Data Usage Drives Cellular Network UpgradesData Usage Drives Cellular Network Upgrades

Significant growth in data transmissions is expected to force cellular network providers to make massive investments in network upgrades, according to market research firm In-Stat. The emerging requirements could stretch their pocketbooks as well as their network capacity.The popularity of smartphones, such as the Apple's iPhone and Google's Android, is altering the mix of network traffic. Video and other high bandwidth applications are becoming more popular and usurping voice's top spot. Consequently, network bandwidth is straining to keep pace with demand. "Nearly every major mobile operator is, or will shortly be, at capacity," said Chris Kissel, Industry Analyst for In-Stat.

In response, carriers will need to upgrade their backhaul connections, the link between the edge of a mobile network and the backbone. In-Stat expects that by 2014, North American carriers will be forced to upgrade more than half of these connections. As a result, they will have to invest $117 billion by 2014, a 41% increase from 2009's expenditures of $83 billion.

Carriers could face a couple of challenges in making these investments. First, the economic news has been grim lately as the downturn has lingered, so these firms could find it difficult to fund the needed upgrades. Second, the migration path from lower speed 3G networks to higher performing 4G networks is unclear. It is uncertain how well new 4G networking options will work, and there is doubt as to whether or not they will deliver as much bandwidth as needed.

The changes could impact small and medium businesses in a couple of ways. Last mile backhaul is critical because poor connections can create bottlenecks that will limit subscriber connections and lower quality of service. Many of these companies plan to deploy new mobile applications and will need to be cautious because carrier networks may not support their new endeavors. One safeguard could be signing strict Service Level Agreements, which would penalize whenever their network performance lags.