Electronic Design
Hot Cellular Market Can't Escape Icy Economic Winds

Hot Cellular Market Can't Escape Icy Economic Winds

Newer technologies such as smartphones and e-books will continue to stoke the wireless fires, though.

While nothing seems to be totally immune to the economic downturn, except perhaps government growth, the wireless industry is still performing better than most.

Revenue is down, but the subscriber rate is up. U.S. carriers added 15 million new subscribers in 2008, boosting the total to more than 270 million by the end of the year. Just over 2.2 trillion minutes were used for voice calls alone in 2008. Total cellular revenue topped $148 billion.

Cellular remains strong because the cell phone has become an inherent part of all our lives. It has evolved into a utility that’s as important as water and electricity. So while we cut back in other areas, we still buy cell phones and service plans and increase their usage. As CTIA president and CEO Steve Largent said recently, the cellular industry is a “shining light in these troubled times.”

THE OUTLOOK: IT COULD BE WORSE
Most handset manufacturers noted negative growth figures in the fourth quarter of 2008 and first quarter of 2009. These drops range from 10% to 50%. ABI Research estimates that worldwide handset shipments will fall by at least 8% in 2009. But that’s a great deal better than other sectors of the electronics business. ABI also projects 2010 sales to be flat rather than down.

All of this negativity is offset by large gains in other sectors of the business, such as a 30% growth rate in revenue in smartphones and large increases in infrastructure spending on the forthcoming 4G technology Long-Term Evolution (LTE) and backhaul. Apple saw iPhone sales increase 123% in the first quarter versus the same period last year.

Another perpetually percolating sector is data services like messaging, e-mail, and Internet access. For example, over 1 trillion short message service (SMS) texts were sent last year, with 620 million in the third and fourth quarters alone. Such data revenue, including video, is expected to maintain that climb even during down times.

WHAT’S HOT IN HANDSETS?
There’s little doubt that the strongest cellphone category involves smartphones like the iPhone and BlackBerry. Almost all manufacturers are adding new models and improving existing models. Smartphones typically include Wi-Fi, GPS navigation, Bluetooth, a camera, and an operating system (OS) that allows e-mail and Internet browsing.

Even non-cell-phone manufacturers are rumored to be considering smartphones, including Asustek, Dell, Lenovo, and Microsoft. Toshiba recently announced a smartphone, and Elektrobit is offering a smartphone reference design that includes satellite access (Fig. 1). Palm started the smartphone trend years ago, but the iPhone set off a spectacular resurgence of new activity. Recent acquisitions and hiring plus rumors seem to indicate that Apple will start designing and building its own silicon to gain a lead or advantage in this competitive category.

Smartphones are still a relatively small category, representing about 23% of all handsets, but that’s quickly changing. Nokia and RIM lead this segment, though others are making headway like Apple, Samsung, LG, and T-Mobile with its HTC G1 Android phone. Palm’s new Pre is an attempt to get back into this space, which it dominated just a few years ago.

Probably the biggest news in smartphones, as well as all handsets, is the touchscreen. Almost everyone has one now, including some of RIM’s BlackBerry models. Apple really started this trend, and now everyone seems to think it is a necessity.

According to Wirefly, the leading touchscreen phones are the LG Vu (AT&T), Samsung Eternity (AT&T), Samsung Behold (T-Mobile), LG Voyager (Verizon), LG Incite (AT&T), BlackBerry Storm (Verizon), Samsung Instinct (Sprint), LG Dare (Verizon), Motorola Krave (Verizon), and HTC G1 with Google Android (T-Mobile). Keyboards won’t go away, but their percentage of the pie is shrinking.

Applications stores also feed smartphone growth with new software. Again, Apple leads the way with its online store offering a plethora of downloadable software. In fact, Apple recently reported more than 1 billion downloads of over 35,000 apps. RIM announced an apps store for the BlackBerry, and Nokia offers the Ovi store. Google has an applications store for its Android phone as well.

The “open” movement has produced some great new software from independent third parties in addition to a new revenue stream. Many other apps stores are in the works, with efforts coming from AT&T, Verizon, and Microsoft. The key to smartphone growth and leadership seems to be attracting third-party developers to the operating system (OS) being used. That’s why the OS and the availability of software development kits (SDKs) and support continues to foster a healthy outlook for smartphones.

