(Accedian Networks') EtherNEWS Blog

As you might expect, global telecommunications industry spending on infrastructure will be driven largely by launches of Long Term Evolution (LTE) wireless networks in many countries in 2012 and for the next several years.

According to the Telecommunications Industry Association, infrastructure spending in the United States, for example, will continue to grow at double-digit rates through 2014.

Overall growth will moderate somewhat from the 2011 gain, but TIA still expects increases of more than five percent annually during the next three years.

The U.S. market will continue to grow at slower rates than international markets, but the gap will narrow. Between 2005 and 2011, growth in international markets averaged 7.6 percent compounded annually, 4.1 percentage points faster than the 3.5 percent compound annual increase in the United States.

During the next four years, the difference will be only two percentage points, with international spending increasing at a 7.3 percent compound annual rate compared to the U.S. compound annual growth rate of 5.3 percent.

Global telecommunications industry spending rose 6.3 percent in 2011, comparable to six percent in 2010, according to the Telecommunications Industry Association.

More moderate growth in international regions in 2011 offset an improvement in the U.S. market. International spending rose 6.5 percent in 2011, down from the 7.6 percent increase in
2010, while growth in the United States accelerated from one percent in 2010 to 5.9 percent in 2011.

The slowdown in international regions principally reflected a decrease in spending on wireless devices following the surge in 2010. Excluding wireless devices, spending in international
regions rose 7.2 percent in 2011.

In the United States, growth was fueled primarily by a 24 percent jump in landline and wireless infrastructure spending, an increase in spending on wireless devices stemming from
the growing popularity of smartphones, and growth in cloud computing, data center construction, internetworking equipment and videoconferencing equipment. Underlying these gains was the jump in data traffic, which either caused or was the result of growth in each category except videoconferencing, TIA reports.

The U.S. Federal Communications Commission now is undertaking reviews of at least three key sets of regulations that have a direct impact on service provider business models and profit margins, as well as directly affecting whether at least one new nationwide Long Term Evolution network can be built, with obvious and direct implications for mobile backhaul facilities.

The FCC is developing new regulations that might obviate the need to make “one-off” rules about using satellite airwaves for terrestrial wireless networks, something it now has had to do with LightSquared and with Dish Network so far. Such new rules would lower the cost for any future suppliers to enter those markets. That would, in principle, provide direct cost incentives for new competitors to consider entering the mobile business, as the cost of regulatory compliance would drop.

The new rules also would govern the FCC ruling on whether Dish Network will be allowed to use its satellite spectrum to build a terrestrial Long Term Evolution network. Dish is waiting for permission to do so, but will not be able to take additional steps until it gets permission to “re-purpose” its satellite frequencies.

The Commission also will be considering interoperability rules for some portions of the 700-MHz spectrum also used by mobile service providers to offer Long Term Evolution fourth generation network services.

Thos “technical rules” will have business repercussions, however. Any rules that allow any single device to work across all of the 700-MHz band will make easier the task of designing devices that can be sold to all service providers, instead of just AT&T or Verizon Wireless, for example.

In the past, the cost of designing different models using different air interfaces and frequencies has limited device availability for smaller service providers. Since the mobile business now is a device-driven business, that has clear competitive implications.

Essentially, manufacturers would be able to build handsets in a single version that could be sold to any LTE service providers using 700-MHz frequencies, rather than having to build distinct models for each network. Some networks will use other frequencies as well, so manufacturers will have to build multi-band models in some cases.

The FCC also will be considering rules that require cable operators to offer their affiliated channels to competitors. Such rules have in the past been considered important pro-competitive measures, as owners might have refused to license popular channels to competitors.

Cable companies that own programming networks argue the requirement is no long necessary. Not everyone will agree.

All three of those discussions illustrate the ways key regulatory bodies directly shape both the ability of a firm to be in a business, but also create the right to be in a business, how businesses must operate, and in many cases how products can be packaged or priced.