ACG Research

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Tuesday, November 20, 2012

3G Technology Slowdown Prompts Vendors to Refocus

Diminishing revenues in 3G technology contributed to the Worldwide Mobile IP Infrastructure market decline of 4 percent in Q3 2012. Traditional mobile radio access network (RAN) vendors will see a massive reduction in macrocell CapEx spending by mobile SPs in the next 4–5 years. In 2012, this trend is emerging in the 3G RAN market, and its effects will continue globally in 2013, with some vendors seeing double-digit declines in 3G revenues.

Mobile service providers are struggling to maintain profitability against the data tsunami and network capability (in some cases data growth of 30% monthly), which is forcing these them to rethink CapEx and OpEx models. For mobile SPs faced with tough boardroom decisions, traditional mobile “network economics” and business plans do not work. Network performance, optimization, and small cell-based capacity planning is top of mind for these executives.

All Tier 1 vendors are now refocusing their engineering, marketing, and sales efforts on mobile IP backhaul, LTE, and small cells. Globally, the mobile IP backhaul segment has taken main stage with new product announcements by Alcatel-Lucent, Cisco, and Ericsson. The industry is also seeing strong growth and consolidation in this segment, traditionally represented by specialist vendors. 

Q3 2012 Worldwide  Mobile IP Infrastructure Market Share
Market Share

Evolution of Mobile Industry and New “Network Economics”
ACG estimates small cells will carry 50% of data traffic to SPs’ networks by 2016. The impact of 50% macrocell offload has radical results in today’s $30B+ mobile RAN industry, already seeing downward trends in 3G RAN revenues. Deployment of small cell and its adoption in developed markets will radically shift CapEx spending starting in 2013, and cause tremendous shifts in vendors’ profitability, market shares, and engineering development in the next three years. While this market has been dominated by purpose-built femtocell products from a handful of niche-market vendors, all Tier 1 vendors are aggressively investing heavily.

Q4 2012 will mark significant milestones in small cells industry, with the maturity of next-generation silicon, vendor focus, and capital investment. Small cell represents a massive paradigm shift for the mobile industry; most vendors are offering or have announced next generation platforms ranging from 20mW to 5W licensed radio solutions, designed for indoor/outdoor requirements of mobile SPs. 

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