Sales of wireless network equipment in the United States grew more than 72 percent in 1995 to $5.44 billion, up from $3.16 billion the previous year, according to a new report from Northern Business Information.
In U.S. Wireless Network Equipment Markets: 1995 Edition, NBI said that cellular equipment accounted for the majority of the market in both years, but that revenues from personal communications services equipment sales will grow to nearly half those of cellular by the end of the decade.
“The high growth experienced in the wireless network equipment market is the direct result of increased spending for cellular network digital conversion, PCS buildout (going from virtually zero in 1994 to $640 million in 1995) and widespread deployment of Cellular Digital Packet Data equipment,” according to NBI Research Manager Bukasa Tshilombo.
Cellular carriers began upgrading their networks to digital technologies in the early 1990s to cope with explosive subscriber growth. That process is accelerating in anticipation of tough competition from the new broadband PCS networks.
“Because PCS operators have the distinct advantage of providing a digital service by definition-with all the perceived implications on quality, capacity, feature offerings-cellular carriers will have to step up their conversion rate to match the claims of PCS operators,” Tshilombo said.
NBI notes that Lucent Technologies Inc.-the former AT&T Network Systems-continues to dominate cellular network equipment sales with a market share of 37 percent. Ericsson Inc. and Motorola Inc. follow with 26 percent and 18 percent shares, respectively.
The company also reports smaller vendors are targeting the new PCS operators to gain a greater share of the network equipment market. These vendors include Northern Telecom Inc., Hughes Network Systems Inc. and Nokia Corp.
This is an exciting time for vendors, but not without risk.
Although it’s not unusual for manufacturers to help finance the buildout of a capital-intensive industry like wireless, Tshilombo said that vendors and other investors are being cautious, and this may lead to less vendor financing being made available, especially for the smaller PCS carriers.
“Competition is expected to be fierce and unforgiving in the months and years to come. Obviously, we do not expect each market to hold eight or more wireless operators*…*some carriers have preexisting strengths that will allow them to beat the competition and possibly force it out of the market,” he said. Perhaps leaving the network equipment vendor holding the bag.
Tshilombo noted that vendors with large technology portfolios like Lucent and Nortel prefer not to get into the “religious” arguments about which digital technology is better because the bottom line is essentially the same for them.
“In the end, it will turn out that subscribers won’t really know or care what underlying technology or spectrum is being used, so long as the basic requirements of quality, coverage, feature offerings and price are met. The same goes for the wireless equipment vendors who benefit from both macrocellular and PCS equipment sales: they won’t really care which equipment is being sold,” he said.