Of course, netbooks are a major player in the PC area, but they may also provide some stiff competition for smartphones (see “Laptops, Netbooks, And E-books, Oh My!”). While netbooks will still perform everyday tasks like word processing, they mostly will act as communications devices for accessing e-mail and the Internet.

Right now, Wi-Fi is built into every laptop and netbook. WiMAX will also get a piece of that business. Now the trend is to embed 3G and 4G cell-phone modules into these devices as well. Qualcomm’s Gobi chipset tackles the entire wireless job inside the netbook. In fact, carriers like AT&T offer netbooks as part of their cellular lines, and they will subsidize them like handsets. You can pick up a good netbook for $50 if you sign up for a two-year data contract.

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WiMAX is a wireless broadband option, representing competition for 3G and 4G cellular data cards and services plus high-speed Internet access offered by cable TV and DSL operators. Clearwire, the leading U.S. WiMAX vendor, will roll out its nationwide Clear WiMAX service over the next few years.

Maybe Clearwire will get some of that $7.2 billion stimulus money allocated to bringing more broadband across the nation, especially in underserved rural areas. Some parts of this country need wireless broadband, since Internet connectivity isn’t available by cable TV or DSL. It’s already a hit in remote places around the world that lack a wired telecom infrastructure. Voice over Internet Protocol (VoIP) will no doubt be a part of some WiMAX systems, too, but it won’t significantly compete with cellular.

Progress in LTE continues. Still no handsets, but infrastructure manufacturers have already lined up customers among the carriers to build 4G LTE basestations and related infrastructure. The test and measurement guys already have products to test any aspect of LTE. The 3GPP has yet to finalize the LTE standard. However, it’s expected to arrive later this year—unless there’s another delay.

Look for LTE to roll out a little later than expected during this economic downturn, though. Verizon has committed to LTE for the future along with 26 other major wireless operators. They expect to have LTE coverage in 25 to 30 major markets by the end of 2010. In the meantime, 3G High Speed Packet Access (HSPA) continues to get more play and will see some increased deployment before we get LTE.

As for WiMAX being a competitor of LTE, forget it. LTE has already won the next-generation cell-phone battle, as those 26 carriers (including all of the top guns) have already adopted it. Yet WiMAX remains a solid wireless broadband option in areas that need it.

Mobile TV is available now. It hasn’t been popular, though there’s some hope it will catch on. Still in its infancy, it should start to take off as the business models get sorted out. Many experts believe that free over-the-air TV will win this battle, yet paid offerings like MediaFLO expect to survive with the right mix of desirable and exclusive content and moderate pricing.

In the U.S., the Advanced Television Standards Committee (ATSC) has a new standard known as ATSC M/H for mobile digital TV (DTV) based on the DTV standard. A finalized standard is expected soon, and there’s no doubt that future handsets will include a receiver chip or chipset capable of capturing over-theair TV formatted for the small screen.

In addition, the machine-to-machine (M2M) sector continues to ramp up in stealth mode. More companies are building cell-phone technology into other products for functions ranging from simple telemetry to complex control. Lots of companies are building these modules, and others offer the network services and backoffice management of all that data.

Growing and future applications of this embedded cellular movement include fleet management, urban planning, healthcare, and smart-grid energy initiatives. As cell phones reach their saturation point, look for M2M to continue to insinuate itself further into the cellular market.

THE INFRASTRUCTURE EVOLUTION
So while handsets keep the cellular business crackling, you need the infrastructure to deal with the widening expansion and new services. For example, more subscribers are using data services like short message service (SMS) and related texting, e-mail, and Internet access. Fortunately, the carriers and infrastructure companies are keeping up with the demand.

To support the data demand, the major operators continue to roll out 3G services for faster network delivery of e-mail, videos, and Internet access. The HSPA movement has been particularly successful with UMTS WCDMA 3G systems. These new systems support data rates well beyond the 2-Gbit/s maximum data rate normally associated with 3G.

Next, as noted earlier, virtually all carriers will ultimately adopt LTE as their 4G technology, including those carriers that aren’t on the GSM/ EDGE/WCDMA/HSPA path outlined in the 3GPP guidelines. That also includes those operators now using cdma2000 and its variants like Verizon and Sprint. Equipment manufacturers are now building the first LTE basestations for testing purposes in 2009 and 2010, with full deployment in 2011 and beyond.

