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Introduction to the Wireless Industry

¹ Video Tip
For our brief video introduction to the Wireless industry, see www.plunkettresearch.com/video/wireless.
 
Wireless communications, including such fields as mobile entertainment, RFID, mobile banking and cellphone service, continues to be one of the hottest sectors in the InfoTech market. There were an estimated 6.8 billion global cellular communications subscriptions by mid 2013, including more than 326 million in the U.S. alone. (Since some people, particularly in developing nations, have more than one subscription, the number of individual subscribers is somewhat less, an estimated 5.4 billion. This means that global market penetration is approximately 75% of the population.) The number of subscribers to fast, mobile Internet access is already 2.1 billion.
New cellphone handsets are selling at a rate of about 1.7 to 1.9 billion yearly—making the cellular phone the fastest-selling single item of consumer electronics by far. These handsets are purchased by new users (those who are getting cellular service for the first time ever) and by those who are upgrading to newer, more powerful phones. (To a growing extent people around the world are upgrading to smartphones. For example, more than 60% of U.S. subscribers now carry smartphones).
Most new cellphones feature a dizzying array of advanced features. More music-capable cellphones are sold each year than stand-alone portable music players. More digital camera-equipped cellphones are sold than stand-alone digital cameras. In addition, new cellphones are often Internet-capable, and increasingly able to take full advantage of high speed access. This means that some small, lightweight smartphones pack much of the computing power of a standard desktop PC.
Cellular service companies have been investing heavily in an effort to improve coverage and service. A good example in the U.S. is the fact that the nation is covered by more than 250,000 cellular telephone towers.
Total U.S. wireless service company revenues were about $185.0 billion during 2012, up from $169.8 billion in 2011, according to CTIA-The Wireless Association. Market penetration of wireless service subscriptions in the U.S. represented 102.2% of the population at year-end 2012 (up from only 79% at the end of 2006). American subscribers spend an average of $48.73 monthly on their cellphone bills. (In 1998, the average monthly bill was $98.02, but intense competition forced prices to plummet.) Advanced services, such as text messaging, Internet access and access to entertainment including videos and games, make up a growing portion of that monthly bill. U.S. text messages via cellphones total in the trillions each year.
Consolidation of wireless service providers is accelerating in some parts of the world, while it is stymied in others. AT&T attempted to acquire the U.S. operations of T-Mobile in 2011 at a price of about $39 billion. The deal would have added a large number of customers plus very welcome infrastructure to AT&T’s business. However, the transaction was blocked by the U.S. Justice Department on antitrust grounds. In mid-2013, however, it looked likely that a merger of Japan’s Softbank with America’s Sprint Nextel and Clearwire would be completed, creating a powerful new force in the American market and giving this successful Japanese firm a solid foothold in the U.S.
In Europe, it would be easy to say that there are too many carriers. Mergers may accelerate there, and some firms are beginning to partner-up on infrastructure costs. Britain’s O2 UK, a unit of Spain’s Telefonica, and Vodafone are placing their networks into a partnership in order to save costs. This is not unprecedented. In India, carriers have long shared antenna networks while competing head-to-head. European companies need to seek strategic mergers or partnerships that would enable them to cut duplicated jobs while building the financial strength needed to pay for continuing network upgrades.
Cellphones continue to replace traditional landlines in U.S. homes. As of the beginning of 2012, 35.8% of households had cellphones only. Meanwhile, mobile shopping is a prime growth area in the e-commerce sector. Also, America’s government has long term plans to free up federal and commercial wireless spectrum that is currently allocated to various uses but remains under utilized. This could pave the way for future growth of wireless services.
Worldwide, cellphone use continues to experience extremely rapid growth in emerging markets. China has over 1 billion wireless subscriptions, with India topping 860,000. In emerging nations, cellphone service is bargain priced. Handsets are particularly inexpensive in some regions. For example, Nokia recently launched cellphones with a good level of features designed for the African market at $15.00 each—a non-subsidized price.
Globally, cellphone-based game playing and mobile entertainment such as music and video continue to make great strides, along with the increasing use of social media on mobile devices. Cellphones are rapidly becoming everyday banking and payment devices, particularly in Japan, Korea and parts of Europe; that trend will move to the U.S. over the mid-term. (In some cases, this is done by using a technology known as nearfield communications to enable cellphones as payment devices when near a cash register or vending machine—somewhat like some credit cards do today.) Mobile banking is one of the most popular services for cellphone owners in the emerging world, as wireless innovation is bringing banking services to remote areas for the first time ever.
The wireless sector incorporates a great deal more than cellphones, ranging from satellite-based services to remote wireless sensor networks (WSNs) and vast wireless Wi-Fi networks on corporate and college campuses. Whether it is access through Bluetooth, the fast data transfer speeds of upstart ultrawideband (UWB), satellite, cellphone or Wi-Fi, consumers and business users alike are becoming more and more reliant on wireless-based services and devices in their daily tasks.
There is no end in sight to the rapid acceleration of wireless. RFID equipment prices are plummeting while adoption is growing on a global basis. Uses for smartphones are growing endlessly. Applications for remote wireless sensors of all types are about to soar as technologies improve and costs decline.
 
