LTE Capex About to Take Off

Between now and the end of 2014, the spend on Long Term Evolution (access networks and packet core) will rise fourteen-fold, from $320 million to $4.5 billion, and the EU will account for between 35 and 40 percent of the global total.

After 2014, as emerging economies start to roll out LTE more widely, the EU percentage of the total market will fall, but its spending will continue to rise for the rest of the decade.

Yankee Group :: Research Report

Will 4G be Different from 3G, and if So, How?

Exactly how 4G products and services evolve is highly uncertain at this time and very similar to when wireless operators first deployed 3G networks, Fitch Ratings argues.

For 3G networks, the industry did not offer a good view of this until smartphones, in particular the iPhone and other similarly oriented devices, drove significant consumer uptake for broadband data, as opposed to the earlier growth provided by 2G email services.

Longer term, Fitch expects the majority of operators should achieve data device penetration rates of at least 70 percent to 80 percent. If so, mobile broadband will collectively represent the killer app for 3G. But what about 4G? Is it just "3G with more speed," or something else?

Fitch expects that 4G services will likewise be defined by innovative devices, perhaps tablet oriented, with new content applications, including video that will drive significantly increased demand for data. If so, 4G might ultimately be different from 3G in providing a platform for different types of end user experiences.

There is a line of thinking that the value of 4G might initially accrue in large part from significantly-lower the cost per-bit costs to provide mobile broadband. Verizon Wireless, for example, believes the cost to deliver a megabyte of data on 4G with LTE will be half to a third of the costs of a 3G network.

But if the 4G experience is anything like what we've seen with 3G, it might take years for the answer to be found.

Sprint Board Members Depart Clearwire

Sprint Nextel Corp. executives serving on the Clearwire Corp. board of directors have left the board, the Wall Street Journal reports.

Sprint Chief Executive Dan Hesse and fellow executives Keith Cowan and Steven Elfman have resigned from the Clearwire board. A spokeswoman for Sprint said the company plans to appoint independent successor directors in the next few months. In the meantime, Sprint has named its general counsel, Charles Wunsch, as an independent observer to the Clearwire board.

Clearwire said that the resignations were prompted by recent changes in antitrust laws, but the move could also could provide Clearwire added flexibility to pursue a deal of some sort that might bring T-Mobile USA into Clearwire as an equity owner, for example.

On the other hand, some speculate that Sprint might also have an opportunity to increase its stake, as other shareholders such as Comcast Corp. have signaled they are unwilling to provide additional funding Clearwire requires. A move of that sort might not require a greater arms length relationship with Clearwire, though.

Clearwire said the move came "out of an abundance of caution to address questions raised by Clearwire

Clearwire's board structure allows for 13 members, seven of which Sprint has the right to appoint. The remaining four independent Sprint appointees to the Clearwire board remain.

Since Clearwire and Sprint compete at the retail level, the current board membership has proven awkward, observers note.

In some ways, it is hard to see any long-term solution that does not have Sprint acquiring a larger stake in Clearwire. Whether a firm the size of Sprint can live, long term, with buying its crucial 4G services from a firm it also competes with is open to question.

Sprint Nextel also faces the complexity of operating several different air interface networks (iDEN, CDMA and WiMAX). Those problems are not directly related to the size or control of the Clearwire network, but could become even more complicated if Sprint adds Long Term Evolution services at some point.

Clearwire to Launch Prepaid Services

Clearwire plans to launch a new prepaid service for users of its WiMAX fourth-generation (4G) network. The apparent effort likely will attempt to entice more-casual users to buy service before competing HSPA+ and Long Term Evolution networks launch and basically eradicate the bandwidth advantage Clearwire has had since 2008.

http://sec.gov/Archives/edgar/data/1442505/000095012310081459/v56755e8vk.htm

Verizon Thinks Customers Will Pay a Premium for LTE Access

Verizon Wireless executives beleive they will be able to charge customers a premium for access to the new Long Term Evolution network. John Killian, Verizon Communications CFO, says the company has said in the past, and continues to believe, that consumers will pay a premium for LTE quality and premium speed.

