LTE to follow very different path from 3G
We have not waited as long for the “year of LTE” as we did for the “year of 3G,” with real progress seen during 2011.
While most carriers have only deployed the 4G system for trials or limited capital city metrozones so far, and the majority remain primarily focused on 3G+, there are several operators which are racing towards broad coverage and experimenting with new services. Verizon Wireless is the flagship, but we are seeing innovative cloud-based services arriving on the shiny new networks of SK Telecom and the Japanese cellcos. There has also been remarkable progress, mainly in the US, in get-ting advanced LTE devices to market.
However, big challenges remain before LTE will become a viable option for the bulk of the world's cellcos. Chief among these will be spectrum policy and fragmentation – which bands carriers can access in various territories; whether they will secure enough bandwidth to deliver the kind of services which will differentiate them in 4G; the problems of building device ecosystems and roaming alliances around many frequencies; and the split between TDD and FDD modes. There are also the issues of supporting voice, especially before most operators have full IMS installed.
A new geographical pattern for wireless
The issues around spectrum availability – the timing of auctions and the regulatory attitudes to refarming 2G or 3G bands - are the key decider in how quickly a country will see widespread LTE services. In a survey of about 200 mobile operators round the world, Rethink Technology Research found that well over half of them – about 58% - would be able to justify 4G build-out in terms of demand for data (in emerging economies, often as a fixed access system). So – in contrast to early 3G – there is a requirement for LTE in most economies, and the main brakes will come from the regulators, the device makers and the operators' own profit models. These will decide the pattern of roll-out in the period to 2015, to a greater extent than varying levels of consumer demand.
The different spectrum approaches will create a very different geographical pattern to the one seen in 3G, whose early years were dominated by the advanced economies. The early adopters have tended to be CDMA carriers, which lack the HSPA community's extensive roadmap to upgrade 3G technologies before taking the plunge into 4G. While many HSPA operators will keep that platform, and its successive updates, at the heart of their data strategies at least until mid-decade – toying with LTE for specific metrozones or, conversely, rural access – CDMA cellcos are under far greater pressure to move quickly to a more universal system.
This has weighted early roll-out to areas where CDMA is strong, notably the US but also parts of Asia, while Europe – the home of the 3G spectrum bubble of the end of the twentieth century – is more focused on HSPA+.
This has often complicated the discussions about new auctions and refarming, although most western European regulators are eager to free up new mobile broadband capacity and to see LTE used for universal broadband plans. However, some of the markets which have been mobile leaders in the past are now being overtaken by countries which were considered laggards in 3G. A dramatic example of the contrast in 3G and 4G regional maps is seen in comparing the UK, always a mobile frontrunner, with the Middle East, where services have been very restricted and backward until recently.
The UK is unlikely to see widespread build-out until 2015 after a succession of delays to the auction of 2.6GHz and 800MHz spectrum, held up mainly by the quarrels between its main cellcos over allocations in the sought-after sub-1GHz bands. Vodafone and O2 have their 2G networks in 900MHz, and Everything Everywhere, the largest player (but with 1.8GHz frequencies for GSM) argues that these two operators could refarm their old spectrum and so should be restricted in how much 800MHz digital dividend band-width they can acquire.
Its rival counter that 900MHz will be a less attractive band for LTE, with a more limited global ecosystem, and the situation is further complicated by the fears of the smallest player, 3G-only 3UK, that it will be disadvantaged in the auctions. A series of proposals on caps and auction rules, plus various legal actions, have taken the UK from being in line to hold the first 4G spectrum auction in Europe, to likely being one of the last.
By contrast, the Middle East region, often held back by bureaucracy and slow-moving nationalized operators, is now seeing a chance to leapfrog 3G and move quickly to LTE. According to analyst James Bennett of SNS Telecom, the Middle East will have nearly 8 million LTE subscribers by the end of 2015 despite its relatively small population, and from 2012 will have among the highest growth rates in the world (197% CAGR from 2011 to 2015). There have been three commercial LTE launches in Saudi Arabia (Zain, STC and Mobily) plus a roll-out in the UAE by Etisalat, and there are 26 further LTE commitments in the area.
A major driver is rural broadband, since outside the cities there are sparse populations and little fiber or DSL. The region has also proved a catalyst for the development of LTE's junior branch, in TDD, since the dominant band in Saudi Arabia is TDD-based 2.3GHz. By 2013, most cellcos will also be refarming their 1.8GHz spectrum in Saudi and neighboring countries. However, an obstacle for the area will be the general lack of sub-1GHz spectrum available, which will make the economics difficult in more rural parts.
The Middle East, then, is a non-traditional star in the cellular sky, as are some other LTE early movers like Uzbekistan (which has two live networks) and Uruguay, Latin America’s first commercial LTE operator as of this month. The US has taken an unaccustomed leading role because of Verizon Wireless (though MetroPCS actually got to LTE first), and now also has commercial services from AT&T as well as Sprint's complex Wimax/LTE mesh of alliances (see separate item on USA). Some leaders remain predictable though – the Scandinavians, led by TeliaSonera, and the operators of Japan and Korea.