Rural operators once acted as slow followers when it came to the next generation of mobile technology, but the proliferation of smartphones and other data-hungry devices along with the marketing noise made by larger operators around 4G has driven rural players to roll out LTE as quickly as possible. However, these players face a number of challenges--regulatory, competitive and cost--on their road to LTE.
"Most of our members want to move forward on a 4G platform, but it's difficult to make those plans and commitments when you still have problems in accessing devices and figure out who the nationwide roaming partner in the 4G world will be if there is no data roaming," said Steve Berry, president of the Rural Carriers Association (RCA).
According to 4G Americas, there are 29 LTE networks in 19 countries across the globe, and a significant number of those are set to be in the United States. Click here for a larger version of this chart.
700 MHz interoperability
One of the largest issues facing rural operators when it comes to their LTE rollout plans is the FCC's rulemaking 11592, which has been pending with the FCC for nearly two years. Rural operators want the FCC to mandate that 700 MHz LTE equipment incorporate all bands in the 700 MHz band. A filing by a group of Tier 2 and Tier 3 wireless operators working under the "700 MHz Block A Good Faith Purchasers Alliance" banner charges that the two biggest winners of 700 MHz airwaves--Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T)--are essentially blocking competitors by issuing requests for LTE equipment that can only work on the 700 MHz band classes they acquired at auction, and not the band classes held by smaller wireless players. Unlike the past PCS and AWS spectrum auctions, interoperability was not mandated for the 700 MHz auction.
A number of smaller operators acquired 700 MHz spectrum licenses in the Lower A, B and C Blocks, which lie in band class 12. The 700 MHz Block A Good Faith Purchasers Alliance argues that AT&T and Verizon are using their size and weight to encourage network equipment makers to build equipment that only supports the 700 MHz band classes that they own.
AT&T, Verizon and a handful of vendors take issue with the filing, saying that incorporating all bands would stifle technological innovation and is technically challenging. These operators say market forces should dictate interoperability.
Automatic data roaming
In April, the FCC mandated automatic data roaming but with caveats that still hurt rural operators, Berry said. The rules say that operators offering roaming may negotiate terms on an individualized basis, and may condition effectiveness of the roaming deals by making sure the carrier seeking to roam on its network offers service with a generation of technology comparable to the one they want to roam on. So if Verizon and AT&T don't incorporate Band 12 in their networks, they won't be compelled to sign a roaming deal. Verizon has appealed the data roaming order.
Berry said the uncertainty around universal service (USF) reform is also hurting the LTE buildout plans of rural operators. The RCA is concerned that the FCC is seriously considering a proposal from landline operators that would see the bulk of USF money going to landline operators.
"Under this current proposal, just 10 percent of USF money would be left for wireless," Berry said. "That is an issue that is of significant concern because many carriers are building out in areas that are the most difficult and costly to reach ... A lot of operators have slowed down their plans because they don't know if they are going to lose 20 percent of their revenue under a new USF plan."
But rural operators aren't sitting on their hands. Their customers are demanding new services.
Verizon's rural LTE licensing program
"We're definitely seeing demand already," said Barry Nothstine, vice president of sales and marketing with the Kentucky-based operator Bluegrass Cellular. "3G was more of a slow-burn rollout, but 4G is coming so much quicker, and the demand is there because of customer usage and devices. On our social media and Facebook page we have folks asking us weekly when 4G is going to arrive."
As such, several operators--despite owning their own 700 MHz spectrum--have signed on to Verizon's rural LTE licensing program. Using leased spectrum in Verizon's 700 MHz upper C Block, these operators are planning to build and operate their own LTE networks, leveraging Verizon's economies of scale and infrastructure and device relationships. That means the networks will serve both Verizon customers and the customers of all rural operators who make LTE deals with Verizon.
Verizon Wireless has deployed LTE to roughtly 160 million POPs.
Barry said this route is one being taken by operators because they have a fiduciary responsibility to keep their businesses competitive via 4G. They simply can't wait for these regulatory uncertainties to clear up.
Bluegrass Cellular was one of the first to sign on with Verizon's rural LTE licensing program. Despite holding its own 700 MHz spectrum that has buildout requirements attached to it, the operator decided to lease Verizon's spectrum as swift go-to-market strategy.
"We already had a solid relationship with Verizon through our roaming agreements. This is the speediest way to offer 4G LTE to our customers in our home markets and roaming environment," Nothstine said, also noting that Bluegrass competes with Tier 1 operators in its markets.
Bluegrass Cellular has yet to announce its timeline for rolling out LTE, but it is actively filling new positions to prepare for its rollout.
The NetAmerica Alliance emerged earlier this year as a way to give rural operators the economies of scale they need along with significant reductions in capital expenditures as they roll out their networks
The alliance has teamed with independent 700 MHz and AWS spectrum license holders that agree to build out their regions using LTE as part of a consortium. NetAmerica wants to give member rural network operators improved buying power, nationwide branding, 24/7 network monitoring, 4G core network elements and other services. It made a deal with Ericsson in March that calls for the world's largest vendor to offer LTE radio functionality, evolved packet core, IP multimedia subsystem and a family of LTE-centric home and small business gateways for its members.
"Teaming with us means that operators can be a part of a national brand and gain huge buying power," said Roger Hutton, CEO of NetAmerica. "We operate the NOC (network operations center) and core application, handle application development and distribution and negotiate roaming arrangements for them. They do all that and get the benefit without giving up their individuality ... All the alliance does is bring critical mass."
Born out of Hutton's consulting company, NetAmerica offers a number of services for rural operators, including business-case evaluation, a propagation plan, a full capital build-out plan and assumptions for how operators can build out their licenses. To date, the company has three announced members: Peoples Telephone Cooperative of Quitman, Texas; Gilmer, Texas-based Etex Telephone Cooperative and Panhandle Telephone Cooperative in Oklahoma.
Hutton said the company is currently engaged in some capacity with more than 100 rural operators.
Other operators are working hard to find alternative cost-effective deployments of LTE. Some operators, such as ClearTalk Wireless, have decided to sign a wholesale deal with LightSquared, which plans to roll out a wholesale nationwide LTE network in satellite spectrum. LightSquared's rollout plans, however are in limbo as the company waits for approval from the FCC amid concerns that its signals interfere with GPS.
Cellular South: Going it alone
Cellular South is building its own LTE network by the end of 2011. Late last year, the operator announced a strategic alliance with Samsung Telecommunications America for the vendor to supply equipment and LTE Band Class 12 LTE smartphones, which won't be able to roam on Verizon's network.
Berry said RCA is working hard to find smartphone manufacturers willing to incorporate chips that are compatible with band 12, 17 and 13 so that rural operators have comparable technology to enter roaming agreements. But he conceded that it will take some time.
"Rural operators are not sitting still," Berry said. "They are working hard. But the problem is with policy decisions that have still yet to be decided. They have to run faster and harder to just stay in the same place."