Three major shifts are underway in the telecommunications industry. First is a skyrocketing demand for wireless voice and data services across the globe. At the same time, consumers are rapidly cutting the cord on traditional landline services. But it is the migration away from cable services and instead, accessing television directly through the internet, which may prove to be the most groundbreaking development in the coming years.
In emerging markets, demand for communications services is surging. Every year, millions of people are pushed into higher income levels and are able to afford voice, data, and entertainment services. However, in many of these areas, both landline and cable wire infrastructures are poor, providing few options for connectivity.
Thus, emerging economies will rely much more heavily on the cellular networks—not cable or landline infrastructure like many Western nations—to deliver voice, data, and internet services. Laying wire across these countries’ large and rugged geographies, particularly in remote areas, is expensive and time consuming. Connecting these eager populations to the mobile cloud will largely come through wireless services.
Currently, connectivity is limited in many areas. Furthermore, where signal does exist, it often tends to be spotty or unreliable. Even in the U.S., many areas remain signal-challenged. Expanding internet access remains a high priority for the U.S. government. Providing a strong usable wireless signal is one of the main tools being used to fulfill this goal. But this element is even more crucial in emerging markets.
At the same time that this demand increases, there is an ongoing phenomenon of millions of people disconnecting their landlines, in favor of relying on cellular service for their communication needs. Since 2000, the number of landline phone subscriptions has dropped about 5% a year, with the economic slowdown making numbers even worse.
These two shifts have been ongoing over the past decade and will continue into the future. But there is a third key shakeup in the telecommunications world will completely revolutionize how people receive and utilize video media, and it is only beginning.
In a break from the past, more and more people are cutting the cord on cable and satellite companies, preferring to get their media services directly through the internet. The CEO of Verizon (VZ) recently compared the reduction in cable subscribers to what happened a decade ago, when customers began cutting their landlines to rely on their cellphones.
Some attribute the drop to a weak economy, but many are turning toward the internet for their television and movie needs. Those people are never coming back.
In its latest conference call, Time Warner (TWC), the country’s second largest cable company, reported a continued downward trend of television-service customers. Telecommunications companies like Verizon have been gaining market share with their media services like FiOS. Netflix (NFLX) and Hulu have clearly benefited from this shift, proving that television programs and movie streaming through the internet onto computers and televisions is the future.
Even Apple (AAPL), the innovator of the tech world, has taken a clear stance as it too foresees a change in the way people watch television with the release of the Apple TV. The device allows users to wirelessly stream IPTV content over the internet.
An interesting way investors may be able to profit from these marked shifts is through a company called AirTouch Communications Inc. (OTCPK:ATCH). AirTouch’s patented wireless signal integration technology eliminates the problem of a weak or unreliable cellular signal. Its product’s base station can be place by a window or high point where signal is strongest. The unit can then amplify up to a 10 times more powerful signal than a normal handheld mobile device, allowing for a reliable service throughout the home or office (up to a 900 foot area).
AirTouch may have a solution for millions of people across the globe by bridging the gap between the point of the strongest (or the only) nearby communication service access, receiving signal with the base station and amplifying this to the end user, solidifying access in undependable areas.
In the U.S., people need an economical alternative for reliable voice and data solutions as Americans continue to move away from traditional landlines. AirTouch’s intellectual property facilitates communication between the cordless phone module and the wireless module so the benefits of the cordless phone, such as sound quality and its mobility within its range, are fully maintained. All of this is accomplished with the handset emitting less dangerous microwave signal than a regular mobile phone, leading to stronger, safer, higher quality phone calls.
People continue to access their communication and entertainment services through various channels such as landlines, cable, and increasingly, over wireless networks. AirTouch’s products also fit seamlessly into this scenario. People can now go “totally wireless” by integrating these advanced services through a single device, with amplified, reliable reception, while wirelessly distributing the data throughout the house. The technology is also the key for enabling users to cut the cord once-and-for-all and rely on a strong wireless connection for all communication and entertainment services—which will be the future.
The company may be on the right track. AirTouch recently secured a key partnership with Brightpoint (CELL), the world’s largest cellular products distributor. AirTouch executed a distribution agreement with the company, with Brightpoint also taking a $1.5 million stake in the company.
Perhaps evidence that converged wireless access is indeed the future, AirTouch boasts purchase orders and other letters of intent representing $75 million in revenue, with gross profits from those projected to near $28 million. Not bad for a company with just over a $30 million market cap.
There has been a clear and marked migration away from traditional landlines as well as a surge in demand—now and in the coming years—for access to cellular communication services, particularly in emerging countries where wire infrastructure is poor. Most interestingly, the decline in television-service customers in favor of streaming over the internet may be the newest trend in the quickly changing landscape of voice, data, and media services. These shifts provide opportunities for investors to reap profits from companies that can adapt and capitalize.
Additional disclosure: I am long ATCH.OB.