Interestingly, the winning investment play around the future of wireless may not be speculating on the ever-increasing value of an intrinsically finite resource. That’s because scarcity of wide-area spectrum will cause a significant migration towards more local area networks such as femtocells (small, lower-power radio transmission stations) and wifi, and will eventually find a relay in the infinitely expandable, wired backhaul—the link to a provider’s core network. Wired fiber infrastructure can still carry vastly more data than any wireless system.
2.So while it is generally commonly accepted that scarcity leads to value increase, and many have taken note that wireless spectrum value can often represent over 50% of the enterprise value of cellular carriers, as in the cases of Leap Wireless (NASDAQ: LEAP) and Clearwire (NASDAQ: CLWR), a migration to local networks may in fact put a cap on the value of wireless spectrum, foiling investment strategies based on the premise that spectrum scarcity will prop up the market cap of cellular carriers.
3.This leads us to the following paradox: the true savior, and arguably only reliable investment play, will be backhaul technology service companies that will allow our wireless future to be wired, moving the paradigm from one of intrinsic scarcity (wireless bandwidth) to one of abundance (wired backhaul). Here, the universe of investable names includes companies providing transmission technology (copper, optical fiber, and microwave relay) as well as digital services at both ends of the wire such as sorting and distributing data packets