(Click on image for larger view)

Others are not so sure. But one way of describing the potential impact  is to look at Clearwire net additions in the second quarter of 2010.

As of June 30, 2010, 52 percent of the company's wholesale subscribers resided outside of Clearwire's currently launched markets, Clearwire says. That's the impact of revenues paid by Sprint Nextel HTC Evo users who live in areas where all they can get is 3G network access.

Of course, that is an indirect indicator, as the net additions were driven by consumer demand for the Evo device, which does require an additional $10 a month payment--not directly for the 4G network, Sprint is quick to point out.

Still, now having had a chance to use the 4G and 3G networks Sprint and Clearwire operate, there is a clear latency advantage for the 4G network, which should be experienced on the Verizon LTE network as well. Sites load noticeably faster on 4G than they do using the 3G network.

Killian says Verizon Wireless LTE speeds will be eight times to 10 times the speed of the 3G network. If that turns out to be true, and there is every reason to believe it will be, consumers likely will make the same value-price decisions they already make for fixed service, namely that there is an expectation higher speed costs more than lower speeds.

Devices also will make a difference, though. Obviously, enough people thought the Evo was worth buying that a $10 a month surcharge did not seem to deter many of the earlier adopters. And though the surcharge is not specifically related to 4G access, more than half of Clearwire's wholesale net adds (Sprint is a wholesaler) were from customers unable to get access to the 4G network immediately.

That is more a test of Evo demand than 4G, but it is illustrative. Consumers might well value faster mobile broadband enough to pay more, especially when bundled with attractive new devices.

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Clearwire LTE Plans Won't Be Long In Coming

Clearwire and Sprint Nextel have been dropping clear hints that Clearwire could adopt Long Term Evolution as an air interface, either alongside its existing WiMAX network or as an eventual replacement.

Since the U.S. wireless industry has been through technology transitions before, it isn't hard to suggest how it might happen, and when. Companies have had to make transitions from one air interface to another within a single generation of technology, as well as migrating customers from an older generation to a new generation.

Where one air interface is switched out in favor of another within a technology generation, the trick is to add all new customers to the new interface while allowing the legacy base of customers to dwindle through attrition. At some point, the old network then can be shut down without undue disruption.

Where an older generation network is replaced by a next-generation network, additional spectrum also is required. If Clearwire wants to shift air interfaces within the fourth generation, it would maintain current customers on WiMAX, while creating a new LTE network alongside WiMAX, signing up new customers on LTE, and allowing WiMAX customers to gradually shrink through attritiion.

That suggests Clearwire will not want to wait too long, as it will want to limit the number of WiMAX customers it has to support while the LTE network is populated with customers.

As an operational matter--and there are other issues to consider--moving sooner is better than moving later, especially given the larger number of customers now coming onboard on the WiMAX network because of the popularity of the Evo.

On the other hand, abrupt action is not required, or even preferable, as the practical details of interworking between LTE and WiMAX, in the core of the network, will have to be proven, in a full deployment mode.

Handset suppliers will also need some time to ready suitable handsets that interwork, as devices now can use either the 2G and 3G networks, or 3G and 4G networks. Alternatively, Clearwire could encourage single-network devices.

With most consumers on two-year contracts, and a natural handset replacement cycle that runs two to three years, customers can be moved to LTE as they replace their current WiMAX devices.

The point is that Clearwire has plenty of spectrum, and industry executives have lots of experience with technology transitions. It will take some planning, and some time, but it is a normal and expected part of the business that air interfaces and networks are changed, at least every 10 years, and sometimes sooner, for other business reasons.

LTE Tests Signal Clearwire Is Serious

Clearwire Announces LTE Tests

The other shoe has not yet formally dropped, but Clearwire now says it will conduct Long Term Evolution tests across its network, including both tests of frequency division and time division versions of LTE, plus the ability of LTE air interface technologies to coexist harmoniously with the existing WiMAX air interface already in use.