The bottleneck in the infrastructure has been identified as the backhaul system between cell sites and the mobile operator main switching site. With 50% microwave, 25% T1/E1 lines, and 25% fiber, the system is already in overload because of the increase in data services and particularly due to the phenomenon of video (Fig. 2). Faster microwave systems will gradually replace the T1/E1 lines, and more fiber will be deployed where it’s practical.

Femtocells are small basestations for home use that exploit a subscriber’s high-speed cable TV or DSL connection for backhaul. These units target users who lack good cellular coverage indoors at home or who want faster data services by wireless. Sprint already has deployed some femtocells in selected areas, and AT&T and Verizon will offer them in the near future.

The standards organizations 3GPP and the Femto Forum recently published the Home Node B standard for 3G UMTS femtocells. Now that the standard is finalized, more progress in deployment is expected. Technical issues like network architecture, provisioning, security, and interference between existing macro basestations and interference between femtos in multidwelling units are still being resolved.

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A NEW OLD WAY TO COMMUNICATE
The idea of an electronic book has floated around for decades. Of course, it has long been possible to read books on your PC, but who wants to do that? Many practical handheld e-book readers have been attempted over the years, yet the most recent products appear to meet the needs better than any previous efforts. The most popular one so far may derive all of its success by embedding a cell phone.

Amazon’s Kindle was first introduced in 2007 and became an instant bestseller. The secondgeneration Kindle should see similar results (Fig. 3). The 5.3- by 8- by 0.36-in., 10.2-oz device has a 6-in. diagonal LCD screen with 16 gray levels and 800- by 800-pixel resolution. With 2 Gbytes of storage, it can hold more than 1500 books. The software lets you flip pages, store your place, and change font size. Other features include a USB port and a battery that will retain a charge during reading for up to four days. A text-to-voice capability lets you listen instead of read as well.

But its biggest feature is a built-in cell phone. Embedded into the Kindle is a full-blown cdma2000 1xRTT EV-DO Rev A data phone. There is no voice capability. The phone is set up to call Amazon so you can buy new books online—talk about enabling your impulse buying. Via the Sprint network, the service doesn’t require an extra monthly phone bill. Amazon has more than 270,000 titles available at prices typically half the price of a printed book. About the only downside is the price, which at $359 is still steep for many.

Amazon also recently introduced an advanced version called the Kindle DX. It has essentially the same features of the Kindle with a larger 9.7-in. screen about the size of a standard sheet of paper. It targets users who also want to read newspapers and textbooks. Some newspapers and textbook publishers are testing the waters for the product. Again, at $489, it may be too expensive for most consumers.

Other new e-book readers are spread throughout the market. The Sony PRS-700 features a 6-in. LCD and can store up to 160 books internally, but it also accepts external Memory Stick Duo and SD Memory Cards for additional storage. The company provides access to its online e-book store with over 20,000 titles via the Internet and a PC connection. Also, Sony has access to the more than a half-million free public domain books from Google.

The unit will use its own text formats, but it also reads Adobe PDFs and Microsoft Word documents. While the Sony unit is attractive and the available titles vast, it doesn’t have the cell phone. Neither do any of the other lesser-known e-book readers, such as those from iRex, Astak, and Plastic Logic, though that could be changing. AT&T and Verizon both expressed interest in developing an e-book relationship like the Amazon- Sprint deal. Who can blame them?

Don’t forget that you can also download and read books thanks to apps on many smartphones, too. Examples include Lexcycle’s Stanza app for the Apple iPhone and the MobiPocket readers for BlackBerry and Symbian OS (Nokia) phones.

Though the technology was around for years, recent Amazon and Sony efforts may have finally pushed e-books into the spotlight. And the e-book could help save some of the many newspapers and magazines nearing bankruptcy. An e-book is just a processor, a big LCD, a large memory, and long battery life. What’s been missing has been the book availability and appeal of the prospect of reading from an electronic screen.

Those obstacles have largely been overcome. Forthcoming generations will be e-book readers if they are readers at all. While printed books will never become obsolete, their monopoly is over as digital media continues its inroads into all aspects of our lives. The cell phone is just facilitating that transition.

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