Sector Watch: Wireless communications

Worldwide use of wireless communications is expanding rapidly.

According to a telecommunications industry report, in 2006, the U.S. corporate, government and educational sectors spent nearly $9 billion on deploying wireless networks. Expenditures are estimated to be growing 25% per year. Spending in the international market was estimated at $28 billion last year and is estimated to be growing 33% annually. A report issued by The Cellular Telecommunications & Internet Association indicates that wireless carriers spent $33 billion on capital investments and expenditures last year and are increasing spending at a 14% annual rate.

Carrier investments are driven by explosive growth in the number of wireless users; in June 2006 (the latest period for which data were available), there were approximately 219 million wireless subscribers in the United States, up 25 million, or 13% from a year earlier.

Increasing demand for wireless networks is attributable to the improved security of wireless data transmissions, the introduction of new, more advanced technologies, greater accessibility and affordability of wireless mobile devices, and expanding capacity of wireless networks, making wireless an acceptable alternative to land lines.

The advantages of wireless communications versus traditional land line networks include:

• Mobility. Mobile communications allow data to be transmitted from remote staff and locations not accessible by land lines. As a result, data collection costs are reduced, access to data and data controls improves and worker productivity climbs. 
• Capacity. Current technology allows wireless transmissions with capacity, quality and reliability superior to land line and comparable to fiber optic networks.
• Cost. Wireless networks are much less expensive than land lines to deploy and operate. In addition, wireless equipment costs are declining as a result of technology advances and production volume increases. In addition, wireless networks bypass local service providers, eliminating recurring monthly fees.
• Deployment. Wireless networks eliminate the need for negotiating rights of way, infrastructure engineering and additional FCC licensing. They can be deployed quickly and inexpensively.

Two small caps that are benefiting from wireless demand are WPCS International Inc. (Nasdaq: WPCS) and Anaren, Inc. (Nasdaq: ANEN).

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