3G or 4G? Parsing the economics of mobile broadband

A similar—though by no means identical—situation exists in the US. Verizon and AT&T are the largest operators in a country where demand for mobile broadband is growing quickly. Both have sizable amounts of new spectrum for 4G, and both are faring well financially and operationally despite the economic recession. Verizon is jumping into LTE immediately though, launching its first trial networks this year, followed by a commercial rollout in mid-2010. Meanwhile, AT&T has moved up its LTE plans but is pursuing a far less urgent timeline, planning a commercial launch of unknown scope in 2011, while continuing to upgrade to faster versions of HSPA and eventually HSPA+ in the interim.

“Verizon has a 3G roadmap that stops and falls off quickly,” Warren said, so Verizon doesn’t have the choice of software upgrades. It’s new networks or nothing at all. But Verizon is also furthest along the 3G path than any other US operator. In 2004, VZW launched its first commercial EV-DO networks, which were themselves upgrades to its existing CDMA 1X network built at the turn of the millennium. Meanwhile AT&T was relatively late to the 3G scene, completing its nationwide HSPA footprint as recently as last year. But by arriving late, AT&T also deployed what was at the time the most state-of-the-art equipment, making it the first operator to simultaneously deploy UMTS and HSPA, thus future-proofing its entire footprint for all the future iterations of 3G.

Since then, however, several UMTS operators have leapfrogged AT&T in capacity. MobilKom has boosted its capacity HSPA’s upper limit, 14.4 Mb/s per carrier channel, and Telstra has moved to HSPA+, offering 21 Mb/s. AT&T, meanwhile, is in the process of upgrading from 3.6 Mb/s to 7.2 Mb/s. Other factors besides technology influenced those individual operators’ decisions, Warren said. Telstra deployed an Australia-wide network over low-frequency spectrum, aiming to get as much capacity as possible into highly spread-out cells. AT&T may have an easy upgrade path on HSPA but it’s likely limited by its backhaul links, Warren said. Until it can fiber or high-capacity microwave to all of its cell sites, AT&T will have to perform its upgrades more gradually, he said.

While today’s operators have generally fallen into two categories--those with older networks and those with newer networks—there is a third category of operator: those with brand-spanking-new networks. Operators that have deployed 3G networks in the last year have base stations that can support all or part of an upgrade from 3G to LTE, Warren said. Telus and Bell Mobility immediately come to mind, Warren said. “They’re in the most flexible position right now. They’re in a position to do either HSPA or LTE on the same equipment in the future. For them LTE could be just another upgrade.”

Cox Communications, though a CDMA operator, is in the same position. Cox’s latest generation Huawei Technologies’ IP radio access gear is “LTE-ready,” according to the vendor, though deploying CDMA and LTE on widely different frequency bands might complicate any direct upgrade.