ruralSmaller carriers are lagging behind Tier 1 carriers in deploying LTE by about two years – but that means the smaller carriers could be increasingly attractive to equipment vendors a few years out, according to iGR Consulting.

Currently Tier 1 carriers’ LTE capex is 14.5 times that of regional and small operators (RSOs), iGR says.  But by 2017 that gap will decrease to a factor of 6. By 2015, Tier 1 carriers will have completed their LTE build-outs and their LTE capex from that point on will be focused on adding capacity to existing networks, explained  iGR President Iain Gillott on a recent webinar about iGR’s regional and small operator research.

As iGR noted in previous research, the regional and smaller wireless market has been shrinking as Tier 1 carriers acquire RSOs. iGR estimates that RSOs had about 22.2 million subscribers, representing about 6.9% of the U.S. total, prior to T-Mobile’s acquisition of MetroPCS. That number will decline to between seven and eight million as a result of that acquisition and assuming AT&T’s plan to acquire Leap Wireless is successful.

But despite the shrinking size of the RSO market, Gillott said, “That’s still millions of smartphones every year.”

One of iGR’s findings was particularly interesting to contrast with Current Analysis research issued this week showing that rural users are very interested in purchasing smartphones. According to iGR’s research, rural users are more likely than urban and suburban residents to have a basic mobile phone and less likely to have a smartphone – perhaps explaining why some people have perceived that rural users are not interested in or cannot afford smartphones.

Like Current Analysis, however, iGR believes rural users’ use of smartphones will increase. “In the next couple of years they will catch up,” said Gillott.

Wireless vendors targeting the RSO market will need to tailor their offerings to meet the needs of rural carriers, Gillott advised. He noted, for example, that while Tier 1 operators will own dedicated evolved packet core (EPC) infrastructure, RSOs will use hosted or shared infrastructure.

“Offering the same solution to RSOs as Tier 1 [operators] is really not valid because of the different scale of operations,” said Gillott.

Because of factors such as these, iGR predicts that by 2015 to 2015, RSOs will spend more in opex than capex when it comes to their LTE network infrastructure.

Other highlights of iGR’s research:

  • Rural users are more likely than urban and suburban users to have wireless devices from LG.
  • Rural users are less likely than urban and suburban users to have Apple devices.
  • Devices owned by rural users are three times more likely to use Android operating systems
  • By 2017, 35% of rural subscribers will be on LTE networks, compared with just below 50% of Tier 1 subscribers.

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