It is no secret here in the United States that rural areas lag when it comes to Internet access--both fixed and mobile. It doesn't take me that long travelling by car here in Arizona to find one of those underserved areas. The reason these underserved areas remain is quite clear; the economics of spending million of dollars of infrastructure to provide services to areas where there are few people to pay for services is hard to justify. But those challenges don't mean that companies are completely ignoring those markets.
Sprint recently announced at the Competitive Carrier Association conference that it was working with NetAmerica Alliance to help rural mobile operators roll out LTE. Huawei, at the same conference, talked about how it was willing and able to help rural operators build their networks as well. Both Sprint and Huawei have company in this area. Ericsson has had a partnership with NetAmerica for several years to help small operators purchase gear. Verizon Wireless has a program in which it will let small operators use its 700MHz spectrum to build LTE networks. None of these companies are doing these things out of a pure social obligation to rural communities. There are clear competitive and financial motivations behind their actions.
For Sprint and Verizon Wireless the motive is simple: each wants to expand its LTE footprint in a profitable fashion. There are clear differences in the two operators' approaches. Sprint's program allows operators to combine their existing LTE spectrum with Sprint's spectrum. Sprint will also add support of 700 MHz Band 12 (a common band with many rural mobile operators) to some of its devices. Until now rural operators have had difficulty in getting device support for Band 12. With Verizon's plan operators can only use Verizon's LTE spectrum when building their networks. Operators participating in these programs also get access to the larger mobile operators' national networks. In exchange, Sprint and Verizon Wireless expand their rural footprints without having to directly invest in those markets. This is especially important to Sprint as its national LTE footprint and capex budget is smaller than that of AT&T and Verizon Wireless.
When it comes to equipment vendors, rural opportunities aren't about bigger footprints, but larger market share. Ericsson has had a relationship with NetAmerica for several years. NetAmerica and Ericsson have developed a program in which rural operators can pool resources together and purchase larger volumes of gear than they could on their own. These larger volume purchases benefit the operators in terms of providing them with lower infrastructure prices. For vendors like Ericsson which is used to dealing with operators on a large scale, it provides an easier way to manage and work with a collection of smaller operators.
Huawei's motivation for focusing on small operators in the United States is a little different from Ericsson's. Where with Ericsson rural operators are an addition to its work with the major Tier 1 mobile operators, Huawei's desire to work with smaller regional operators is in place of working with Tier 1 operators. Huawei recently has been essentially blocked from working with major mobile operators in the U.S. Working with rural operators gives the vendor a reason to maintain a U.S. presence and generate some revenues while waiting for a possible change of attitude from the major mobile operators. Unfortunately, with both Sprint and Verizon using Ericsson (and Alcatel-Lucent), rural operators working with those two mobile operators will be steered away from Huawei. Furthermore, while Alcatel-Lucent may not have an alliance with NetAmerica, the vendor is very active with rural operators on its own. This only adds to Huawei's challenge of maintaining its presence in the U.S. as a mobile network infrastructure provider.
Daryl Schoolar is Principal Analyst of Wireless Infrastructure for Ovum. Daryl's research includes not only what infrastructure vendors are developing in those areas, but how mobile operators are deploying and using those wireless networking solutions. Contact him at [email protected] and follow him at @DHSchoolar.