3G or 4G? Parsing the economics of mobile broadband
GSMA technology director Dan Warren explains why some operators are running head-first toward LTE while others are holding back
Verizon Wireless (NYSE:VZ, NYSE:VOD) is jumping into long-term evolution (LTE), launching its first networks this year, while AT&T (NYSE:T) is taking a little more time, planning its rollout in 2011 and upgrading its 3G network in the interim. In Japan, there’s a similar story. NTT DoCoMo (NYSE:DCM) is as gung ho over LTE as its Verizon, but Softbank Mobile appears to be in no hurry.
Why are some operators rushing forward with LTE while others are content to wait? One simple explanation is the distinction between CDMA and UMTS service providers: CDMA operators, with no migration path remaining on their 3G networks, are proceeding immediately to 4G, while UMTS providers, with plenty of upgrades left for their high-speed packet access (HSPA) networks. That’s only a partial explanation, though. It’s true many CDMA providers—Verizon, Sprint (NYSE:S), KDDI, MetroPCS (NYSE:PCS)—have been quick to adopt LTE, but in Canada Telus (NYSE:TU) and Bell Mobility (NYSE:BCE) have opted to deploy HSPA networks to compliment their CDMA networks. Meanwhile, HSPA operator DoCoMo will have one of the first LTE launches in the world, followed by Nordic operators TeliaSonera, Tele2 and Telenor.
Another generalization is that business model determines the deployment: Operators interested in offering true mobile broadband services are launching LTE sooner rather than later. Again, this explanation holds only so much water. While true for operators like Verizon and DoCoMo, MobilKom Austria and Australia’s Telstra are aggressively pursuing mobile broadband access businesses with souped-up 3G networks.
The truth is the reasons why an operator goes 4G can’t be boiled down to a simple rule, said Dan Warren, director of technology for the GSM Association. Rather, each operator faces a broad and varied set of factors when marking the decision to move to 4G. The competitive landscape in the operator’s territory, the market demand for mobile broadband, its spectrum holdings or the availability of future spectrum, and its financial position are all factors. But even if all of those factors work in an operator’s favor, 4G isn’t necessarily a given. The most critical factors in determining an operator’s near-term technology path, Warren said, are the age and status of its current 3G network.
The older a 3G network, the longer an operator has been recouping its investment in mobile data, clearing the financial hurdles for a major investment in a new 4G network. In addition, the age of an operator’s equipment determines how easy it is to upgrade to more advanced HSPA technologies or LTE—if even an option, Warren said.
“If you have shiny new equipment in your network, it will be much easier to upgrade than if you have old equipment,” Warren said. “The guys who have older equipment pay for their upgrades through the nose.”
NTT DoCoMo is the perfect example, Warren said. It was the first operator to launch a UMTS network in 1999, long before the industry had perfected HSPA. While DoCoMo has been upgrading the speed and capacity of its networks like anyone else, it has been essentially forced to retrofit its old base stations for the new HSPA software upgrades. Meanwhile Softbank’s later deployment of 3G used later-generation base stations built with HSPA upgrades in mind.
“NTT has equipment in its network that is very obsolete, while Softbank has more recently made its investment,” Warren said. “NTT is at the point where every upgrade to 3G is more painful than the last, while Softbank has hit the point where its equipment is good enough [that] it can continue upgrading 3G relatively cheaply.” On the financial side of the equation, DoCoMo has milked its 3G Foma network for all it’s worth, generating from it almost 10 years of operating profits. With a longer return on its 3G investment, DoCoMo is in a much better position to justify a new investment and a new network. Meanwhile, Softbank launched its first UMTS network at the end of 2002, but most of its heavy investment in 3G came in 2004. “Softbank, I suspect, aren’t in a position to go to LTE right now, not without writing off a significant proportion of their current business,” Warren said.
Want to use this article? Click here for options!
© 2014 Penton Media Inc.
In this Webinar you will learn how to create a real-time relationship with your customers, how to proactively improve the customer experience, and how to successfully target and cross-sell services to boost incremental revenue.
- Megabytes to Megabucks, Bandwidth to Business Models: How 4G Is Changing Everything
- How to Unplug Your Redundant Telco Apps To Save Money and Improve Efficiency
- When IaaS Isn't Enough: Service Provider Business Models to Drive Growth and Build Margin
- How to Transform Your Aging Telco Voice Network to Drive New Profits and Revenue
- Creative Licensing Approaches for Telcos & Their Network Equipment Vendors
- Smart Home Opportunity: Balancing Customer Data & Privacy
This paper discusses the rise of Diameter and benefits of Diameter Protocol.
- Conducting The Orchestration – Order Management at the Speed of Business
- Toward a Converged Network Edge
- Beyond Spam – Email Security in the Age of Blended Threats
- 6 Important Steps to Evaluating a Web Filtering Solution
- The Expertise to Protect You from Botnet and DDoS Attacks
- Seeing is Believing – Bridging the Order Visibility Gap
Service providers are under tremendous pressure to turn up new services faster then before and, at the same time,
to do it at less expense - and intra-office fiber is one of the biggest challenges in terms of both cost and service
From the Blog
Join the Discussion
Get more out of Connected Planet by visiting our related resources below:
Connected Planet highlights the next generation of service providers, as well as how their customers use services in new ways.Subscribe Now