The tests do not definitively confirm a partial switch to LTE, but are a concrete bit of evidence that LTE will be part of Clearwire's future.

Clearwire intends to conduct FDD LTE (Frequency Division Duplex) tests using 40 MHz of spectrum, paired in 20 MHz contiguous channels, of its 2.5 GHz spectrum. Clearwire expects to confirm the capability to produce real-world download speeds that range from 20 Mbps to 70 Mbps. This is expected to be significantly faster than the 5 Mbps to 12 Mbps speeds currently envisioned by other LTE deployments in the U.S., which will rely on smaller pairs of 10 Mhz channels or less.

Clearwire will concurrently test TDD LTE (Time Division Duplex), in a 20 MHz configuration, which is twice the channel size currently used in its 4G WiMAX deployments.

Clearwire will also test WiMAX co-existence with both FDD LTE and TDD LTE to confirm the flexibility of its network and spectrum strength to simultaneously support a wide-range of devices across its all-IP network.

My own anecdotal experience with Clearwire's network is that, as you would expect, 4G is faster than 3G. But I have to say my experience also points out how much end user application latency is to be found elsewhere in the delivery ecosystem, such as the far-end servers. I also would observe that the 4G network signal seems more fragile than the 3G signal. Even in areas with both 4G and 3G available, the 4G often loses enough signal strength that my smartphone defaults back to 3G.

I'm not complaining, just noting that, as with many earlier increases in access bandwidth, faster is better, up to a point. If nothing else, having more access bandwidth simply points out latency elsewhere in the ecosystem.

Clearwire

Verizon Wireless 4G Caps "Unfair"?

Verizon Wireless boss Lowell McAdam reportedly said at a Barclays Capital conference that Verizon Wireless likely will move away from unlimited plans on the 4G Long Term Evolution network, instead charging for 'buckets' of megabytes.

That is one more sign of the direction the entire industry will take. Some observers think this is somehow unfair. They sometimes base this belief on the lower "cost per megabit per second" or "cost per transferred megabyte" of a 4G network, compared to a 3G network.

It is no more inherently unfair than a company lowering its headcount, wage rates, reducing advertising or any other steps it may take to keep costs in line with anticipated revenues.

The fundamental trend in the communications business is that the "retail price" of bandwidth keeps dropping. When that happens, providers must sell more units to maintain flat revenue. In a business that also has major declining lines of business, any entity must, over time, reduce its costs in line with the revenue drops in those lines of business as well.

The net effect is a need for greater efficiency, and the lower cost per bit of a 4G network is part of that effort, as much as it is a hedge against constantly-growing bandwidth demand.

Moore's Law adequately captures the typical pace of semiconductor density change. But most of the rest of the natural world cannot improve its performance metrics at that pace. Not batteries, not construction, transportation, manufacturing or marketing cost. Greater efficiency in the transmission network is simply part of preparing for a future where bandwidth costs, per unit, will keep squeezing.

Verizon looking at non-unlimited plans for 4G data

LTE of 100 Mbps at 75 Km

Telstra and Nokia Siemens Networks have conducted groundbreaking trials of Long Term Evolution networks in Australia, successfully achieving peak speeds of 100 Mbps download and 31 Mbps upload over a record-breaking distance of 75 kilometers in regional Victoria.

Performance of that sort helps explain why, after years of wrangling, Telstra has agree to essentially divest itself of its fixed-line network and become a wholesale buyer of capacity to support its fixed-line operations.

As has been the case elsewhere, incumbent carriers can be persuaded to trade away an access near-monopoly for something else of tangible value. For some, it is the ability to expand in non-traditional markets outside the existing footprint. For others it is a chance to invest in higher-growth or higher-margin businesses.

For Telstra, the LTE carrot is more appetizing than the structural separation stick.

