SAN FRANCISCO -- Mobile networks in North America are filled to 80 per cent of capacity, with 36 per cent of base stations facing capacity constraints, according to a survey by investment bank Credit Suisse.
Networks in other regions also are more than 50 per cent utilized, with the global average at 65 per cent, Credit Suisse said after surveying carriers around the world. That level of use matches the average "threshold" rate that would trigger the service providers to start buying more network equipment, the report said. Looking ahead, on average the carriers expected their utilization rate to grow to 70 per cent within 12 months.
Credit Suisse used the results to predict new sales by makers of cellular equipment, such as Ericsson [Nasdaq: ERIC], Alcatel-Lucent
[NYSE: ALU], Nokia Siemens Networks (NSN) and Huawei Technologies Co. But at a certain level, heavy use of a base station can also affect the mobile experience of individual subscribers. The survey found that 23 per cent of base stations worldwide had capacity constraints (defined as a utilization rate over 80 per cent during busy hours), while 36 percent in North America were under that kind of pressure.
The North American networks were 72 per cent utilized two years ago. The region's carriers expect the rate to ease back down to that point within two years. North American service providers are likely to buy more equipment soon, because having their networks 74 per cent filled is the threshold rate in that region, the survey said.
However, a Canadian telecommunications consultant and an industry analyst doubt the results apply in Canada. “In the past eighteen months we have had new network builds by Videotron, Mobilicity, Wind, Public Mobile, and a new HSPA national network joint-build by (BCE Inc.’s) Bell and Telus (Communications Corp.),” said Iain Grant, managing director of the Montreal-based SeaBoard Group. “If there was a capacity constraint, as the report suggests with 72 per cent utilization two years ago, I suspect that with five new networks in the most populous areas that began life with zero per cent capacity, that we aren't at 80 per cent now. That said, there may be some nodes that are saturated at certain times of day -- but that is the usual task for capacity engineering.
“Credit Suisse is making a general statement that may well be true south of the border, but 'averages' don't actually mean much when prognosticating across very different marketplaces.
Ron Gruia, a Toronto-based telecommunications analyst at Frost & Sullivan agrees to some degree. The real bottlenecks are in backhaul and the network core, not base stations, he said in an interview. However, he said there is no doubt there is an “insatiable appetite” for mobile wireless data among users.
Asia's mobile networks are also getting more filled, the report said, rising from 54 per cent utilization two years ago to 62 per cent in 2011. But Western European networks are getting less constrained, falling from 66 per cent to 56 per cent. Both regions will be well over 60 per cent within two years, however. Latin America's mobile networks will hit 85 per cent average utilization within a year, according to the survey.
Data services are driving the growth in network usage and in turn account for most of the growth in average revenue per user to the carriers. Credit Suisse forecast worldwide data revenue to grow by 11.7 per cent this year while voice revenue falls 4.4 per cent and SMS (Short Message Service) revenue declines 3.3 per cent. Last year, average data revenue per user increased 25.6 per cent.
Mobile operators' capital expenditures are expected to grow 10 per cent this year, despite downward pressure on prices for the pieces of equipment they are buying. Capital spending is likely to increase everywhere but in Western Europe, the survey showed. The largest share of that will be spent on radio-access network equipment, rather than back-end infrastructure.
Chinese vendors, especially Huawei, are likely to keep gaining share over the next few years, according to Credit Suisse. The report forecast Chinese manufacturers growing from 32 per cent of the market now to 42 percent in three years. But deeper success in the U.S. and Western Europe may be hard for those vendors to achieve, the report said. Meanwhile, Ericsson, already the biggest mobile infrastructure leader with 36 per cent of the world market, is likely to grow to 40 per cent in the coming years, Credit Suisse said. This is partly due to the company's early lead in winning LTE (Long-Term Evolution) contracts, the report said.