I think, in hindsight, that I was wrong in my earlier forecast that the state of the US and global economy would not really affect wireless (although, to be fair, I was speaking about the energy crisis in that case and only indirectly about the overall economy). Looking back, it was clear that I (and even a lot of economists, so I don’t feel too bad about this one) did not know the real extent of the problem. It’s now clear to that too much variable-rate credit, augmented by poor policy and lax regulation and followed by an increase in interest rates (these at least particially in response to soaring energy prices), triggered defaults, which affected the viability of a lot of bank debt (and the banks themselves), bonds, securitized trash, and ultimately exposed what turned out to be a global house of cards. The government should have known better, the banks should have known better, and, being the skeptical type, so should I have known better.
The problem now is confidence, not fundamentals. Liquidity is almost non-existent, and any business that could get a loan is probably really worried that there won’t be enough business in the coming year or so to justify the risk inherent in taking the loan in the first place. Assuming, then, a less-than-robust business climate overall, such will clearly have an impact on spending for wireless and mobile. I’m concerned here because so much of spending on wireless is driven by consumers, and, with so much equity in homes now gone, they will be the last segment of the economy to recover.
Still, with the global markets up sharply this morning as I write this, I think we’re likely near a bottom just based on technical indicators and historical precedent – things probably won’t get much worse. But they also won’t get much better for a year or so, as, again, consumers are just going to have a tough time for the next year. So let me say now that I do expect the economy to impact wireless, but just a little. It would actually be nice to make this prediction to be more than just a little; we could even see price reductions from the carriers under that scenario. But I don’t think that will happen, at least for now.
As for wireless LANs, though, things will be a little tougher as businesses postpone capital spending for a while. As is always the case though, such can only be put off for so long, creating pent-up demand. So, unlike the issue with energy, the current financial challenges are a relatively short-term affair. Things will get better, and the long-term trend remains up and to the right. This isn’t the end of the world, not by a long shot.
