We have heard very little about the applications expected to drive new revenues through LTE. This is reasonable in that we believe web access will be the key data revenue generator for operators. To the end user, LTE will simply offer greater bandwidth. It remains unclear how operators will monetise this faster network.
Firstly, operators can't charge for additional speed that they can't guarantee. Secondly, they may want to charge a premium, but history suggests that this will only be possible for additional value-added services or new devices at the outset, and it will be eroded very quickly.
Conversely, vendors' marketing messages emphasise increased capacity, more efficient management of data traffic and faster service provisioning. Therefore, LTE's key benefit will be to reduce OPEX. If revenues are unlikely to grow, then at least margins will not be eroded by increased data traffic costs.
These premises overlooks a key issue: migration. The arguments about reduced OPEX may be true when an operator's entire customer base is on LTE, but how long will that take‾ We still do not have blanket 3G coverage in Europe. Considering that LTE requires even greater cell density, LTE's timeframe could be even longer.
Mobile operators will still need to support 2G and 3G networks while LTE achieves full coverage. But it is not just the radio access network. Billing, provisioning and service assurance will still need to be supported for 2G and 3G networks during this transition phase, which is likely to last eight to ten years.
Then there is backhaul. Current solutions will be insufficient for the anticipated traffic. Fibre offers the best option for LTE, so operators will need to add fibre backhaul deployment to their total LTE migration expenditure.
The result threatens to be even greater network complexity, undermining the argument for greater simplicity and efficiency.
Network operators need to view the impact of LTE in the same way as NGNs in the incumbent space - as part of a process for transforming their business to adapt to an IP-centric world. It is not simply a new layer in the radio access network, but a major overhaul of the business. As a result, it will also take time and money beyond network deployment.
To benefit from LTE's promised efficiencies, operators must embark on a long term mission to strip out legacy networks, systems, business processes and working practices. In parallel they will need to implement new operational systems and processes to effectively manage the new architecture.
Our recent report Telco transformation: best practice looked at incumbent fixed and integrated operators, yet the conclusions resonate with a mobile world moving towards LTE. One of the key findings was that operators need to shift their focus from being technology, product and network based, and move towards becoming software-led, service-driven and customer-centric businesses.
This is also true for mobile operators.
"¢ senior management must rigorously communicate the objectives, methods and mission;
"¢ the organisational structure and functions must support customer centric processes;
"¢ customer segments should be characterised through needs-based segmentation;
"¢ telcos should aim to reduce customer support touch-points, requiring changes in data management, business intelligence, service assurance, billing and CRM to ensure that the customer experiences a seamless interface;
"¢ the use of agile business processes and third parties (such as system integrators and application developers) for outsourced, hosted or managed services to reduce costs and improve time to market.