Will LTE rescue mobile operators?

• Two flavours of LTE complement each other; spectrum fragmentation, device ecosystem are challenges
• WiMax operators have upgrade path via TD-LTE , but plans to do so still uncertain in the SEA region

ANALYSIS WITH the advent of Long Term Evolution (LTE), mobile operators are gearing up for what many industry observers believe to be one of the most important inflection points in the wireless business since the industry went from analogue to digital.
 
At the centre of this evolution is whether or not the use of LTE will be able to boost operators’ flagging average revenue per user (ARPU) rates, decrease the capital and operational expenditures (capex/ opex)  of their networks, and enable them to squeeze more bandwidth and capacity out of the frequency spectrum they own.

All this set against a backdrop in which voice revenues are dropping and tariffs are becoming more commoditised.
 
Overall, LTE has had a strong year in 2012 as the number of new commercial networks more than doubled and subscriber growth remained strong, according to Ovum.
 
The London-based tech research firm however noted that much of that subscriber growth remains concentrated in a few markets where operators have been most aggressive in deploying networks. This concentration of subscribers in a few markets most likely won’t change for several years.
 
“The LTE landscape in 2013 will be much like it was in 2012," said Daryl Shoolar, principal research analyst with Ovum, in a research note. “The number of new commercial networks will continue to increase, but the number of subscribers will remain concentrated in a few markets – Japan, South Korea and the United States.”
 
Network rollout strategies
 
As explained in our article on April 30, LTE comes in two variants – Frequency Division (FD-LTE) and Time Division (TD-LTE).
 
To date, much of the world’s LTE deployments are based on the FD-LTE variant as this is the most natural upgrade path for traditional cellular operators due to the fact that 3G is based on a frequency division scheme.
 
However, the deployment of LTE – whether FD-based or TD-based – is far from straightforward, as it does not merely involve swapping existing 3G base stations for LTE ones.
 
Several issues face operators today and these are complex in nature and involve a blend of technical, regulatory and marketing challenges, all of which need to be addressed before LTE can be profitable.
 
Ovum’s Schoolar (pic) said that in terms of network deployments, not all are equal as outside the three key main markets of Japan, the United States and Korea, LTE deployments are focused on being utilised for capacity rather than for coverage.
 
“Operators that only have spectrum in higher bands such as 2600MHz have limited their deployments to a few select areas that need a capacity injection due to high congestion,” he said in Ovum’s report entitled “The LTE Outlook for 2013.”
 
“These operators appear to be waiting for lower spectrum bands before they build out widespread network coverage,” Schoolar explained. “In the meantime they offer LTE as a 4G ­hotspot service. [In general the lower the frequency, the better the coverage; higher frequency bands have better bandwidth capacity but poorer coverage when it comes to in-building penetration].
 
Moreover, Schoolar noted that operators are happy to extend the life of their 3G networks instead of aggressively deploying LTE because they have invested billions of dollars in their 3G networks, with some still not having fully recouped the cost of their investments.
 
“For those operators it makes better financial sense to increase network capacity through HSPA+ [the next evolution after 3G which some term 3.5G] upgrades than it does to install a new LTE network.”
 
That said, Schoolar pointed out that the development of TD-LTE can boost the adoption of LTE as it is part of the overall LTE standard and can therefore take advantage of the economies of scale that come with the more widely-deployed FD-LTE.

“Some of these economies of scale include shared research and development (R&D) resources in infrastructure and semiconductor development,” Schoolar explained. “This shared resource extends to devices where smartphones are expected to support both types of LTE.”
 
For operators that are fortunate enough to own both sets (TD and FD) of spectrum licences, TD-LTE can also provide extra capacity to a 4G network.
 
Noting that the growth of data traffic has motivated operators to look at ways to expand their network capacity, Schoolar said TD-LTE could also be deployed in conjunction with FD-LTE to expand existing network capacity.
 
“One example of this is Softbank in Japan, which has deployed a multimode TD-LTE and FD-LTE network, and 3 in Sweden, albeit on a smaller scale.”

Next page: The WiMax conundrum