Important wireless trends for the mid-term include:
a)      The total wireless market and the number of uses for wireless connections will continue to grow, even though market penetration of individual cellphone subscribers is reaching extremely high levels on a global basis. M2M, or machine-to-machine communications, will be a major growth factor. Analysts at LM Ericsson forecast 50 billion wirelessly-connected devices by 2020.
b)      Cellphones will continue to morph into ever more complex, multi-purpose personal communication devices (including the growing use of the cellphone as a financial transaction device). Cellphone circuitry will become much more powerful, piggybacking off the revolution in ultra-fast, multi-processor power in handheld game machines. The amount of storage in cellphones for data, photos, video and entertainment will continue to increase dramatically. Batteries for wireless devices will become much stronger, while chips will become more energy efficient.
c)      Although cellphone markets are well established in the U.S. and in major developed nations everywhere, the number of subscribers continues to grow in these countries. In the U.S., the newest subscriptions tend to be accounts set up by parents for their children, or accounts for additional personal devices like iPods.
d)      There is no end to the ways to make money out of wireless devices. This trend will be driven by the rapidly growing market for smartphone applications or “apps.”
e)      Ultra-high speed LTE is quickly gathering advocates, as is HSPA. Download speeds on the most advanced cellular networks are already in the range of 7.2 megabits per second (Mbps), and 14 Mbps will be available on many networks after additional infrastructure investment.
f)       Security issues such as eavesdropping on Bluetooth conversations, hacking into Wi-Fi networks and viruses spread among cellphones will require more attention and investment from the technology and telecommunications sectors.
g)      RFID (radio frequency ID tags used to track inventory) will continue rapid adoption by manufacturers, logistics centers, shippers and retailers. This is thanks largely to an early initiative by Wal-Mart to require its largest suppliers to use RFID to wirelessly transmit data from cases of merchandise. Second and third-generation RFID will eliminate most of the disappointments of earlier RFID implementations.
h)      The Apple iPhone sets the standard for consumer expectations for smartphone handsets. However, the Android operating system, launched by Google, has higher market share on smartphones than the iPhone operating system.
i)        Wireless Sensor Networks (WSNs) will proliferate, providing exciting new ways to gather environmental and industrial data, and to foster home automation and monitoring along with industrial uses.
j)        “Contactless payment” systems, utilizing nearfield communications to wirelessly debit or charge accounts by waving a cellphone at a cash register or vending machine will grow quickly.
k)      The cellphone industry is relatively immune to dips in the economy, as consumers consider their mobile communications to be as basic a need as transportation.
l)        The immense success of Apple’s iPad, a lightweight, “tablet” computer, has introduced an entirely new type of platform for wireless access to the Internet. This is excellent news for cellular service providers, as many consumers rely on both Wi-Fi, when available, and cellular service for connectivity. To a growing extent, tablets are replacing the market for small laptop computers, and they will likely eat into the market for desktops.
m)    The Personal Health Internet is about to become widespread, with consumers constantly monitoring their own vital signs and uploading related data to online sites for analysis. The enormous popularity of products such as the Nike+ Fuelband, that tracks all of a user’s daily activities, will accelerate this trend.