The mobile phone industry is not slowing down technologically – even though the global financial crisis may have temporarily dampened the investment climate. Competition continues to drive the development and deployment of new technologies, particularly in base-station equipment.

In these systems, analog technology is being steadily replaced by digital technology. This digitization is enabling greater miniaturization and consolidation of key base-station components and programmability. Chips can be loaded with software to run different radio technologies, rather than having to rip out and replace costly hardware. The buzzword is software-defined radio (SDR). And even if some big equipment makers hate to admit it, SDR is not some "pie in the sky" concept; it is becoming reality, albeit slower than its supporters anticipated.

SDR is at the core of efforts to deliver multi-standard systems, and it will play a greater role in future multi-band systems and systems that combine both. The technology runs radio functionality as software modules on an integrated and unified hardware platform.

As detailed in the latest edition of Unstrung Insider, "Multi-Standard Radio Systems: The Race Is On," operator demand is growing for versatile base stations that can support multiple air access technologies. Confronted with falling margins, operators are demanding such flexibility and investment protection. With SDR-based multi-standard systems, operators will be able to roll out new mobile services and features more easily and extend the lifespan of the networks, thus lowering the total cost of ownership.

Vendors that can deliver these systems stand to gain a competitive advantage. Not surprisingly, those pushing hardest are the ones most eager to expand worldwide – companies such as China's Huawei Technologies Co. Ltd. , ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), and a number of quick-moving startups equally eager to sell their know-how to established players.

Even if multi-standard radio systems still face some technological challenges, the technology is on its way. The reason is that operators want unified solutions, and competition will drive vendors to deliver them. It could take another year or more before the market is flush with these systems, but it is clearly no longer a question of if, but of when.

The biggest question facing vendors, in particular those that still have business models based largely on selling boxes and that have been slow to embrace SDR, is how to make money in an industry increasingly dominated by software.

It can be done, as big IT hardware makers, such as Sun Microsystems Inc. and Oracle Corp. (Nasdaq: ORCL), have shown. They have found a way to generate a steady flow of revenue from the sale of software and services, in addition to their hardware products. So why can't manufacturers of mobile infrastructures do the same or even more? They can, and many of them will.

— John Blau, Research Analyst, Unstrung Insider

The report, Multi-Standard Radio Systems: The Race Is On, is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.unstrung.com/insider.