IT-Online - LTE world-first trial achieves 100Mbps at 75km

FCC to Allow "Re-Purposing" of 90 MHz of Mobile Satellite Spectrum

The Federal Communications Commission has initiated a proceeding to free up 90 MHz of spectrum
for mobile broadband by removing barriers to flexible use of satellite spectrum allocated for other purposes.

The FCC already has approved the Harbinger-SkyTerra transaction, which will enable Harbinger to
invest billions of dollars in building a 4G wireless network using spectrum that includes spectrum in the mobile satellite service bands that originally were licensed for mobile satellite only. Under new rules, that spectrum can be used for terrestrial fourth-generation mobile use as well.

The FCC had already allowed some terrestrial service over MSS, allowing satellite operators to build ground-based networks over the spectrum to augment the larger satellite network. But the FCC now has lifted the satellite requirement entirely from two other MSS bands, the L-band and the band known as Big-LEO (low earth orbit), where satellite operators like SkyTerra and GlobalStar operate.

The FCC apparently is moving towards allowing satellite operators could lease out their spectrum to terrestrial operators as well, allowing them to augment or build their own mobile broadband networks. Currently, the rules allow MSS-license holders to wholesale capacity on networks they build, but the MSS operators might also be allowed to sell wholesale access to the spectrum itself.

LTE is About Cost of Providing Service, As Much as Bandwidth

The cost of carrying one megabyte of data over its LTE network would be half to one third the cost of carrying the same data over the company’s current 3G network, Lowell McAdam, Verizon Wireless’ CEO, says. That is going to be good news both for users and mobile services providers.

Bandwidth services providers universally need to improve the efficiency of their networks, since increased data consumption typically involves non-linear revenue effects. In other words, providers earn less money, on a revenue-per-bit basis, the higher the amount of bandwidth they provide.

And though consumers will not likely appreciate a gradual shift to buckets of usage, so long as the plans, pricing and consumption patterns are relatively closely matched, people can adapt. People are used to buckets of voice and text messaging, for example.

But key to crafting such plans is that they are viewed as fair. A lower cost, higher capacity network that works better for key applications such as voice and video is a likely prerequisite.

User patterns also are changing. Unlimited plans work quite well for users and providers when consumption is low. But most users consume more bandwidth over time, driven especially by video use, which requires an order of magnitude to two orders of magnitude more capacity than voice, for example.

Verizon's coming shift to buckets of usage for multiple devices also makes sense. As users shift to use of broadband for multiple devices, they will not prefer paying for access to each discrete device. Also, usage profiles vary by device.

Cameras and e-book readers will not typically demand much bandwidth. Nor will voice applications. Smartphone web browsing will consume more, but smartphone data consumption typically is far less than from a PC. Blending usage from a range of devices, and allowing consumers to pay once, for access on all the devices, will save users money and provide more value while at the same time allowing service providers to offer service on terms that are sustainable.

FT.com / Telecoms - Verizon to offer 4G customers ‘buckets’ of data

World's 2nd-Largest WiMAX Network Switches to LTE

Russia's Yota network, which connects 300,000 people over WiMAX technology, is switching to LTE, and plans to spend $2 billion migrating its network to the different air interface.

Backed heavily by Intel, which hoped to make WiMAX as ubiquitous as Wi-Fi, the tide turned in favor of LTE when virtually all the world's mobile service providers decided to back LTE instead of WiMAX.

WiMAX had a headstart getting to market, but LTE now has closed the gap. Early adopters argued that they had to get to market fast, so WiMAX made sense. But the rival LTE air interface now stands to garner so much production volume that it now makes more sense, going forward, even for early adopters such as Yota.

Yota should be able to upgrade using software, some argue, as the Samsung-supplied base stations Yota uses can support both FDD-LTE and TD-LTE, and Yota uses spectrum well suited to the time division variant of LTE.

The new LTE network will start in Kazan, Novosibirsk and Samara, with Moscow and St. Petersburg to follow by the end of 2011. The 15 cities previously scheduled for WiMAX deployment will go straight to LTE.

