Ops push 4G wholesale model

OvumWe recently attended the LTE World Summit in Amsterdam. Larger operators espoused the virtues of LTE in the 1800MHz band, which they feel offers the best balance between coverage and capacity. We were also struck by the specter of fragmentation of which spectrum bands will be used for LTE as more networks go live, which risks setting back LTE roaming and undermining the key principle of LTE as a global standard. However, we were also drawn to the calls for industry transformation coming from two of the smaller, newer, and most disruptive players – Yota and LightSquared.
The industry needs to transform
The hardest-hitting message from the event actually materialized on the second day: the telecoms industry needs to fundamentally adapt to a new environment. Presentations from Yota of Russia and LightSquared from the US portrayed the evolution to LTE as part of a wider industry transformation. Their views practically endorse the conclusions of our Telecoms 2020 series, in which telcos must adopt a far more network-centric approach (LEAN – low-cost enablers of agnostic networks) or become full-service SMART (services, management, applications, relationships and technology) players.
In line with our LEAN scenario, Yota was first to declare that its recently announced deal to become the single wholesale LTE provider to Russia’s mobile network operators (MNOs) was an example of how the industry should evolve. Yegor Ivanov, Yota’s networks and business development vide president, supported this view with the fact that the spectrum at 2.6GHz and level of investment available in Russia for LTE would be insufficient to meet the market’s needs. He also cited an excellent example of how other industries separate infrastructure from services: airports don’t operate airlines and airlines don’t operate airports.
This view was echoed by LightSquared, which proclaimed the era of the vertically integrated telco as over. As such LightSquared would not be retailing its services. It also elaborated on what this restructured approach means to a telco. LightSquared is ruthlessly focused on cost and its primary focus is the network, so operational activities are outsourced.
As a result, it aims to have no more than 500 employees. To reinforce the point, LightSquared quoted a survey of 2,000 Amazon Kindle users. Only about one third of respondents knew who provided their connectivity. Better examples of the LEAN model in action will be difficult to find.
LTE 1800MHz depends on re-farming
The message proffered at the event by the ‘traditional’ MNOs focused on the need for additional spectrum and in particular the desirability of using spectrum at 1800MHz for LTE. From a practical perspective 1800MHz spectrum offers a good balance between the most common LTE bands of 800MHz for coverage and 2.6GHz for capacity. Operator after operator queued up to espouse the virtues of this frequency band and called on regulators to either allow the re-farming of existing spectrum or make available unallocated spectrum blocks at 1800MHz more promptly.
Deutsche Telekom went first in the conference’s opening address, and TeliaSonera followed. It has a live LTE network using spectrum in the 1800MHz band in Lithuania and will be launching shortly in Finland and Denmark too.
Cosmote followed later in the afternoon and then on the second day Hong Kong’s CSL reinforced the 1800MHz mantra by describing how soon it will be using its 1800MHz spectrum for both 2G technologies and LTE.
However, for all the operators’ clamoring to endorse the merits of the 1800MHz band, it is important to remember the practicalities of using this spectrum in the near term. As it is widely used around the world for GSM, and UMTS soon, regulators need to re-farm existing spectrum.
This creates two issues. Firstly, the timing in which frequencies are cleared of existing use can delay availability. Secondly, as seen in the UK, this can bring cries of unfairness, policy implications for supporting competition, possible legal challenges, and delays where considerable inequalities in the distribution of spectrum exist.
In general it is recent entrants and pure 3G operators, which lack holdings in the lower spectrum bands, which are in the weakest positions and thus most adversely affected by such changes. This perspective was reinforced at the conference by German MNO E-Plus, which highlighted the competition implications of who currently has 1800MHz spectrum and how much – and who will be best placed to procure any newly released frequencies.
Re-farming is gaining momentum around the world in response to pressure for more liberal management of spectrum, but we certainly do not see it being a smooth path or moving rapidly everywhere. As such, we believe that the 800MHz and 2.6GHz bands will remain the most popular for LTE in the near future.
Roaming risk
Another recurring spectrum theme at the conference was that of the disparate bands being used for LTE disrupting the global standardization originally promised. To illustrate the extent of the problem the event featured presentations from Deutsche Telekom (which currently operates LTE at 800MHz in Germany), TeliaSonera (1800MHz and 2.6GHz currently, 800MHz soon), Verizon (700MHz), NTT DoCoMo (2.1GHz currently and 1500MHz shortly), CSL (2.6GHz and 1800MHz shortly), and LightSquared (1500–1600MHz). Furthermore, Huawei emphasized the role of TDD spectrum, which muddies the water further.
Today these multi-band deployments make minimal practical difference as uptake is still small. It is contained by small customer numbers on only a small number of networks, reducing the likelihood that a user will want to roam onto another network with their LTE modem. However, as customer numbers increase so will the chances that they will want to roam and it is at this point that fragmentation becomes an issue.
The event offered little hope. TeliaSonera announced that it now has a tri-band 800MHz, 1800MHz, and 2.6GHz modem that it is distributing to support roaming across its own Nordic and Baltic footprint. It is also true that certain bands are proving more popular than others, particularly in Europe (for example, 800MHz, 2.6GHz and the increasingly popular 1800MHz mentioned above). Therefore, regional roaming is most likely. However, further afield the situation is as hazy as it was in the 2G and 3G worlds. CSL is pushing for 1800MHz and 2.6GHz for roaming, while the US and NTT DoCoMo in Japan will continue to hold very different spectrum.
One solution is simply to use multi-mode radios that cover all the spectrum bases in one chipset, as claimed by Altair. However, although the chipsets may exist, it does not appear that multi-band devices will be commercially attractive to vendors. One only has to look at the limited availability of even quad-band GSM devices. As such, it looks as though a truly ‘world phone’ will be as far away on LTE as it is today.