It Just Makes Good Business Sense
Two costs lay heaviest on the balance sheets of traditional wireless carriers: infrastructure and spectrum.
Infrastructure involves the cellular radios and other hardware, permitting, tower space leases, backhaul, and many other costs. Infrastructure costs are mostly driven by the technology providers, the Ericssons and Huaweis of the world. They provide the hardware that is used in the base stations to send and receive cellular signals, transmit backhaul to the operating centers, and route traffic. In recent years, software defined radios have allowed the base stations to upgrade their technology not with hardware swaps, but with software upgrades. While these technology upgrades are simpler, the technology providers still want to cash in and thus charge enormously for those upgrades.
To remain profitable, licensed spectrum must be used by carriers for voice and data connections rather than other uses like machine connectivity.
Voice/data connectivity brings carriers the most revenue per Hz (a unit of measure used for amount of spectrum). In the industry, this logic is broken down using average revenue per user, or ARPU. It just makes good business sense for carriers to maximize ARPU, especially with the enormous weight of spectrum costs. It is for this very reason that carriers are shutting down their 2G networks.
Download our Cellular Generations infographic to see how these forces will continue to drive carriers to sunset.