Test Equipment Vendors Need to Keep Pace With Changing Standards - Report

Recovering from the dismal growth of 2002 and 2003, the European wireless communication test equipment market improved considerably in 2004 to record revenues of approximately US$572.8 million and is likely to grow at a compound annual growth rate (CAGR) of 9.2% to reach just over US$1 billion in 2011. The deployment of 3G infrastructure in the existing 2G and 2.5G networks and a substantial increase in data traffic have proved to be strong driving forces for this market.

However, due to constantly evolving standards, test equipment vendors are facing the task of not only keeping pace with them but also deciding which of these standards they should support in order to offer corresponding test equipment. Before adopting a particular standard, they will also need to evaluate various critical factors such as cost, time, risk and manpower. This is no small challenge and will continue to impact vendors over the long-term.

On the other hand, there has been increasing complexity in the networks due to these changing standards. Network operators are not experienced enough to offer different voice and data services over various protocols and are therefore ill-equipped to handle this complexity.

"This provides a welcome opportunity for test vendors to offer solutions that cater to the increasing network complexity," notes Frost & Sullivan Research Analyst Prathima Bommakanti. "The major challenge here would be to understand the various protocols and offer test solutions accordingly."

Another driving force for the market is the appearance of a variety of mobile phones incorporating new technologies that need testing. In the future, many new standards are likely to emerge and continue to drive market expansion.

However, interoperability of multi-vendor equipment poses a significant design-related challenge to vendors. Wireless communication technologies can be successful only if the network and mobile equipment of different vendors can communicate effectively while using them. Recognising the significance of this challenge, vendors are likely to use single-box solutions widely and eventually develop fully interoperable equipment on a large scale.

As the demand for smart and fast test equipment continues to rise, vendors are likely to focus on solutions that offer capabilities for multiple standards and testing including testing for wide-band code division multiple access (W-CDMA), code division multiple access (CDMA2000), wireless local area network (WLAN) or Bluetooth. Moreover, test solutions will need to be backward compatible in order to be able to test both the new digital protocols as well as legacy standards. Most importantly, the equipment would need to be easy to use to match the skill levels of different end users.

"These complex requirements generate numerous product development challenges for test equipment vendors, especially since end users are increasingly likely to adopt standards for the enhanced functionality they offer," says Ms. Bommakanti.

The growing uptake of universal mobile telecommunications system (UMTS) is likely to be one of the biggest drivers for the wireless communication test equipment market in terms of volume. Having invested heavily in acquiring the UMTS spectrum, mobile service providers are rolling out 3G services to realise their investments in selective locations that guarantee higher returns. This is likely to drive the revenues of test vendors operating in the UMTS domain.

"The 3G networks will complement both the existing and new 2.5G networks that are being deployed across Europe, which creates unique testing needs from the mobile service providers," comments Ms. Bommakanti.

Rolling out technologies such as UMTS and enhanced data rates for GSM evolution (EDGE) would help meet growing end user requirements for interoperable and cost-effective equipment. Given that the technology standards in the market are constantly changing, the impact of this driver will be particularly high.

However, since next-generation 3.5G and 4G technologies have a long way to go before their commercial deployment, test equipment vendors would do well to focus on addressing the testing requirements of R&D applications for the moment. Although this area does not offer significant scope for growth in the short run, vendors can use this opportunity to create a niche segment by addressing its current requirements. Such vendors are likely to be able to consolidate their positions by the time 3.5G and 4G base stations are commercially deployed."

Posted to the site on 5th October 2005