4G Wireless: Years, Miles to Go

The current 3G opportunity: Getting in on the problem-solving spending.

As AT&T has discovered, 3G phone users, particularly the vocal owners of Apple(AAPL) iPhones, have a low tolerance for spotty service. The outcry has caused AT&T to drop some money to make network improvements.

One area were AT&T has been focusing its spending is backhaul. Heavy traffic areas like Manhattan and San Francisco suffer less from network coverage and more from congestion.

Having finally strung together nationwide 3G networks, telcos are switching their spending to help beef up the systems. To open the bottlenecks between the antennas and the core phone network, telcos have been spending on optical backhaul, installing fiber-optic connections to antenna base stations.

"Networks are built for a maximum load and it's easy to reach that load limit in areas like Manhattan," says Telecom Pragmatics analyst Sam Greenholtz.

Some of the big players in optical backhaul that benefit from anti-congestion spending are specialists like Adtran(ADTN), Ciena(CIEN) and China networking giant Huawei.

Catching a Breather

But don't expect big gobs of cash to get thrown around. Outside AT&T's network improvement efforts and Verizon's ongoing plans, big wireless equipment spending may take a bit of a breather.

Comments last week by Vodafone(VOD) executives indicate that networks, on a whole, are running at about one-third capacity during the heaviest traffic periods. If true, that would mean telcos aren't under intense pressure to spend more than their modest budgets allow.

It also means, as you might suspect, that the race to 4G is off to a much slower-than-expected start.

-- Written by Scott Moritz in New York

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