The move towards the LTE era has seen the emergence of some unpredictable trendsetters. The real interest of the vendors and analysts lies in how quickly the BRIC economies (Brazil Russia India China), the world's growth engines, will start to invest heavily in 4G.
We would expect the first two of these powerhouses to lead the way in 2012. India's government has made many pledges to auction 700MHz and other LTE-suitable bands in short order, and there would be a logic, given the nascent state of 3G in the country, to pushing a direct-to-LTE policy. However, in reality huge obstacles lie in the way of the grand plans, combined with the country's cumbersome telecoms bureaucracy. Most of the designated bands are occupied by defence departments or broadcasters, with no clear process yet laid down to vacate them.
The carriers invested heavily in 3G spectrum and have little resource to spend again in auctions, before they have seen some ROI on their previous purchases. The country's famously low ARPUs and device prices are inflating a little as a result of 3G, but it is hard to see how they could support a 4G profit model for some years. And the creation of an ecosystem is being complicated by government insistence that cellcos buy large percentages of their equipment from domestic suppliers, even though India has only a very immature wireless manufacturing base of its own.
All these factors suggest that the only “4G” build-out for the next three or more years will be in the TDD 2.3GHz BWA band. Here, state-owned BSNL kicked off with a Wimax rollout but is now looking to hand back its frequencies, citing lack of a business model. The largest deployment, then, will be Reliance Infotel's national TD-LTE plan, but even that may not take off until 2013.
The signals are more mixed in China. This is the biggest driver of the TDD flavour of LTE, because its largest cellco, China Mobile, has TDD spectrum and is eager to move rapidly to 4G because of the shortcomings of its TD-SCDMA 3G network. It has been building huge test networks around key cities and making international alliances for device production and roaming, but may still face regulatory hurdles before it can go live on a national basis.
The authorities recently said they would only sanction 4G in China when it had reached a “level of maturity,” which some local analysts believed meant a wait of 2-3 years. The other operators, China Telecom and China Unicom, are still expanding their 3G systems and are unlikely to welcome another migration and investment for some years either.
By contrast, Brazil and Russia may make more rapid progress to-wards mobile broadband. Both are experiencing significant growth but have 3G and wireline infrastructures which are too fragmented and inconsistent to support that effectively, so there are powerful incentives to accelerate the move to LTE, which could support fixed and mobile needs in these vast countries.
In Russia, the government's approach to accelerating LTE rollout, even before many frequencies have been freed up, has been to encourage the creation of a single network to be shared by the four main carriers. This is to be built and run by former Wimax start-up Yota in the spectrum it already holds for mobile broadband, with the three cellcos and fixed line giant Rostelecom all using it for initial LTE services, and potentially taking stakes in Yota.
There have been various disputes around this plan and even reports that the mobile players – MegaFon, MTS and VimpelCom – would abandon the scheme and go their own way. However, many of the arguments must have been ironed out, as several participants have now signed formal agreements, raising hopes that 4G commercial services could appear in 2012. Yota has obtained the signatures of MegaFon, the country's second cellco, and Rostelecom.
The former agreement does not just allow the cellco to ride on its LTE network, but gives it additional sites and infrastructure on which to expand its system. Yota will be able to use MegaFon's 120,000 kilometers of fiber and more than 25,000 GSM base stations to build out its 4G RAN. Rostelecom has a more conventional MVNO agreement, which will allow it to offer LTE services to its 100 million users. MTS and VimpelCom, however, are still to sign.
Other operators may come into play too. For instance, there is the controversial start-up Osnova Telekom, which is 25% owned by Defence Ministry-controlled Voyentelekom. It said recently that it intends to pursue frequencies in the 790-MHz to 862-MHz band for LTE. This would support a dual-purpose network, offering commercial services as well as a highly secure subsystem for the government and the Ministry of Defence. However, it also wants high frequencies for urban capacity, and may be allowed to keep some experimental licences it had in 2.3GHz.
The idea that it might be awarded the latter frequencies without any competitive process angered Rostelecom, which had previously been awarded 39 of the 40 available concessions, as well as the main three cellcos, which protested against anti-competitive distribution of licences and said that creating a 4G federal communications network from scratch could cost as much as $7 billion. The row shows how complicated the Russian situation remains, but also the urgent demand that exists for new networks.
