The enormous success of the smartphone market has put a rocket booster under Apple Inc.’s stock price. But it’s also stressing the nation’s cellular communications networks.
A torrent of smartphone sales has generated a flood of wireless data traffic that cellular giants, including AT&T Inc. and Verizon Communications, are struggling to keep up with.
Their challenges mean sales opportunities for technology providers — among them Austin’s Freescale Semiconductor — that are putting together the building blocks for future networks that will handle more data more easily.
But industry experts say the data traffic overload may show up in degraded service to American cellular customers by the end of this year.
Analyst Jeff Kagan of Atlanta says he expects to see service slowdowns and outages affect U.S. cellular networks late this year or early next.
“This is an urgent and serious problem, and nobody has the answer yet,” Kagan said.
But Freescale is working on it.
The company’s Wireless Access Division is designing complex new network processor chips for the communications gear that will drive a new, more efficient type of network that they expect will be installed in dense urban areas where cellular traffic is the heaviest.
While Freescale and its competitors look for technology solutions, cellular companies and many analysts say they need something basic from the federal government — more wireless spectrum, which are bands of radio frequencies that are dedicated to cellular traffic.
The Federal Communications Commission, which regulates the cellular industry, says it is in the process of making more spectrum available, but analysts like Kagan say the agency isn’t moving nearly fast enough.
“Washington works at a snail’s pace,” Kagan said. “We are going to start to run out of spectrum in some parts of the country by the end of this year.”
What that will look like, he said, is poorer service, more dropped calls and slower data transmission speeds. The problem will probably hit first in congested urban areas.
“When customers start to scream, people may start to listen,” Kagan said. “Maybe things will happen then. Maybe the government will move quicker. There has to be more pressure than is happening now.”
Both Verizon and AT&T are taking steps to acquire spectrum owned from other companies. The U.S. Justice Department on Friday approved an antitrust settlement involving Verizon and four large cable companies. Included in the deal is a $3.9 billion payment from Verizon to the cable companies for wireless spectrum. AT&T announced a much smaller spectrum purchase, acquiring Next Wave Wireless in early August for $600 million, that included assumption of
Today’s problem began with the sudden popularity of Apple’s iPhone, which was introduced just five years ago.
The iPhone gave users access to the Internet wherever they were. Customers would pull down Facebook pages in seconds and download music, photos and video content on the fly. Some users began watching television programs that would stream into their smartphones or the first cellular-enabled media tablets, which Apple popularized in 2010.
AT&T, which operates the second-largest U.S. cellular network, said its data traffic has expanded by 200 times since the iPhone was introduced.
Early smartphones didn’t start out to be data-intensive products, Kagan said, but the iPhone changed the game.
“Five years ago we had only a few hundred (wireless) apps, and they were not widely used,” Kagan wrote recently. “Then the Apple iPhone was born and the entire industry shifted. Now wireless data usage through hundreds of thousands of apps is squeezing the networks dry.”
Not only are more smartphones being sold, but new generations of smartphones seem to be driving more data traffic. And there is no sign of a letup.
Ericsson, one of the world’s largest mobile equipment makers, expects the number of smartphones, tablets and personal computers with mobile Internet connections will expand to nearly 7 billion in 2017, up from 1.5 billion in 2011. That will generate a 15-fold increase in data traffic, which the company expects primarily will be driven by more mobile video content.
While cellular operators are pressing the government to make more spectrum available, Freescale and other companies are building the components they expect will revamp wireless networks.
They are designing the building blocks for advanced wireless networks that will offer better coverage while delivering more data to more users.
Today’s wireless networks are based on high-power “macrocells” that are made up of large antennas and controlling electronics that govern the wireless traffic over an area of up to several square miles.
The new networks will be more complex, but also more flexible so they can adjust quickly to traffic surges.
For Freescale, that means new generations of processors and new layers of software to control them.
Austin is one of the main engineering centers for the company’s wireless access business, working in collaboration with engineering centers in Israel and India.
Freescale’s network processing business generated $1.6 billion in company revenue last year, and analysts say that could expand as cellular companies invest in new networks.
“Small cell base stations can play a significant role in helping wireless carriers tackle challenges associated with broadband capacity and coverage,” said Scott Aylor, Austin-based general manager for Freescale’s wireless access division.
“Wireless infrastructure is a big piece of business for Freescale,” said Stephen Turnbull, who is marketing director for Aylor’s division. “The opportunity for small cell technology out there in the market is huge, and we have the right technology.”
Freescale’s customers ultimately will decide how they deploy the new technology in networks. But Turnbull guesses that a network with many small cells could easily deliver twice as much data with improved service and reliability as a more conventional “large cell” network.
The chip-maker is betting that, over the long-term, plenty of companies in the cellular industry will come around to its way of thinking about the future. It is one of several wireless technology players working on the building blocks for small cells.
Sales of small cell technology to big cellular operations have been slow so far, said analyst Will Strauss with Forward Concepts, but he expects that will change over the next several years.
“That part of the equipment market hasn’t taken off yet,” Strauss said. “But it will.”
Source: MCT Information Services