The (Updated) Perfect Storm for Wireless Operators
In October of 2009, I forecasted on a now-defunct blog that our industry was approaching “The Perfect Storm for Wireless Operators.” I now offer an updated blog based on hindsight and the current state of the wireless industry.
In 2009 I wrote:
Today in both Europe and North America, the wireless industry shows its own combination of circumstances which could create a future perfect storm:
- Market saturation – it is estimated that 85-90% of Americans own a cell phone and the number in many European countries are estimated to be at or over 100%,
- Cheaper “all-you-can-eat” rate plans – in the USA, all of the four major carriers offer voice/data plans for $99/month and Metro PCS offers voice plans for as low as $50/month, and
- Increasing OPEX – the two largest expenses for wireless carriers are payroll and rent roll and both are inflating.
It doesn’t take a meteorologist to forecast enormous pressure on cellular operating margins.
That prediction was based on fundamental economics. As an industry approaches market saturation competition increases, prices begin to fall, and companies start to focus on operating expenses to protect their margins.
When I gazed into my crystal ball in 2009, I failed to scry the fourth, and the arguably most severe storm that impacts our industry today – the insatiable demand for wireless data. At that time the iPhone was only two years old, and as a loyal Blackberry user, I just failed to foresee the explosive growth in OTT and other high-bandwidth apps.
With the benefit of hindsight and current market trends, the following is an updated assessment of what I call “the Perfect Storm for Wireless Operators.”
- Market Saturation (aka – wireless penetration rates) – Estimates vary widely, but Wikipedia has concisely compiled info confirming that both the USA and almost all of Europe have far exceeded 100% penetration.
- Increased Price Competition – This is obvious. You see many deals advertised on TV, and everywhere you go. Operators are now trying to prop up their price plans with content – See AT&T/Time Warner merger.
- Increasing Opex – Payroll and rent roll for cell sites remain two of the top Opex line items on operators’ profit and loss statements. I now add a third line item, backhaul. The cost of fiber in a 4G, soon to be 5G world will be a critical line item to watch.
- Demand for data is driving CapEx – Operators have significantly increased their Capex budgets to upgrade and modify their existing cell sites more frequently and rapidly than ever before. They are also now underlaying their existing networks with small cells. Millions of new microsites are needed. These are becoming very common throughout Asian and the USA and are now beginning to develop in Europe as well.
As often occurs when an industry matures, competition due to market saturation creates downward price pressure and increased focus on operating margins. This is typical. However, in the wireless industry, this pressure is compounded by the increased need to deploy capital to meet the demand for bandwidth. Over the next few years, the wireless infrastructure industry needs disruptive innovation.
At Md7, we welcome the challenge.
Why Small Cells Matter
In an era where roughly 77% of adults in the United States now own a smartphone, to say that network capacity is critical is something of an understatement. This is before you begin to think about the Internet of Things and the impending data explosion that it’s about to bring with it – there will be 30.7 billion devices connected to the IoT by as soon as 2020 alone.
Because of this concepts like expanding capacity, improving coverage and bringing service closer to the consumers who need it the most are of paramount importance – which is precisely why small cell sites are so critical to our future.
At Md7, we have years of experience working on thousands of unique small cell deployments in nearly every environment you can think of – from dense urban areas to suburban neighborhoods to beach and resort communities and everything in between. With projects having been successfully deployed in both the United States and in Europe, we are truly the partner in your wireless future that you (and your customers) need when you need it the most.
Md7 is proud to offer a wide range of different services, all of which can be fully customized to meet your needs. These include but are not limited to things like:
- Siting and Candidate Identification. In addition to identifying geo/polygon and targeted node locations, we will work directly with municipalities, utility companies, pole authorities and more to help get your solution up and running.
- Zoning & Permitting. We have experience in challenging areas such as dense urban, beach communities, and environmentally sensitive areas.
- Solution Engineering and Design, which can include site surveys, A&E services, utilities coordination and more.
- Deployment/Construction Management
The need for small cell towers and related services is only going to increase – and become more urgent – over the next few years. If you’d like to find out more information about why small cells are such an important factor in both the current and future success of your business, or if you’d just like to discuss your needs with someone in a little more detail, contact Md7 and let us show you how we can help you Get On-Air Faster.