Meanwhile, Brazil's government is preparing three spectrum auctions for next year and is starting consultation on a fourth process, all geared to increasing mobile data capacity. The first two sales will be in 2.5GHz and 450MHz, and should take place in April, followed by a second swathe of 3.5GHz spectrum later in the year. And the regulator is kicking off plans to auction the 700MHz digital dividend frequencies.
Telefonica and America Movil, the head-to-head regional giants in Latin America, are both expected to bid for 2.5GHz licences to sup-port LTE rollouts. Joao Batista de Rezende, head of the Anatel regulator, said in an interview: “The Brazilian market will guarantee return on investment. From the conversations I'm having, no-body is going to miss out on this kind of spectrum, because that would mean missing out on 4G.” Other candidates are likely to include Telecom Italia's Brazilian unit, TIM Participacoes, as well as Tele Norte Leste, NII Holdings and Vivendi‟s Global Village Telecom.
The 450MHz band is a more unusual allocation, though it was used for 1G services and has been refarmed for CDMA in some parts of eastern Europe, Asia and elsewhere. Its low frequencies make it ideal for low cost coverage of sparsely populated areas and so it will help address the vast underserved regions of Brazil, especially in the period when carriers are waiting for the other – and more standardized – sub-1GHz option in 700MHz. Because this is the initial LTE band for the US, it will bring its adopters a broader device ecosystem, and better roaming opportunities, than 450MHz.
Anatel is also preparing an auction in the second half of 2012 for the 3.5GHz band, which has traditionally supported Wimax or fixed wireless. There is no LTE profile in this band but it can be used for short range video and data services, and particularly for backhaul and enterprise links. “It strengthens the data transmission infrastructure of the big companies,” Rezende said. “Mobile service is going to need more frequencies in the future.”
By the end of 2012, Brazil will have offered 764MHz of spectrum to cellcos but it needs 980MHz by 2015 to keep up with demand, according to the ITU. The 700MHz band will help with that target, but as elsewhere, it needs to be freed up by its broadcaster incumbents. They are expected to leave the band by 2016 as they switch to digital TV services.
Latin America's first LTE network
In general, Latin America is hampered by its controversial system of heavy spectrum caps and by a proliferation of spectrum bands, hindering roaming or cross-border alliances, though there are greater attempts to harmonize new LTE spectrum allocations on a uniform band plan. The massive presence of the two giants, Telefonica and America Movil, will ensure heavy investment and can help achieve pan-regional efforts and roaming, but their head-to-head can also be a dampener on other competitors and therefore on innovation. However, while we would not expect the region to gain LTE services on anything like a widespread basis until mid-decade, there are some very interesting developments in certain, mainly urban, areas.
The region actually got its first commercial LTE service this month, with small nation Uruguay claiming the crown. The incumbent carrier Antel switched on its 4G network on Tuesday in capital Monte-video and the upmarket coastal resort area of Punta del Este, a popular retreat for wealthy Argentinians and other tourists. Cover-age will be extended to other parts of the country over time, the state-owned operator said, without going into detail. The base sta-tions, packet core and backhaul equipment were supplied by Alcatel-Lucent, which will also offer provide maintenance services.
Earlier this year, Uruguay's government designated spectrum in the 2.5GHz and 700MHz bands for LTE services, in line with the band plan common to many parts of the Americas. Field trials began in May, with the administration chiefly interested in the potential to improve home broadband access in underserved areas.
Another key driver in Latin America is the pay-TV sector, which holds large amounts of spectrum, particularly in the MMDS bands around 2.5GHz. This was originally for fixed and broadcast use, but many regulators agreed to allow mobile broadband services in re-cent years. The spectrum has been used for Wimax in some countries such as Argentina and Mexico, and now operators are looking to the growing option of TD-LTE – once considered years behind its FDD cousin, but now close to being commercially viable (indeed, there are live networks in a few countries such as Saudi Arabia and Poland).
In Brazil, DirecTV subsidiary Sky Brazil is an example of the region's TV/TD-LTE community, which may prove an alternative to the big two telcos in offering quad play services. Sky has launched a TD-LTE service in capital Brasilia and will expand this to other cities next year. Initially it is targeting under-served broadband households, using equipment from Nokia Siemens, but in time will add mobility and video.
Tomorrow: the China market, TD-LTE comes of age.