Challenges Faced by Operators in 4G LTE Deployment
4G LTE - A Tough Act for Telco Operators
4G Long Term Evolution (LTE) technology is often touted as the magic bullet for operators worldwide to address the increase in data traffic on their capacity constrained mobile networks.
As the next generation mobile network, LTE promises significant advantages over the current 3G technology such as higher spectral efficiency, lower cost of data transmission, faster speeds and lower latencies. However, as with any new technology, there are several challenges ahead for global operators in deploying 4G LTE networks. So what are these challenges?
Well, we managed to interview two telecom industry veterans, Zhang Gene and Nigel Wright from Spirent Communications during CommunicAsia 2012. Mr. Zhang is the Vice President and General Manager for Asia Pacific, while Wright is the Vice President for Corporate Marketing. Both individuals shared their insights into the needs of telecom operators, equipment and device manufacturer customers, as well as a first-hand look into market trends and issues. From our discussions, we've compiled the various issues to help you better understand the industry concerns and to set your expectations on what's to come. Now that some of the savvy users in Singapore have gotten a taste of what 4G feels like, it's time to understand the bigger picture that will come to shape the telecommunications industry.
1) Fragmentation of LTE Spectrum Bands
According to Wright and Gene, the biggest single problem faced by operators is the range of spectrum bands to support. In Singapore, there is already a minor fragmentation in the frequency bands supported; both SingTel and M1 have stated that their LTE networks operate on the 1800MHz and 2600MHz frequency bands while StarHub will refarm its 1800MHz frequency band to carry its LTE services.
The fragmentation is worse in other countries such as the USA, where within the same geography, telcos operate on different frequencies. Verizon and AT&T use the 700MHz band for their LTE networks while Sprint is using 1900MHz and 800MHz spectrum.
A lower spectrum band (e.g. 1800MHz) provides better indoor signal strength and travels further compared to one of a higher spectrum band (e.g. 2600MHz). However, the higher spectrum bands are better suited for covering densely-populated areas and managing heavy data volumes due to their larger bandwidth.
Wright added on that lower frequency spectrums are more affordable to build and signals travel further, whereas higher frequency spectrums require a lot of base stations to cover a similar disance. This could very well be another possible reason why different telcos around the world use different spectrum bands, besides the obvious fact that they are also limited by the availability of these bands.
2) Building a New or Converged Network
Another challenge is how operators build up the network. Wright elaborated by saying that some carriers like Verizon will build a completely new 4G network along the existing networks. Other telcos will create a converged network, where they try to make the different generations of technologies work together.
In both cases, the process is highly complex and cost intensive.The transition to 4G network will require new radio access technology and core network expansion, while maintaining existing 2G/3G networks alongside the new 4G network will result in additional burden on telcos.
StarHub, for example, is adopting a more cost-effective approach by refarming its 1800MHz GSM band to carry LTE services. Furthermore, it is also switching on its advanced DC-HSPA+ mobile network, which will see its current 3G downlink speed doubled up to 42Mbps to maintain an optimal user experience and improve the quality of mobile data service.
3) Return on Investment (ROI) on 4G LTE
As mentioned earlier, the migration to LTE or upgrading of existing mobile networks will incur high costs. Moreover, 4G LTE is expected to disrupt the traditional business models of telcos: voice calls and SMS.
With faster mobile data connectivity, consumers will be more inclined to use services and apps such as Skype and Whatsapp for communication. This change in consumer's usage behaviour will pose a challenge for telcos to profit from their investments in 4G networks.
According to Wright, he predicts that telcos will continue to face this challenge in the next three to four years. Citing the example of Skype, Wright pointed out that telcos would be at the losing end if subscribers turn to Skype for making voice calls overseas. Wright also agreed that the rise of instant messaging services such as Whatsapp have resulted in declining revenue from SMS.
Wright feels that the reason why telcos are excited over 4G is due to the fact that it enables voice over LTE and the other services that come along with it. Telcos can then differentiate themselves by offering a single application for consumers to do almost everything from high quality voice, video sharing to instant messaging. And because telcos are supporting the singe application, Wright thinks that consumers will go for it instead of switching between apps.
5) Tiered Data Plans
To justify the investments in the new 4G networks, telcos have to change their data price models. There are three ways for telcos to go about doing this, all of which consumers in Singapore should be familiar with by now.
First, telcos can charge higher prices for their LTE offerings compared to their existing mobile data plans and maintain a higher quality of service to justify the higher premiums. Previously, M1 and StarHub charged an additional $10.70 for customers who wanted to sign up for the 4G value-added service but reversed their decisions shortly after.
Second, telcos can break away from the traditional one-size-fits-all approach which is not sustainable in the long term. They should implement "pay-for-what-you-use" pricing models, where consumers are charged based on their usage behaviors.
SingTel is the first telco to introduce the tiered pricing model in June, which incurred quite a lot of backlash from consumers. M1 and StarHub followed suit shortly after. This strategy is highly controversial as consumers feel shortchanged when telcos lower the data bundles across the board.
Third, telcos can adopt a value-based pricing model where consumers can pay a premium for a better experience. Vodafone, a British multinational telco company, raised the possibility of introducing tiered service levels that guarantee certain connection speeds.
Total Telecom - "A video tariff guarantees a connection speed that supports video, but then you also have an email tariff for people who are only using small amounts of data," he (Vittorio Colao, CEO of Vodafone)said.
So far, SingTel is the only telco to offer similar services. In June 2011, the telco announced the launch of its Priority Pass Broadband Service, where its premium mobile broadband service offers faster and more reliable Internet connectivity on the move. Customers can enjoy higher priority for their data traffic when the network is heavily loaded, thus ensuring smoother streaming and downloads.
A similar Priority Pass traffic feature for its 4G service will be introduced next year. Users can get higher typical download speeds between 8Mbps and 10Mbps, compared to the normal speed range of 3.4Mbps - 12Mbps.
Wright differs in his opinions on the tiered pricing model, which he feels that consumers cannot relate to it as they have to constantly monitor the amount of data they have used. While it is a tough model to implement, Wright commented that some operators are desperate for measures to tackle the increasing data traffic on their mobile networks. Hence, there is no silver bullet to data tariffing.
6) True 4G Global Roaming - Fiction more than Reality
Due to the lack of harmonization of LTE spectrum bands across different countries, it is almost impossible within the near future to support LTE global roaming.
To use a LTE device for data roaming, based on the current worldwide spectrum usage, Wright said that the device needs to support at least 15 bands. From an engineering perspective, supporting so many bands on a device is really tough. Therefore, Wright believes that for the next decade, 3G data roaming will still be dominant.