Mobile data traffic volumes continue their seemingly inexorable rise, but 3Q’16 spending on mobile infrastructure dropped 11 percent from its 3Q’15 level and 2016 is just about set to be the first year macrocell spending will decline, according to the latest market research from IHS Markit.
Global macrocell mobile infrastructure revenue dropped to $10 billion in 3Q, confirmation that the market has entered a post-peak LTE phase. Besides dropping 11 percent YoY, revenue declined sequentially, down 4 percent from 2Q’16, Stéphane Téral, senior research director, Mobile Infrastructure and Carrier Economics, highlights in a research note to IHS Markit’s 4Q 2016 Mobile Infrastructure Market Tracker.
Spending on LTE dropped less YoY than that for 2G and 3G infrastructure – 3 percent YoY as compared to 20 percent for 2G and 3G. Sequentially from 2Q’16, LTE spending rose 1 percent, driven by an uptick in Evolved Universal Terrestrial Radio Access Network (E-UTRAN) activity. Spending for 2G/3G dropped 11 percent, with spending on wideband code division multiple access (W-CDMA) in Japan keeping it alive, according to IHS Markit’s latest report.
Alternatives to Macrocell Spending
It’s not that wireless/mobile carriers are shying away from investing more in infrastructure, researchers note. Rather, they’re shifting resources away from hardware and ramping up software-centric network devices and equipment that employ software-defined networking (SDN) and network functions virtualization (NFV) in a bid to better cope and expand along with customer demand.
Spending on 2G/3G and 4G LTE network software continues to be a comparative bright spot, Téral points out. Globally software revenue rose 17 percent YoY in 2015 to exceed $15.2 billion, driven in the main by LTE-A upgrades, which account for most of the fast-growing market segment. IHS Markit expects mobile macrocell software market revenues to increase at a 9 percent CAGR from 2015-2020 to exceed $23 billion.
¨The transition to software is happening, and software will sustain the entire mobile equipment market until 5G kicks in, creating an inflection point and bringing some much-needed growth—though moderate at best,¨ Téral writes.