US : Mobile network operators are finally shifting their infrastructure capital spending away from GSM/EDGE technologies and toward 3G Wideband CDMA (W-CDMA) and High Speed Packet Access (HSPA), with carriers in Western Europe leading the 3G charge, according to a major new report from Heavy Reading.

3G Squeeze: GSM, LTE & the Future of Wideband CDMA delivers a complete analysis of the technology shifts now underway in mobile networks worldwide. Drawing on inputs from major GSM and W-CDMA/HSPA operators as well as interviews with major vendors, the report weighs the underlying technology, business, consumer, and regulatory dynamics that are shaping infrastructure decisions by mobile network operators around the world. The report includes a detailed forecast of mobile operator capex on GSM/EDGE, W-CDMA/HSPA, and emerging LTE technologies through 2012.

The 53-page report assesses the positioning of mobile infrastructure vendors in each of the major technologies and across the 3rd Generation Partnership Program (3GPP) family as a whole. It examines the positioning of relatively new entrants such as ZTE, along with incumbent vendors in a market sector that is becoming more dynamic despite consolidation. The report analyzes suppliers' market positions and strategies for success in this newly volatile environment.

"Over the last 18 months, HSPA has finally started to deliver on the mobile broadband performance promise of 3G," says Patrick Donegan, Senior Analyst with Heavy Reading and author of 3G Squeeze: GSM, LTE & the Future of Wideband CDMA. "There is genuine excitement on the part of users at being able to get out their laptops across extensive urban and suburban areas and consistently get at least 1 Mbit/s throughput over the air."

However, the slower-than-expected adoption of 3G by network operators could result in a squeeze on the technology's lifespan if so-called 4G technologies are developed and rolled out as currently planned, Donegan adds. "Just as W-CDMA is finally starting to establish itself as the preferred global platform for mobile broadband services, it faces the prospect of being made redundant by an acceleration in the time to market of the 4G mobile WiMax and LTE standards," he says. "These technologies are designed to be deployed in much larger spectrum channel widths and offer better spectral efficiency, higher throughput, and lower latency than anything W-CDMA/HSPA can support."

Still, Donegan predicts that capital spending on 3G infrastructure products will continue to grow through 2011, while capex on GSM/EDGE gear will begin to decline this year, after remaining stagnant since 2005.

Key findings of 3G Squeeze: GSM, LTE & the Future of Wideband CDMA include the following:

Global annual capex on W-CDMA/HSPA infrastructure will peak at about $19 billion in the 2010-2012 timeframe. For most GSM/EDGE or W-CDMA/HSPA operators, HSPA will be their primary, if not exclusive, platform for delivering mobile broadband services over the next three years.

The era of GSM/EDGE dominance is coming to a close, and the first shutdowns of GSM networks are likely to occur as early as 2012. The main indicator for this decline is that growth in emerging markets is starting to flatten out. While strong-growth markets such as India may well see higher GSM/EDGE capex in 2008 than in 2007, other operators in emerging markets are starting to either reduce total capex or shift capex into W-CDMA/HSPA.

The total 3GPP infrastructure market will decline slightly over the next five years, from $42.5 billion in 2008 to $38.5 billion in 2012. Increases in capex on W-CDMA/HSPA infrastructure will come at the expense of GSM/EDGE spending. Price cuts also will contribute to the revenue decline, as operators move to exploit opportunities to leverage still-greater economies of scale in their procurement, and as suppliers from China pursue aggressive pricing strategies to gain market share.

Ericsson and Huawei appear to be in the best position to capitalize on changes in the 3GPP infrastructure market. Huawei is clearly the vendor with the most market-share momentum in GSM and W-CDMA, and is likely to breach the 15 percent global share barrier in 2009. Ericsson has held its market share, and may even have gained. Motorola and Nortel are losing the most ground in the 3GPP infrastructure sector, but both have ambitions to regain their position with LTE.