Few would dispute that the two defining technologies of the past 20 years are mobile telephony and the internet. With the development of LTE (Long Term Evolution) the two are fusing. Mobile and the web have changed society, relationships and commerce dramatically, but the business is following a curiously familiar arc.
With LTE, the alphabet soup of acronyms that mark mobile telephony largely goes away, because all transmission is based on packet switching governed by the Internet Protocol (IP). All message content, whether voice, video or text, becomes a single data stream. According to Cisco’s Visual Networking Index, global mobile data traffic will grow 26-fold between 2010 and 2015, reaching 6.3 exabytes per month.
There are currently differences in how people access LTE, since devices use either different frequencies or different timeslots into which they insert their data packets. But these too will disappear with LTE-Advanced.
This means that core networks can become much simpler and cheaper. All they have to do is route and switch packets from their source to their destinations, at vast speed. The basic LTE hardware market has three elements: base stations, small cells, and user devices. But it is the availability of suitable frequencies, the cost of the right to use them, and thus the need to optimise the efficient use of that spectrum that determines what products emerge.
In Europe and the US, LTE tends to operate in paired frequencies where uplink and downlink traffic run on different frequencies (frequency division, FD-LTE), but much of the action is driven by China Mobile’s decision to champion the separation of calls and responses by time (time division, TD-LTE). China Mobile’s 600 million customers are a powerful commercial argument for the technology.
LTE networks use licensed frequencies in bands between 700MHz and 2.6GHz, including existing 2G and 3G bands. Market researcher Wireless Intelligence predicts there will be 38 different frequency combinations used in LTE deployments by 2015. It warns that this ‘fragmented scenario’ risks creating an ecosystem where handsets are expensive due to lower economies of scale, and users will find it difficult to roam freely, reducing LTE’s global appeal (see table, page 10). But we’ll come back to this later.
Only 50% of European mobile phone users are on a 3G network 10 years after the spectrum auctions, Wireless Intelligence said. It forecast that the three South Korean operators will migrate half their respective subscribers to LTE in just under three years, based on how quickly they migrated them from 2G to 3G technologies.
To avoid repeating the European scenario, the US Federal Communications Commissioner Julius Genachowski is fighting Congressional efforts to restrict the FCC’s freedom to conduct spectrum auctions.
‘While Europe led in getting to scale for 3G, we have a strong early lead in getting to scale for 4G because the US was first to open its airwaves,’ he said in a keynote speech at January’s CES (Consumer Electronics Show) in Las Vegas.
Stefan Zehle, CEO of spectrum consultancy Coleago, has a different view. If no new spectrum is made available, he said, networks may become congested.
‘As a result, prices for mobile broadband will increase and the return on capital employed will increase. There are no cash outflows to purchase spectrum and no new deployment capex. As free cash flow increases, share values increase. Furthermore, without new spectrum the threat of new market entry is blunted,’ he said.
Great for incumbents, less so for consumers. Does this matter? Genachowski notes that the US captures 30% of all internet revenue worldwide and more than 40% of net income.
Fortunately, more spectrum is becoming available, firstly through the ‘digital dividend’ of frequencies abandoned as television broadcasters switch to digital broadcast, and in the form of ‘white space’, frequencies that separate existing licensed users (see feature, page 18).
If Genachowski and the UK’s communications regulator Ofcom have their way, white space will be free-to-air. He said the unlicensed nature of these ‘junk frequencies’ led to innovations that produced cordless phones, Bluetooth, and Wi-Fi. He noted that mobile operators have shifted from scorning Wi-Fi technology to depending on it to relieve congestion in their cellular networks (see feature, page 14).
Much has been made of ‘digital dividend’ spectrum in the 700MHz and 800MHz bands, as well as the newly allocated 2.6GHz band, as key 4G/LTE frequencies. But recent research by the GSA (Global Mobile Suppliers Association) suggests that 1800MHz spectrum ‘will emerge as a prime band for LTE deployments in virtually all regions of the world’, with vital importance for international roaming. In its January report, the GSA counted 48 LTE projects that use 1800MHz, with 15 already commercial.
By the end of 2011, the GSA totalled 49 commercial LTE networks in 29 countries, adding that 226 operators in 76 countries had made LTE commitments, and a further 59 in 17 more countries were running pre-commitment trials. There is likely to be a roughly 60:40 split between FD-LTE (paired frequency) and TD-LTE (unpaired frequency) networks, it said.
The ‘usual suspects’ are involved in the development of LTE networking equipment, ranging from single boxes to complete end-to-end solutions. These include Nokia Siemens Networks (NSN), Alcatel-Lucent, Ericsson, Motorola, Huawei, ZTE, Tekelec, and Samsung. They are being joined from the data networking and WiMAX side by Cisco, Alvarion and Ruckus Wireless, among others.
‘Global 2G/3G/4G cellular network infrastructure revenues are set to reach over $51bn by 2015, up from $46bn in 2010 at a CAGR of 5%, with LTE accounting for more than 20% of revenue,’ said market researcher Mind Commerce.
North America accounted for over 42% of the total LTE infrastructure revenue in 2011. However, it expected Asia-Pacific to account for over 68% of the revenue by 2015. It said Ericsson and Alcatel-Lucent probably led the market with market shares of over 35% and 27% respectively.
