For investors, the upgrade reeks of another Internet gold rush: 4G promises to take smartphones to desktop speeds, unleash a whole new crop of wireless devices and finally deliver the full potential of the mobile Internet.
|Ericsson CFO Jan Frykhammar.|
The Boom at HandThe foreseeable future lies in the switch from 2G to 3G. "We are involved with a big shift from voice networks to mobile broadband," says Frykhammar. In short, 2G to 3G is a move from slow to faster data connection speeds. In tech terms, the upgrade to 3G means networks are switching standards (moving from EDGE to UMT and HSDPA, or high speed downlink packet access). And Verizon, which runs its network on a different standard, is switching from CDMA 1x to EV-DO (see "Decoding Wireless" for terminology).
Surprisingly, although 3G has been available commercially for 10 years, its implementation is far from complete and users have only recently started to convert. In a recent report from Morgan Stanley, analysts estimate there were about 500 million 3G users worldwide by the middle of last year. That represents a penetration rate of 11% of the total market. Looking ahead to 2013, 3G penetration will hit close to 44%, according to Morgan Stanley. In the U.S., about 37% of mobile users are on 3G. With nearly two thirds of the market yet to convert to 3G, Morgan Stanley analyst Ehud Gelblum sees plenty of upside for smartphone shops like BlackBerry maker Research In Motion ( RIMM), and wireless chip maker Qualcomm ( QCOM).
Catching a BreatherBut 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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