4G Upgrade Costly for Carriers & Equipment Makers

That 4G smartphone in many a pocket, with its super-fast data connection, is a dream come true for most cellular customers. Webpages load faster, pictures upload almost instantaneously, and social networks update in real time. The days of waiting for those last few kilobytes to push through are largely in the past, at least if you’re in a major metropolitan area.

But the upgrade to 4G has been a strain on mobile carriers and the companies from which they buy equipment. As customers use more data, telecom operators have to shift some of their spending from maintaining older 2G and 3G hardware to purchasing and installing newer, faster 4G hardware.4G Upgrade Costly for Carriers

An analysis from Reuters says that there could be a wave of consolidation that reduces the number of telecom equipment manufacturers. Currently, five main competitors dominate the market:

  • Alcatel-Lucent
  • Ericsson
  • Huawei
  • Nokia Siemens Networks
  • ZTE

Those companies could begin gobbling up smaller suppliers soon, and might even start combining themselves. Alcatel and Lucent joined in 2006, and Nokia and Siemens combined in 2007, when the 3G transition was still in progress. ZTE and Huawei have been competing on price, forcing the other companies to accept lower profit margins.

Not that it’s cheap for consumers either. Investopedia recently calculated the total cost of smartphone ownership - including data, text, and voice fees as well as taxes and overage charges – at $3,400 over a two-year contract period. Still, consumers are getting faster service for, generally, a little less money than before. A similar calculation by PC World in 2009 estimated the two-year cost at $3,800, without even including taxes.

That’s part of why Verizon Wireless is altering its pricing structure: to make sure customers using the most data are paying for it. Unlimited plans are being phased out in favor of shared data family plans, in which a data allowance is shared among multiple family members. Moving away from unlimited plans also allows the carrier to more accurately predict how much data transfer capability it will need. Other carriers such as AT&T are already following suit.

So is anyone making money in the mobile industry? Sure. Just not as much as you might think when you look at your monthly bill.


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