 billion spent globally on LTE infrastructure. However, after 2011, spending will ramp up considerably in other regions, and North America’s influence will dwindle to less than 20 percent of overall global spending.

Overall, growth of LTE infrastructure spending will reach $27.9 billion by 2014, managing a compound annual growth rate (CAGR) of a 107.5 percent from $1.5 billion in 2010—a spectacular eighteenfold expansion.

“While this spending represents tremendous growth in next-generation wireless technology, carriers still will be required to support multiple air interface technologies simultaneously, as the migration to 4G and LTE will not happen overnight,” noted Jagdish Rebello, senior director and principal analyst for communications and consumer electronics at IHS. “In most cases, carriers will need to offer 2.5G, 3.5G and 4G technologies in order to support all customers and roaming customers. As a result, semiconductor suppliers must focus on developing effective infrastructure solutions that not only meet the current needs of carriers but also achieve alignment with the 3G/3.5G technology migration paths of the carriers to 4G.”

Some original equipment manufacturers (OEM) already are starting to promote solutions that

support migration from any previous generation to 4G, Rebello added. However, in the long run, these solutions will need to be flexible enough to accommodate the changing needs of the operators.

New business models—new architectures
As data traffic on the networks of mobile operators continually grow at exponential rates, driven primarily by rising consumer adoption of video streaming services, mobile operators are carefully looking at their business models and network deployment plans, Rebello said. Around the world, mobile network operators (MNOs) are trying to create plans that allow them to deploy 3.75G and 4G networks while also profitably monetizing data traffic.

For operators, this means moving increasingly to tiered pricing plans based on the amount of bandwidth consumed. IHS believes that such a move constitutes the first step in operators’ attempts to transition their networks from ‘dumb pipes’ to ‘metered dumb pipes’, and then eventually to ‘smart pipes.’

Furthermore, to successfully monetize data traffic, operators will have to migrate their networks to smarter networks that can provide dynamic quality-of-service guarantees, prioritize traffic, and offer certain services that can be exempt from data traffic ceilings.

Differentiated pricing plans also could be presented that allow consumers to choose options tailored to their needs. This way, consumers could choose to pay price premiums for the option to access video streaming applications, or choose plans that only offer data services and web access.

To do all this, Rebello said, operators will need to evolve their networking architecture into a heterogeneous architecture involving a combination of macro cells, micro cells and small cells, co-existing with femto cells and WLAN (wireless local area network) mesh networks. Such heterogeneous architectures will have to be optimized with end-to-end solutions, which will allow operators to implement service-level policies on data packets through their networks.

Big future for small architectures
A critical part of this future network architecture, IHS believes, will be the implementation of small architectures. Small cells—also referred to as pico cells and metro area cells—will allow operators to deploy 3G/4G network coverage in dense urban areas possessing a high concentration of mobile data users. If properly implemented, small cells can be tuned so that the network capacity is aligned with periods of high use. For example, small cells in urban downtown areas can be turned off at night when data consumption by enterprise users in these areas declines, Rebello noted.

If operators are able to successfully monetize data and manage the bandwidth crunch, it is clear that networks will have to evolve from the current homogenous architecture into intelligent, managed heterogeneous architectures, Rebello observed further.

“This means tremendous opportunities will be available for infrastructure OEMs, silicon suppliers and software providers to offer differentiated end-to-end solutions, and for operators to take advantage of the explosive growth in data,” he added.

IHS iSuppli