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2G networks to die within a decade: Analysts

2G networks to die within a decade: Analysts

Telstra could be first to terminate 2G services in Australia.

2G wireless networks are likely to shut down in Australia and around the world before the end of the decade, according to telecom industry analysts.

Australian wireless operators Telstra, Optus and Vodafone Hutchison Australia have said they will keep 2G for now. Telstra, has said it hasn’t reached a “final decision” but would ensure a “smooth transition” if it decides to end 2G. All three telcos are investing billions of dollars in new 4G services.

In the US, AT&T has said it will end 2G by 2017. Meanwhile, operators in South Korea and Japan have already shut down their 2G networks.

“In Australia, operators are already refarming 900MHz spectrum for 3G (Optus) and 1800MHz spectrum for LTE (Telstra and Optus),” said Ovum analyst, Nicole McCormick. “We see only residual 2G subscribers remaining in Australia by end-2017, and we expect some networks will no longer be in operation.”

“Over the next five years, we expect a lot more operators in Asia with increasing 3G/4G subscriber bases to close their 2G networks,” McCormick said. “This 2G spectrum can be refarmed for either 3G (900MHz) or LTE (1800MHz) in most markets.”

Gartner analyst Geoff Johnson agreed 2G shutdowns are coming in Australia, but said he doesn’t “see this happening in a hurry until the next lot of spectrum auctions our resolved.” The Digital Dividend auction of 700MHz and 2.5GHz spectrum takes place in April next year. “You’ll see a 2G tidy up after that’s resolved,” he said.

“Every country’s got its own reasons for migrating at a particular time,” said Johnson. 3G infrastructure over time is less expensive to operate than the 2G networks, and operators want to refarm 2G spectrum for the higher-speed technologies, he said. Given the size of its customer base, Telstra is likely to be first to end 2G in Australia, he said.

Telsyte analyst Chris Coughlan said carriers would benefit “due to greater efficiencies” from turning off 2G networks and refarming the spectrum for 4G. As more customers shift to 3G and 4G devices, “the operating margins in a 2G network will decline to a point where the revenue won't cover the operating costs,” he said. International roaming revenue may support 2G somewhat, “but will slowly decline as other markets move to 3G and beyond,” he said.

“Telstra has been doing the most to migrate customers to 3G,” Coughlan said. “Once they had the NextG network up and going they sourced and sold primarily 3G devices, hence their 2G handset base is proportionally smaller than Optus and Vodafone. Telstra has also been promoting the use of 900MHz spectrum for 4G within the global operator community, vendors and standards bodies.”

Johnson said business use of 2G today is very low and so would not likely be impacted by termination of the lower-speed network. However, there are still low-income consumers with 2G devices, he said.

Coughlan pointed to two other groups relying on 2G. “There are still a lot of 2G devices from overseas” and a ”significant embedded base” of 2G machine-to-machine devices, he said. “The 2G M2M devices will sometimes be in remote locations and owned by corporate customers. To placate these customers Telstra will no doubt be asked to assist fund the replacement of these devices with 3G devices.”

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