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4G Finally Takes Seat at Wireless Throne

June 21, 2016
After nearly seven years since it was introduced, global revenue from 4G wireless service is poised to overtake 3G for the first time. Meanwhile, 2G and 3G revenues are falling.

Nearly seven years ago, TeliaSonera flicked the switch on the first commercial 4G LTE networks in Stockholm and Oslo. There were few mobile devices that could access these networks, and the event passed with little ceremony. But it was the first step on a journey to 4G supremacy.

Later this year, revenue from 4G services will overtake those from 3G operations for the first time, according to estimates from Strategy Analytics, a research firm that tracks global wireless revenue. The analysts expect that 4G LTE services will yield around $426 billion by the end of 2016, an increase of around 35% over last year.

It has been an ongoing process for wireless carriers and chipmakers to phase out older wireless technologies. Smartphones and other handheld devices still contain chips to access 2G and 3G networks, which were introduced in 1991 and 1999, respectively. The devices simply switch between networks depending on the radio equipment that covers the area.

These earlier generations are still widely used in developing countries in Africa, Asia, and the Middle East. According to research from Ericsson, the network equipment maker, 2G will remain the dominant form of cellular communication in these areas until around 2018.

In other places, these networks are reaching their shelf life. Major wireless carriers in the United States and South Korea are in the process of shutting down 2G service and recycling the spectrum for more advanced networks. In 2016, according to Strategy Analytics, service revenue for 2G is expected to decline 21%, while revenue from 3G networks will fall 19%.

As older networks shut down, 4G is filling in the gaps. “The advanced markets of the U.S.A., Japan, and South Korea will see the vast majority of their revenue come from 4G LTE services this year,” said Phil Kendall, an analyst with Strategy Analytics.

Kendall estimated that, in 2016, around 79% of service revenue in North America would be linked to 4G networks. That compares to 82% in Japan and 90% in South Korea, while the Middle East and Africa would only have about 10%.

China, on the other hand, still does not qualify as one of the advanced markets for the technology. 4G accounts for only about half of China's enormous cellular revenue, but the country overtook the United States as the largest market for 4G networks in 2015, according to Strategy Analytics.

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