With the Verizons and AT&Ts of the world racing to roll out 4G Long-Term Evolution networks, the technology is expected to become the industry's primary area of infrastructure spending.
Analysts with IHS iSuppli, in a Jan. 31 report, said they now expect global capital spending on LTE technology to reach $24.3 billion in 2013, nearly tripling the $8.7 billion expected to be spent in 2012. In 2015, LTE spending is expected to reach $36.1 billion, compared with $9 billion on 3.5G technologies, ending the latter's five-year run. Revenue from 3.5G technology, the research firm added, is likely to reach $19.8 billion in 2013.
The move from 3.5G to LTE has been "gaining momentum" since the second half of 2009, according to IHS Principal Analyst Jagdish Rebello.
"The number of mobile network operators that are trialing, deploying or commercially operating 4G LTE networks now has grown to about 200 worldwide, up from 160 in 2010," Rebello said in a statement. "And such widespread support will drive carrier spending on LTE to surpass 3.5G by next year."
Carriers like AT&T, Sprint and Verizon are aggressively expanding their 4G networks, and other companies are joining the race. Officials with U.S. Cellular said Feb. 1 that the company would begin its LTE rollout in March.
The Dell'Oro Group is similarly forecasting strong LTE equipment spending. In a Feb. 1 report, the group said it expects the LTE infrastructure equipment market to grow by 45 percent over the next five years, prompted by consumer demand.
"The availability of affordable smartphones, creative pricing models, and the continued innovation in the device ecosystem and app community will open up new markets in both the developed and developing economies," Stefan Pongratz, senior analyst at Dell'Oro Group, said in a statement.
"Changing user behavior and network expectations, coupled with spectrum constraints, will continue to drive operators to invest in the most spectrally efficient technologies per unit area, which will in turn drive the need for operators to not only deploy 4G technologies, but also to complement the macro network with co-channel pico nodes and WiFi," added Pongratz.
IHS likewise expects 4G networks to evolve with the help of metro cells, or "small cells," to augment coverage in high-traffic areas and to be used alongside WiFi hotspots.
For the time being, adds IHS, semiconductor suppliers are addressing the challenge of metro cells with solutions germane to the heritages. Texas Instruments and Freescale Semiconductor, for example, are targeting the market with digital signal processing solutions, while PicoChip and Broadcom are using "scaled-up versions of their system-on-chip solutions for femto base stations.
However, continued IHS, "such solutions will require tremendous flexibility in networking equipment, and the solutions likely will have to be tailored to the needs of the individual operators. And even for a given operator, such needs will vary by location."
The U.S. Cellular LTE rollout in March will initially go into a "handful of markets," which makes up 25 percent of its service footprint. Those markets include three areas each in Wisconsin and Iowa, two in Maine, and Greenville, N.C. The company says its LTE speed will be 10 times faster than 3G. To complement the network, said to feature speeds 10 times faster than 3G, it also introduced its first two LTE devices, the Samsung Galaxy S Aviator and the Samsung Galaxy Tab 10.1.
AT&T on Jan. 31 shared that from 2009 through 2011 it spent $3.5 billion improving networks in Illinois alone. It deployed faster fiber-optic connections to nearly 625 cell sites, which in combination with Evolved High-Speed Packet Access (HSPA+) technology, enables 4G speeds, and launched LTE in Chicago.