The hardware market is still immature, judging from the differences between regions. US-based market researcher NPD In-Stat reported that Huawei was the leading supplier of LTE base station equipment in Europe last year, followed by Ericsson and Nokia Siemens Networks (NSN). Together the three accounted for more than 90% of LTE base stations, it said. Samsung, which grabbed a full quarter of the Asia-Pacific market in 2011, won less than 1% of Europe.
Chris Kissel, senior analyst at In-Stat, said success now was more about the purchasing cycle of carriers, especially large carriers, than about the region. Almost half of Huawei’s 2011 LTE base station wins was due to Vodafone in Germany, he said, while most of Samsung’s estimated 10,000 base stations went to the South Korean operators LG Uplus, KT and SK Telecom.
Kissel expected NSN, with its renewed focus on broadband carrier systems and 17,000 less workers, to grab the top spot in the European LTE base station equipment market in 2015. Ericsson, with its focus on low ARPU markets, will take top spot in Eastern Europe despite Huawei having half the present installed base, he predicted.
A feature of the LTE market is the wide range of ‘points of presence’ (POPs). These range from the traditional ‘macro’ sized base stations through micro, pico and femtocells. Some are for outside installation, others, usually pico and femtocells, are for indoor coverage.
Kissel estimated there will be over 400,000 LTE POPs in European countries by 2015, and more than a billion in Asia-Pacific. He said that LTE networks will generate 50% of last mile backhaul demand in North America by then.
Many POPs will be multi-band devices, and, crucially, support Wi-Fi. In a white paper on LTE, Hewlett-Packard noted that data traffic will this year outstrip even LTE’s carrying capacity, making off-loading via Wi-Fi essential to avoid congestion.
In the UK, O2 says it is already considering a combined cellular/Wi-Fi base station for its free Wi-Fi deployment in central London and the Olympic Park. It is already using its temporary 2.6GHz licence to implement an NSN-supplied LTE network in central London.
CES 2012 in Las Vegas was awash with LTE devices, mainly because, except for T-Mobile, the US network operators are expanding their LTE coverage as fast as they can, and new operators like LightSquared plan to offer commercial services this year.
The GSA counted just under 200 LTE-enabled devices at the end of 2011. CES will have boosted that number. At the event, AT&T unveiled the Nokia Lumia 900, the Windows LTE phone that Nokia hopes will help it claw back market share in the highly competitive smartphone market.
It faces stiff competition from all quarters, especially the Chinese, with Huawei and ZTE showing off extensive ranges of routers, modems, phones and even personal mobile hotspots. For example, Huawei unveiled its E392, claimed to be the world’s first LTE TDD/FDD/UMTS/GSM multi-mode USB modem, as well as a modem and a router that both support LTE Category 4 and offer 150/50Mbps down/upload speeds.
Missing from the hoopla was support for Voice over LTE (VoLTE), despite the industry conducting successful interoperability tests in mid-2011.
Ericsson, Huawei, Intel Mobile, RADVISION, Samsung, and ST-Ericsson tested VoLTE over a complete live LTE infrastructure from Huawei that included LTE-enhanced radio access (eNB), Evolved Packet Core (EPC), and IMS (IP Multimedia Subsystems).
The tests covered functions such as LTE voice call establishment, supplementary services (OIP, OIR, TIP, TIR, HOLD and three-way conferencing) and connectivity to legacy services. There will be more tests later this year. Despite this, In-Stat’s Kissel estimated that by 2015, there will be 290 million LTE subscribers, of which about half will be using LTE handsets.
Following a survey of 30 LTE operators in Europe, the US and Asia-Pacific, the Tariff Consultancy (TCL) is more conservative. It predicts 250 million LTE subscribers by 2016, but says prices will drop 60% over the next five years.
It says operators are pitching LTE as a premium product, based mainly on high theoretical data download speeds, as high as 150Mbps, says Zain Saudi Arabia.
Data caps average 22GB per month, but range from 80GB (Sweden) to much less (North America), for an average of €50 per month on a 24 month postpaid contract. Per gigabyte costs range from €0.5 (Sweden) to €9.90 (Lithuania), and throttling is severe, down to 64kbps, for excess usage.
NTT Docomo plans to provide 98% population coverage by 2014, following a $5bn, three year investment programme, according to Ryuji Yamada, CEO and president of Japan’s largest operator. In a video interview with Mobile World Live Yamada said Docomo will expand its line-up of LTE-enabled devices offer ‘attractive LTE billing plans’ including free voice services; and increase network capex. ‘We will aim to increase the [LTE] population coverage to 98% percent by fiscal 2014,’ he said.
TCL says there is already evidence of price erosion, mainly in Asia-Pacific. ‘Average pricing per subscriber will decrease to around €20 per month – a decrease equivalent to more than 60% over the next five years,’ said TCL MD Margrit Sessions.
‘Operators will have to bundle other services into their LTE offer and develop more compelling user-based applications and content services,’ she said. Now, where have we heard that before?
• 49 commercial LTE networks have been launched
• 45 LTE FDD systems
• 3 LTE TDD systems
• 1 dual-mode LTE FDD-TDD system
• GSA forecasts 119 commercial LTE networks by end of 2012
• 269 LTE user devices launched, including 48 smartphones
• 285 operators investing in LTE
• 226 network commitments in 76 countries and 59 pre-commitment trials