How cheap is 4G? -- revisited

Given that this week’s Mobile World Congress in Barcelona is turning into a long-term evolution feeding frenzy, I feel it’s only appropriate that we take another look at a column I recently wrote exploring the operational efficiencies of 4G. The column, which delved into a study AT&T presented at ATIS about the cost of delivering a megabyte of data over an LTE network, drew a lot of disbelief from readers, so I promised to get in touch with the study’s authors, Analysys Mason, to further parse their numbers. It’s a good thing I did.

If a cost of 13 cents to deliver 1 Mbyte of data over LTE seemed extremely high to you, that’s because it is. The slide presentation Hank Kafka, vice president of network architecture for AT&T, gave at ATIS’s LTE conference last month had numbers that were off by one decimal point. Instead of 13 cents per megabyte, the number should be 1.3 cents (or 1 euro cent) per megabyte. Consequently, the cost of delivering 1 Gbyte of data over an LTE network comes to $13, not $130 as I originally concluded. AT&T made what was obviously an innocent mistake in the preparation of the slides, and it certainly wasn’t their intention to generate controversy. But since the column drew so much attention, I felt it best to revisit the issue in a new column, as well as take the opportunity to bring in Terry Norman, senior analyst with Analysys, for his take on the LTE cost-efficiency debate.

But first let’s rehash the (corrected) numbers. According to Analysys, An LTE network running at full capacity on a 5 x 5 MHz channel could deliver 1 Mbyte of capacity to a user at the cost of 0.01 euros. In comparison, it costs an operator running a standard UMTS network in the same configuration 0.06 euros to deliver the same amount data, while the newest high-speed packet access (HSPA) networks can ship 1 Mbyte for 0.03 euros.

I should point out, though, that while the numbers I originally quoted were off by a factor of 10, the mathematical relationship between them remains the same. The implication is that an LTE network can deliver data three times as cheaply as the HSPA networks AT&T and T-Mobile run today. The question remains whether a three-fold increase in operational efficiency is enough to support the future mobile broadband services the wireless industry is touting. $13 is certainly a lot less expensive than $130 for a Gbyte of data, but laptop data card users will certainly have expectations of consuming more than 1 Gbyte of data per month. The LTE pipe won’t just be more efficient, it will be fatter, so applications that don’t work well over 3G networks today — video streaming, large file downloads — will be much more accessible in a 4G world and drain far more resources from the network.

Analysys’ Norman agreed that demand for larger amounts of data will always increase, just as the price customers expect to pay for that data falls, but he said it is counterproductive to scoff at technology just because it can’t achieve the highest level of demand. “In a greedy world where you can have everything you want, it’s never enough,” Norman said. “In a realistic world, though, this is significant improvement. The incremental gains are certainly enough to justify LTE being rolled out.”