Buckets for Verizon LTE, No "Unlimited" Plans

Verizon Wireless CEO Lowell McAdam says Verizon's 4G network will not offer unlimited broadband access plans, but will instead feature "buckets of usage" similar to the way most consumers now buy voice service and text messaging services.

Sprint Might be Looking at LTE for its 3G Network

Sprint Nextel Corp. has issued a 'next generation network' request for proposal for its CDMA third-generation mobile network in the United States, and Long Term Evolution (LTE) has emerged as a potential technology choice.

The RFP does not appear to affect the Clearwire network presently using WiMAX, but the "legacy" CDMA network that underpins Sprints current 3G network that operates in the 800 MHz and 1900 MHz frequency bands.

Light Reading Mobile - 4G/LTE - Sprint RFP May Include LTE - Telecom News Analysis:

LTE Adoption Will Take Some Time: It Always Does

It will take at least five years before Long Term Evolution devices represent 25 percent of mobile broadband device sales (PC dongles, not phones), once they are introduced, and it might take as long as 16 years before LTE device sales reach their peak, based on past experience with new mobile air interfaces and device sales, according to Keith Mallinson, founder of WiseHarbor Research.

Assuming the first LTE networks activate in early 2011, that implies it will be 2016 before dongles and aircards based on LTE will represent a quarter of broadband dongle and aircard sales.

Mallinson also predicts it will be 2019 before LTE device sales are equal to CDMA-based technology devices, such as those using EV-DO, and HSPA/HSPA+.

History suggests that new mobile technologies to peak demand takes far longer than the five years, and as much as 16 years for a mobile technology to mature.

That suggests today's third-generation networks will be dominant for quite some time. AT&T Mobility, for example, recently surprised observers when it decided that, instead of moving directly to LTE, it would upgrade its existing 3G network to HSPA+. That will prove a quick bandwidth boost from about 3.5 Mbps to 7.2 Mbps for a relatively small amount of capital investment, even as it plans to start building its 4G network in 2011.

But such plans also mean that AT&T can target its 4G build to the most-dense markets, and count on the faster 3G network in less-dense areas that the company might take some time to build out, as typically is the case when new mobile networks are constructed..

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Verizon LTE Test Runs at 8.5 Mbps

In recent tests, Verizon Wireless has found that its new Long Term Evolution network runs at about 8.5 Mbps in the downstream direction in the real world.

Clearwire Emerging as a Wholesaler

Perhaps Clearwire did not initially think its business model would be anchored by wholesale wireless, but that seems to be shaping up as key to its future. Of the 283,000 net new subscribers added in the first quarter of 2010, 111,000 of them, or 39 percent, were gained by wholesale partners.

Most of the other major national wireless providers also have some wholesale operations, but none likely approach Clearwire's percentage. Clearwire’s network is behind Sprint’s 4G services as well as Comcast and Time Warner Cable wireless services. Then there is T-Mobile USA, which seems to need wholesale 4G capacity as well.

It might not be unreasonable to speculate that one reason Clearwire is preparing for a transition to Long Term Evolution, instead of sticking with its WiMAX air interface, is that T-Mobile USA might well require LTE capability in order to sign up.

"There was an agreement before that was really a commercial deal between Intel and Clearwire that would restrict us from using anything other than WiMAX up to, I think it’s February of 2012," said Bill Morrow, Clearwire CEO. "That deal is no longer in effect."

Now, either Intel or Clearwire can give 30 days notice and the deal is over. "So it does give us the flexibility that if we wanted to do a commercial launch of LTE or some other technology, that Intel would not be holding us back," said Morrow.

With less than a million total subscribers, it is too early to say how the retail versus wholesale customer mix holds up over time. Should Clearwire pick up T-Mobile USA as a wholesale partner, and as Comcast and Time Warner Cable gear up their wireless operations, it is not hard to envision wholesale growing to be a majority of customers.

Clearwire Removes Obstacle to LTE Shift

Clearwire says it changed the terms of an agreement with Intel, one of its largest investors, that could eventually lead the way for Clearwire to switch to Long Term Evolution as its radio interface, ending its use of WiMAX. Clearwire and Sprint executives have said in the past they believe the two standards now are so similar it would not be difficult to adopt a unified air interface.

