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Building new channels for the data flood

By Kirk Ladendorf, Austin American-Statesman –

AUSTIN, Texas — The enormous success of the smartphone market has put a rocket booster under Apple Inc.’s stock price. But it’s also stressing the nation’s cellular communications networks.

A torrent of smartphone sales has generated a flood of wireless data traffic that cellular giants, including AT&T Inc. and Verizon Communications, are struggling to keep up with.

Their challenges mean sales opportunities for technology providers — among them Austin’s Freescale Semiconductor — that are putting together the building blocks for future networks that will handle more data more easily.

But industry experts say the data traffic overload may show up in degraded service to American cellular customers by the end of this year.

Analyst Jeff Kagan of Atlanta says he expects to see service slowdowns and outages affect U.S. cellular networks late this year or early next.

“This is an urgent and serious problem, and nobody has the answer yet,” Kagan said.

But Freescale is working on it.

The company’s Wireless Access Division is designing complex new network processor chips for the communications gear that will drive a new, more efficient type of network that they expect will be installed in dense urban areas where cellular traffic is the heaviest.

While Freescale and its competitors look for technology solutions, cellular companies and many analysts say they need something basic from the federal government — more wireless spectrum, which are bands of radio frequencies that are dedicated to cellular traffic.

The Federal Communications Commission, which regulates the cellular industry, says it is in the process of making more spectrum available, but analysts like Kagan say the agency isn’t moving nearly fast enough.

“Washington works at a snail’s pace,” Kagan said. “We are going to start to run out of spectrum in some parts of the country by the end of this year.”

What that will look like, he said, is poorer service, more dropped calls and slower data transmission speeds. The problem will probably hit first in congested urban areas.

“When customers start to scream, people may start to listen,” Kagan said. “Maybe things will happen then. Maybe the government will move quicker. There has to be more pressure than is happening now.”

Both Verizon and AT&T are taking steps to acquire spectrum owned from other companies. The U.S. Justice Department on Friday approved an antitrust settlement involving Verizon and four large cable companies. Included in the deal is a $3.9 billion payment from Verizon to the cable companies for wireless spectrum. AT&T announced a much smaller spectrum purchase, acquiring Next Wave Wireless in early August for $600 million, that included assumption of debt.

Ericsson, one of the world’s largest mobile equipment makers, expects the number of smartphones, tablets and personal computers with mobile Internet connections will expand to nearly 7 billion in 2017, up from 1.5 billion in 2011. That will generate a 15-fold increase in data traffic, which the company expects primarily will be driven by more mobile video content.

While cellular operators are pressing the government to make more spectrum available, Freescale and other companies are building the components they expect will revamp wireless networks.

They are designing the building blocks for advanced wireless networks that will offer better coverage while delivering more data to more users.

Today’s wireless networks are based on high-power “macrocells” that are made up of large antennas and controlling electronics that govern the wireless traffic over an area of up to several square miles.

The new networks will be more complex, but also more flexible so they can adjust quickly to traffic surges.

For Freescale, that means new generations of processors and new layers of software to control them.

Austin is one of the main engineering centers for the company’s wireless access business, working in collaboration with engineering centers in Israel and India.

Freescale’s network processing business generated $1.6 billion in company revenue last year, and analysts say that could expand as cellular companies invest in new networks.

“Small cell base stations can play a significant role in helping wireless carriers tackle challenges associated with broadband capacity and coverage,” said Scott Aylor, Austin-based general manager for Freescale’s wireless access division.

“Wireless infrastructure is a big piece of business for Freescale,” said Stephen Turnbull, who is marketing director for Aylor’s division. “The opportunity for small cell technology out there in the market is huge, and we have the right technology.”

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