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Demand Is Challenging The Wireless Communications Market

The growth of the wireless communications industry over the last decade has been explosive. In 2009 alone, approximately 1 billion mobile phones were sold worldwide — more than 13 million of which were iPhones. Last year, Research in Motion (RIM), the name behind the wildly popular BlackBerry smartphone, reported that in just 10 years it has sold more than 50 million phones to some 21 million customers worldwide.

Many of us now enjoy the advanced wireless services that such devices have introduced to the marketplace; everything from Web browsing to live video streaming is now at our fingertips. As the numbers suggest, the proliferation of smartphone applications and the overwhelming demand for increasingly efficient and convenient wireless communications has created business opportunities far and wide for phone manufacturers and wireless network operators.

Still, the rush to advancing the wireless market hasn’t come without setbacks. Most notably is a U.S. communications network that was originally built, designed and managed for technology far different — and consuming — than today’s smartphones require.

Spectrum, the invisible frequencies on which wireless communications operate, is much like real estate; there is only so much and there are certain areas where value is much more acute and in-demand. As consumers and businesses continue their love affair with smartphones, and the increasing market for all things wireless continues, there comes a tipping-point where more demand exists than supply allows. Simply, our wireless spectrums are insufficient for all of the demand. Even large telecom companies — Sprint, Verizon and AT&T — which once boasted an ample supply of airwaves, are now struggling to find enough spectrum to keep up with consumer demand.

Today’s mass-market mobile devices consume thousands of megabytes each month. At a recent national gathering of wireless communications professionals, Federal Communications Commission Chairman Julius Genachowski warned that the growing need for spectrum is one of the FCC’s top concerns.

“What happens when every mobile user has an iPhone, a Palm Pre, a BlackBerry Tour, or whatever the next device is?” he asked. “What happens when we quadruple the number of subscribers with mobile broadband on their laptops or netbooks? The short answer: We will need a lot more spectrum.”

The FCC has gone on record indicating that the “biggest threat” to the future of mobile communications in the U.S. is the looming spectrum crisis. This crisis boils down to consumers using far more bandwidth than originally planned. In fact, experts note that as the U.S. finally moves toward adopting a 4G network, spectrum availability will be of utmost importance. Fixing the spectrum gap is clearly a top priority for the FCC.

It is at this intersection that some have identified great opportunity. Undoubtedly, the wireless revolution will continue into the next decade, and the process of staking ground on the spectrum is going to be more and more vital to the industry’s success.

For example, early this year, the FCC will be awarding a considerable number of high-value spectrum licenses to be vacated by Sprint. This spectrum is presently comprised of both contiguous and noncontiguous channels, and usable for a wide range of services including cellular voice, broadband and multimedia uses. According to the FCC, these licenses will be awarded on a first-come, first-served basis. The first applicants for these licenses will be positioned to sell or lease their channels to a major wireless operating company or contribute them to a joint venture or partnership.

There are few entities suited to developing clear and reliable spectrum solutions — either for private investors or large wireless companies — yet the crisis is significant and merits much attention. What I imagine we will see in the very near future is a nation full of users hooked on their “CrackBerrys” and in love with their iPhones who will soon experience the price impact of too little supply and not enough demand. And those who own the airwaves will be king.