MetroPCS to skip 3G with LTE rollout?

Mike Dano

While the LTE adventures of Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T) and LightSquared have managed to capture the bulk of the market's attention, regional, flat-rate carrier MetroPCS (NYSE:PCS) continues to plow ahead with plans to launch an LTE phone and corresponding prepaid service by the end of this year.

But what exactly will MetroPCS' LTE service look like? According to company filings and industry experts, MetroPCS' move to 4G probably won't carry many of the attributes--super-fast speeds and revolutionary new services--typically associated with fourth-generation wireless technologies. Instead, MetroPCS' LTE service probably will look a lot like most carriers' 3G services.

Interestingly, MetroPCS has long been a rider in the LTE bandwagon. The carrier said way back in August 2008 said it would deploy LTE services, and in September 2009 MetroPCS named Ericsson and Samsung as equipment suppliers and set a launch goal of year-end 2010. Finally, earlier this year MetroPCS promised to offer the Samsung SCH-r900 LTE handset in Las Vegas and other, unnamed markets by the end of this year.

Interestingly, according to a recent MetroPCS filing with the Securities and Exchange Commission, that LTE rollout may well stretch across much of the carrier's footprint: "We are planning to design, roll-out and begin selling LTE services in most of our currently served metropolitan areas by the end of 2010," the carrier said in a May filing.

It's an ambitious project for a small carrier--and MetroPCS faces some significant challenges. First, the carrier's LTE buildout likely will sit primarily in the carrier's AWS spectrum holdings (1710-1755 and 2110-2155 MHz). According to Signals Research Group, MetroPCS owns 20 MHz of AWS spectrum in Las Vegas, where it plans to launch LTE later this year, and the FCC recently approved the Samsung SCH-r900 with AWS and 1900 MHz bands. This means MetroPCS is using spectrum for LTE that is quite different from the 700 MHz airwaves that behemoths Verizon and AT&T plan to use for their respective LTE buildouts. Thus, MetroPCS likely won't benefit from the economies of scale derived from purchasing the same equipment as its larger rivals, nor will it initially be able to offer roaming (unless suitable devices are built to support AWS-700 MHz handoffs).

When questioned, a MetroPCS representative declined to discuss the details of the carrier's planned LTE rollout.

Perhaps more importantly, MetroPCS warned in its SEC filing that its forthcoming LTE network might not wow users with lightening-fast downloads.

"In some cases, because of the limited amount of spectrum available to us in certain metropolitan areas, we will be required to deploy LTE on 1.4 or 3 MHz channels," the carrier said.

Michael Thelander, founder and CEO of Signals Research Group, explained that 1.4 MHz is the smallest channel that can be reasonably used to deploy LTE. In comparison, Verizon Wireless plans to devote up to 10 MHz to LTE. Because MetroPCS is squeezing LTE into such a narrow spectrum channel, the carrier likely won't be able to provide data speeds beyond what are available through today's 3G networks.

"With a skinny LTE channel, it's not really going to be better than HSPA," Thelander predicted. (Today's 3G networks provide around 1 Mbps downloads, while Verizon said it will provide around 8 Mbps via LTE.)

However, Thelander noted that MetroPCS' spectrum holdings range from 700 MHz to 1700 MHz to 1900 MHz, which means the carrier may be able to mix and match bands in order to provide faster speeds (though it also will also be forced to mix and match equipment, which could be an expensive proposition).

So why does MetroPCS seem hell-bent on deploying LTE this year? What benefit does the carrier gain by beating Verizon Wireless to the market with an LTE handset? (Verizon has said it won't offer LTE handsets until next year.)

The answer, quite simply, is that MetroPCS doesn't have much of a 3G network. The carrier said it only offers CDMA EV-DO connections in one or two markets (and declined to provide specifics), and offers texting, talking and data service to the vast majority of its subscribers via a CDMA 1xRTT network--which typically supports data speeds of around 100 Kbps. MetroPCS is basically leapfrogging 3G with a 4G play, likely with an eye toward boosting the speeds of its LTE offerings via additional spectrum purchases, technology innovations and possibly partnerships with the likes of Leap Wireless (NASDAQ:LEAP) or others (think Clearwire (NASDAQ:CLWR) or LightSquared).

MetroPCS executives talked up the benefits of LTE during the company's first-quarter earnings conference call, confirming the technology will reduce MetroPCS' cost-per-bit and noting capacity is cheaper on LTE than on CDMA. Company executives also said MetroPCS had conducted successful LTE calls in Dallas and Las Vegas, and that the carrier will focus on providing a "premium service at an affordable price" via LTE Qwerty phones and smartphones. (Interestingly, on that same call MetroPCS executives dismissed a question about partnering with Harbinger, explaining that the carrier prefers to build its own network.)

So what does this all mean? It means MetroPCS is poised to offer flat-rate services via LTE this year--a notable action considering the growth in both U.S. prepaid and data usage. But Metro isn't really alone in the area: Sprint Nextel's (NYSE:S) Dan Hesse continues to hint at a prepaid WiMAX offering, and Metro's rival Leap recently confirmed it tested LTE in San Diego with equipment from Huawei.

Metro's move to LTE probably will help the carrier maintain its footing among its data-savvy rivals, but don't expect it to generate the same buzz as buildouts by Clearwire, Verizon or Harbinger. --Mike

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