Why Infrastructure Still Matters

One of the hottest trends in the mobile network infrastructure market doesn't have anything to do with expanding networks with new equipment or improving the capabilities of existing gear through innovation. It's not about products at all — it's about services. This includes the professional services that vendors provide to help carriers get the most out of their networks, as well as the managed network and hosted application services they increasingly are providing to carriers wanting to outsource the dirty details of network management to focus more on their customer relationships.

The major infrastructure vendors pushed into services as a way of building closer, longer-term relationships with their carrier customers, but the over-riding reason for pursuing them was that the infrastructure market began to decline a few years ago, what some people referred to as a pre-3G slump — many carriers had expanded their networks to full market coverage, and the transition to 3G was taking longer than had been expected.

More recently, however, there has been at least a modest spike upward in the mobile infrastructure market, at least in some regions of the world. The Dell'Oro Group reported last month that the total worldwide mobility infrastructure equipment market grew 7% during 2005, reaching $40.1 billion, the highest level it has ever attained during a calendar year. The number is all the more impressive when you consider how many traditional equipment vendors spent the last year or so managing the threat of increasing competition that was coming from gear manufacturers in Asia that were offering carriers sharply discounted pricing.

Dell'Oro stated that the market was particularly strong in the fourth quarter, posting an 8% sequential gain on strong sales of wideband-CDMA- (W-CDMA) and GSM-based equipment. “The strength in the fourth quarter was due in part to robust sales of W-CDMA infrastructure, which increased by 30% over the third quarter, and now comprises 17% of the total mobility infrastructure market,” said Greg Collins, senior director of mobility infrastructure research for Dell'Oro, in his report.

Collins said that W-CDMA market value grew in every region of the world, including North America, during that quarter as operators improved coverage. North America accounted for 7% of W-CDMA sales during the quarter. The GSM-based infrastructure market in North America grew by 9% sequentially to reach $6.7 billion in the fourth quarter.

Still, there were also market dips for some types of mobile infrastructure, with generational deployment cycles again to blame. Dell'Oro said market for CDMA-based infrastructure declined by 10% during the fourth quarter of 2005, partly because of slow sales in North America as the coverage phase of the EV-DO upgrade cycle neared its end.

But the modest growth in some areas gave the major infrastructure vendors cause to be optimistic, and for many, it provided more confidence for pursuing the innovation that they say never abated during the difficult times of market decline. Ericsson had a particularly tough time dealing with a deflating market during the first half of this decade (Telephony, Feb. 6, page 24), laying off thousands of employees, but the company tried to protect its research and development resources as much as possible, according to Mikael Stromquist, the company's executive vice president of strategy and marketing for North America.

“Our research and development effort is something we kept intact, even during the hard years,” Stromquist said.

Furthermore, despite all the talk of a new services economy between vendors and carriers, the major infrastructure vendors are continuing to innovate in response to real-world operational challenges. Last month's 3GSM World Congress trade show in Barcelona, Spain, had plenty of evidence of that on display. Ericsson announced a dual-access GSM/W-CDMA base station.

“More and more operators would like to reuse existing sites and leverage the technology they already have in place as they upgrade their networks,” Stromquist said. The dual-access base station allows a portion of its capacity to be used for W-CDMA channels, while the rest is used for GSM. Potentially, carriers can even allocate voice traffic to the GSM portion, while keeping data and other advanced traffic on the W-CDMA portion.

“The operators are dealing with the space limitation and the spectrum limitations of many markets,” Stromquist said.

One of the other much-talked-about new products at the show was Lucent Technologies' combined base station/router, a piece of equipment that triggered fresh debate about the “flattening” of the radio access network. “You can't point out one particular event that was the cause for this development, but it came out of a lot of the things that Bell Labs was working on and also the work we were doing about how to introduce VoIP,” said Mike Iandolo, president and general manager of mobility access solutions for Lucent. “We also looked at how to reduce cost in the network by moving intelligence to the edge.”

The migration to wireless voice over IP (VoIP) was one driver from some of that work, but another was the overall increasing complexity of wireless network architectures, with overlay upon overlay being added as carriers upgrade their networks. “We're trying to not make the network more complex than it already is, and a flat IP architecture with a lot of functions collapsed into the base station helps with that,” Iandolo said.

He added that a base station/router could be an important piece of gear for carriers currently trying to sort through components necessary for the migration to an access-agnostic IP multimedia subsystem (IMS) architecture. “You can plug a WiMAX system into the BSR, or a W-CDMA system or another, and it will come out all IP on the other side and manageable the way that IMS intended,” he said.

In the same line of thinking, Iandolo said the base station/router could be used as the centerpiece of a high-speed downlink packet access (HSDPA) upgrade. HSDPA was another hot infrastructure topic at the 3GSM event (see related story on page 9). “I think there was a big thrust at the show on HSDPA performance and getting beyond a lot of the talk of lab speeds for that technology,” said Alan Pritchard, vice president of GSM/UMTS product marketing for Nortel Networks.

At the show, Nortel brought 3.6 Mb/s HSDPA out of the lab and into a live demonstration, showing video on a Category 6 (3.6 Mb/s capable) handset from LG Electronics. The vendor also focused on some of the ripple effects of more HSDPA access and applications like full motion video on the network. Pritchard said the company has a backhaul model showing how the class of service made possible by ATM technology can be used in a 1000-site city network to potentially save a network operator roughly $20 million in backhaul costs.

“Those classes of service can allow you to provision more bandwidth for data services if that's what you're seeing,” Pritchard said. Nortel also discussed options for improving HSDPA coverage in-building and in remote areas.

Technology upgrade cycles being what they are, the mobile infrastructure market may have only a tenuous hold on the current growth trend. It's also worth noting that the growth in managed services is not just a fad and will continue to increase — the evidence of that is no further away than the trend of operator consolidation that is still sweeping through the industry. Carrier consolidation generally means network integration, and although Cingular Wireless doesn't have to worry about that with the pending merger of its biological parents, AT&T and BellSouth, this deal could inspire other mergers that will involve difficult integration projects.

Yet, the major mobile infrastructure vendors are proving that infrastructure innovation won't decline in the shadow of the managed services economy. Lucent's Iandolo said something that was meant to describe Lucent's BSR effort, but easily could be applied marketwide: “This is a clearly a case of us trying to solve a problem with technology, rather than creating a technology and then try to spin it to solve some other kind of problem.”