Below is an extract from this 14 page Telco 2.0 Report that can be downloaded in full in PDF format by members of the Telco 2.0 Executive Briefing service and Future Networks here. Non-members can subscribe here and for this and other enquiries, please email contact@telco2.net / call +44 (0) 207 247 5003.

We will be looking further at the role of LTE as an element of the strategic transformation of the telco industry at the invitation only Executive Brainstorms in Dubai (November 6-7, 2012), Singapore (4-5 December, 2012), Silicon Valley (19-20 March 2013), and London (23-24 April, 2013). Email contact@stlpartners.com or call +44 (0) 207 243 5003 to find out more.

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Taking the pulse of LTE

Introduction – NGMN 2012

In June, Telco 2.0 attended the main annual conference of NGMN in San Francisco. NGMN is the “Next Generation Mobile Network” alliance, the industry group tasked with defining the requirements for 4G networks and beyond. (It is then up to 3GPP and – historically at least – other standards bodies, to define the actual technologies which meet those requirements). Set up in 2006, it evaluated a number of candidate technologies, it eventually settled on LTE as its preferred “next-gen” technology, after a brief flirtation including WiMAX as well.

The conference was an interesting mix of American and Asian companies, operators (with quite a CTO-heavy representation), major vendors and some niche technology specialists. Coincidentally, the event also took place at the same time as Apple’s flagship annual developer conference at the Moscone Center across the road.

Although it was primarily about current LTE networks, quite a lot of the features that feature in the next stage, “LTE-Advanced” were discussed too, as well as updates on the roles of HSPA+ and WiFi. Some of the material was outside Telco 2.0’s normal beat (for example the innards of base station antennas), but there were also quite a lot of references to evolving broadband business models, APIs and the broader Internet value chain.

Key Take-Outs

In some countries, LTE adoption is happening very quickly – in fact, faster than expected. This is impressive, and a testament to the NGMN process and 3GPP getting the basic radio technology standards right. However, rollout and uptake is very patchy, especially outside the US, Korea and Japan. They are still problems around the fragmentation of suitable spectrum bands, expensive devices, supporting IT systems and the thorny issue of how to deal with voice. In addition, many operators’ capex budgets are being constrained by macroeconomic uncertainty. What also seems true is that LTE has not (yet) resulted in any substantive new telco business models, although there is clearly a lot of work behind the scenes on APIs and new pricing and data-bundling approaches.  

We are also impressed by the continued focus of the NGMN itself on further evolution of 4G+ networks, in resolving the outstanding technical issues (e.g. helping to drive towards multiband-capable devices, working on mobilised versions of adaptive video streaming), continuing the evolution to ever-better network speeds and efficiencies, and helping to minimise operators’ capex and opex through programmes such as SON (self-optimising networks).

LTE adoption: accelerating – but patchy

One key conclusion from the event was the surprisingly rapid switch-over of users from 3G to 4G where it is available, especially with a decent range of handsets and aggressive marketing. In particular, US, South Korean and Japanese operators are leading the way. The US probably has the largest absolute number of subscribers – almost certainly more than 10m by the end of Q2 2012 (Verizon had 8m by end-Q1, with MetroPCS and AT&T also having launched). But in terms of penetration, it looks like South Korea is going to be the prize-winner. SKTelecom already has more than 3m subscribers, and is expecting 6m by the end of the year. More meaningfully, the various Korean presenters at the event seemed to agree the penetration of LTE could be as high as 50% of mobile users by the end of next year. NTT DoCoMo’s LTE service (branded Xi) is also accelerating rapidly, recently crossing the 3m user threshold, with a broad range of LTE smartphones coming out this summer, in an attempt to take the wind out of Softbank’s iPhone hegemony.

Figure 1: South Korea will have 30m LTE subs at end-2013, vs 49m population

This growth is not really being mirrored elsewhere, however. At the end of Q1, TeliaSonera had just 100k subscribers (mostly USB dongles) across a 7-country footprint of LTE networks, despite being the first to launch at the end of 2009. This probably reflects the fact that smartphones suitable for European frequency bands (and supporting voice) have been slow in arriving, something that should change rapidly from now onwards. It is also notable that TeliaSonera has attempted to position LTE as a premium, higher-priced option compared to 3G, while operators such as Verizon have really just used 4G as a marketing ploy, offering faster speeds as a counter to AT&T – and also perhaps to give Android devices an edge against the more expensive-to-subsidise iPhone.

Once European and Chinese markets really start to market LTE smartphones in anger (which will likely be around the 2012 Xmas season), we should see another ramp-up in demand – although that will partly be determined by whether the next iPhone (likely due around September-October) finally supports LTE or not.

To read the note in full, including the following sections detailing support for the analysis…

…and the following figures…

• Figure 1: South Korea will have 30m LTE subs at end-2013, vs 49m population
• Figure 2 – Juniper: exposing network APIs to apps
• Figure 3 – Yota is wholesaling LTE capacity, while acting as a 2G/3G MVNO
• Figure 4 – A compelling argument to replace old public-safety radios with LTE
• Figure 5 – NTT DoCoMo made a colourful argument about LTE spectrum fragmentation