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Increased deployment and aggressive pricing of WiFi capabilities from operators such as SBC, AT&T and MCI, as well as the increased provisioning of free WiFi hotspots will place as much as $12 B of projected profits of US wireless operators at risk, according to new analysis from Strategy Analytics. The key impacts on wireless operators will include a reduction in projected wireless data average revenue per user (ARPU) from $3.40 to $3.20 in 2005, and from $10 projected in 2008 to $7.20; an effective reduction in the average projected cost in the US to transmit one megabyte of data from nearly $12 previously projected for 2005 to about $6, and for 2008, a reduction from about $4 down to $1.50. Wireless data activity and revenues will grow rapidly in the US. The growing availability of lower cost or free WiFi services will definitely cut into the projected revenues and profitability for cellular-based services. “It is not only a question of lower cost alternatives for high speed wireless access, but of more intense price competition for an expanding number of operators,” says Harvey Cohen, president of Strategic Analytics. “Operators, including Verizon, Cingular/AT&T and Sprint/Nextel will make more than $100 B in investments into advanced wireless capabilities over the next four years, but the returns may not be as high as initially expected, due to the growing intensity of competitive forces. This increased competition is good news for wireless data users interested in multimedia applications. Lower effective rates will accelerate total demand, while keeping operators from their financial goals.”
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