The new terms allow either Intel or Clearwire to exit the WiMAX agreement, which had until now forced Clearwire to use WiMAX through Nov. 28, 2011, with just 30 days notice. Those of you who believe Clearwire ultimately will switch to LTE can take that as a sign Clearwire might make the move before late 2011.

 CFO Erik E. Prusch reiterated the company's view that the overall ecosystem for 4G wireless was converging and as such, the market won’t have the technology wars in the future that it has seen in the past.

The technologies underlying LTE and WiMAX aren’t so far off as to make a transition from one to the other all that expensive in terms of the network costs, but devices that are currently running on the WiMAX network might need to be replaced if Clearwire implements a wholesale technology change on its radio network.

link to webcast

Will LTE Bend the Cost Curve?

Mobile service providers hope Long Term Evolution will "bend the cost curve." They also hope it will provide the foundation for new services, but many of us would guess the primary advantage lies in bending the cost curve.

Is Another National LTE Network Needed?

Do businesses and consumers in the United States need one more fourth-generation nationwide wireless network, aside from the existing Clearwire, soon-to-be-built Verizon and AT&T networks, as well as regional networks being created by regional mobile providers and cable companies, not to mention high-speed 3G networks running at top speeds of 22 Mbps?

Though no firm answer can be given to that question, we might find out relatively soon whether investors think there is a need for another facilities-based 4G network of national coverage.

Harbinger Capital, which recently merged with SkyTerra, proposes to build a fully integrated satellite-terrestrial network to serve North American mobile users, with a national 4G terrestrial network covering 260 million people by the end of 2013.

The planned network would launch before the third quarter of 2011 and cover nine million people, with trials set initially for Denver and Phoenix. The next milestone is that 100 million people have to be covered by the end of 2012, 145 million by the end of 2013 and at least 260 million people in the United States by the end of 2015. Harbinger told the FCC that all major markets will be installed by the end of the second quarter of 2013.

The original thinking has been that wireless services within a number of vertical markets that are highly dependent upon the ubiquitous coverage and redundancy to be provided by its satellite network would be the core of the business strategy. But Harbinger might think there is a market broader than that as well.

Harbinger actually is required by the Federal Communications Commission to provide wholesale access to third parties, and also to restrict total Verizon Wireless and AT&T traffic to no more than 25 percent of total, to provide more competition in the market.

The big issue is whether there is substantial need for additional spectrum at this point. One might argue that industry requests, as well as FCC proposals, for allocation of an additional 500 megaHertz of spectrum for mobile broadband are clear evidence of need.

But there are other issues of market structure and competition. Assuming hundreds of new megaHertz of spectrum can eventually be relocated, most observers think the buyers of such spectrum would be the largest mobile providers such as AT&T and Verizon.

The Harbinger network, by definition, would largely be a platform for other providers, as it would operate as a wholesale provider.

The key business issue is whether there actually is sufficient business demand for another national 4G terrestrial network, though. Sprint and Clearwire both have relatively lavish amounts of spectrum already, and both have shown a willingness to sell wholesale capacity.

One might argue the key differentiator would be the satellite roaming features that would be available on handsets that normally default to the terrestrial network. But the bigger test will be of investor sentiment, as Harbinger will have to raise billions to build the new terrestrial network.

The 36,000 base stations that Harbinger plans to use, along with the tower sites, backhaul and other gear associated with a terrestrial network will require billions of dollars worth of investment.

Analyst Chris King at Stifel Nicolaus estimates that Verizon’s LTE network will cost about $5 billion to deploy. Clearwire has also spent billions on its network, with analyst estimates ranging from $3 billion to about $6 billion. There is no particular reason to think the ubiquitous terrestrial network Harbinger expects to build would cost less.

Investors will have to be found first, before there is a chance to test the thesis that another facilities-based 4G network is needed.