LTE gestation to take time

By Edwin Yapp March 20, 2013

LTE comes to town, albeit rolled out at 1,800MHz; market not ready for 2,600Mhz deployment
Muted ad campaigns good for industry; focus should be on coverage rollout, handset ecosystem and competitive pricing

Periscope by Edwin Yapp

ANALYSIS Now that Long Term Evolution (LTE) has somewhat arrived in Malaysia, our mobile operators can finally say that they have joined the ranks of developed nations like the United States, the United Kingdom, Hong Kong and Singapore which are implementing the most advanced wireless technology to date.

Maxis Communications Bhd got the jump on everyone else here when it announced that it was the first local operator to go live with its LTE network. As reported on Jan 2 on Digital News Asia, Maxis claims to be the first “true” fourth generation (4G) network in Malaysia, with a roll-out in selected parts of the Klang Valley including Taman Tun Dr Ismail, Damansara Utama, Desa Sri Hartamas, Bandar Puchong Jaya, Bandar Sunway and Cyberjaya.

Customers would enjoy speeds of up to 75Mbps, with typical average speeds of 10 to 30Mbps, on the Maxis 4G LTE network, the company claimed. The service will be available in other areas very soon, it added.

Maxis went a step further when it launched two 4G LTE smartphones,the Nokia Lumia 920 and HTC One XL, the first two devices to be activated on the cellular provider’s 4G LTE network. The company claimed that with these handsets, subscribers will be able to enjoy higher surfing speeds and a better overall experience.

To put things in perspective, it’s important to note that Malaysia’s 4G LTE frequency spectrum assignment is actually on the 2,600MHz band, and all licensees are to operate on these bands for their respective LTE deployments.

That said, some operators today already own the license to the 1,800MHz band. Since there are no conditions that stipulate what kind of technology should be used at these frequencies, operators such as Maxis have cleared the use of their 2G and 3G technologies and migrated LTE onto parts of its 1,800MHz band.

The reason for doing this is simple.

Currently, there are very few, if any, handsets that are based on the 2,600MHz spectrum. Much of what is available on this frequency band are mobile broadband dongles which are used to connect to laptops most of the time, and not used as mobile devices.

LTE gestation to take time According to Daryl Schoolar, principal analyst for network infrastructure at Ovum, LTE at 1800MHz (LTE1800) is the most common spectrum band among commercial LTE operators.

“Of the 154 commercial LTE networks, 68 are LTE1800, and this includes Singapore,” he tells Digital News Asia (DNA) in an interview. “Overall, LTE1800 is very popular in the Asia Pacific region, where it is currently used by 17 operators."

Schoolar says he expects the adoption of LTE1800 to grow and this will help drive more handset support for the spectrum band.

“The Global mobile Suppliers Association (GSA) currently estimates that 25% of all LTE devices support the 1800MHz band, so deploying LTE at 1800MHz is a smart move on the part of Maxis,” he adds.

But what of the other players that have been assigned the 2,600MHz LTE spectrum? What can we expect from them in the coming months?

Nicole McCormick, senior analyst with Ovum, believes that Maxis’ main competitors, Celcom and DiGi, won’t be that far behind in bringing LTE services to market because they do have a great impetus to do so – that of lowering the 'per-bit-cost' of their respective networks.

“This makes LTE a compelling strategic decision for operators, including those in Malaysia, who are currently spending large sums on network modernization programs,” she says.

Asked what kind of strategies operators will employ to make the transition from 1,800MHz to 2,600MHz, Schoolar says, “LTE1800 and LTE2600 will be used together, along with other bands. LTE1800 is better for coverage and will thus be used where that is needed, whereas LTE2600 will be used to enhance capacity in metropolitan areas. Device support for LTE2600 should be strong, as it is a common global brand.”

Pricing strategies

LTE gestation to take time From a pricing point of view, Maxis seems to have not made any differentiation between its older 3G packages and its LTE offering.

Ovum’s Schoolar says based on what he has seen in the United States, which currently leads the world in LTE subscribers, Maxis has taken the correct pricing strategy.

“In the United States, three things have helped drive adoption, the first being the availability of a variety of LTE smartphones,” he explains. “The second is that the operators have built, or are building, large scale LTE networks that are trying to duplicate the existing 3G and 2G coverage. And the third is pricing data as data, and not trying to differentiate based on 3G or 4G."

Schoolar notes that in other markets such as Western Europe, some operators have priced LTE services at a significant premium and have only deployed their networks in limited areas, something that he said had led to much lower uptake.

“The risk is that these operators will alienate those high average revenue per user (ARPU) customers who signed on early to LTE as the price of these services will inevitably decline,” he says.

McCormick adds that LTE pricing decisions are market specific. For example, she says operators that offer low speed 3G services (14.4Mbps) can justify moderate premiums for LTE, while operators with extensive 42Mbps services may see a premium as unjustified.

“Those operators that do not charge a premium for LTE (Malaysia, Singapore, Australia, KPN in Holland and soon 3UK) need to ensure they have compelling services to drive usage and clear up-sell paths for consumers.”

Managing expectations

LTE gestation to take time For LTE to take off in a big way, my belief is that the three aforementioned key ingredients – a thriving handset ecosystem, adequate LTE coverage and competitive and undifferentiated pricing – must not only be all there but also be experienced by users in a consistent manner.

After all, it’s in no one’s interest to have LTE coverage when there are no handsets to support the technology. Neither is it beneficial if you have the handsets and the coverage but the price is too prohibitive for users.

From this perspective, it’s good to note that the local mobile operators have not gone to town with their LTE advertisements as yet. Besides Maxis, which may have had bragging rights as the first to offer LTE services, other operators have somewhat tempered their expectations of what LTE can do for the average Joe.

This is a good sign in the industry as perhaps our mobile operators have finally learnt that putting the user cart before the technology horse isn’t a good thing as such moves will only come back to bite them.

As I’ve argued in a previous column before, mobile operators must get their basics right before going to town with the next advertising blitz of the next best technology. It happened with 3G, and HSPA to a lesser extent, but in those days, too much emphasis had been placed on how wonderful 3G speeds were, what it could do for users and why users should sign on.

The fact is, for LTE to really make an impact locally, the market would need the support of LTE handsets at the 2,600MHz band, and not merely at the 1,800MHz band. Specialized dongles for laptops and fixed-modems replacements, IMHO, will not be enough to spur the market.

Realistically speaking, LTE may have arrived in Malaysia but the gestation period for it to really take off in a big way would range from two to three years.

Only then can we truly say that we are an LTE-enabled nation.

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