@CTIA Reader Forum: America pushes the boundaries of broadband

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At the CTIA mobile industry trade show in Las Vegas this week, much of the talk is going to be about the impact of the mobile broadband revolution sweeping the U.S. market. The extraordinary growth in mobile data traffic in the U.S. in the past year means that, for once, the word “revolution” is actually justified. As demand for mobile social networking, mobile video, navigation and other mobile multimedia services soars, the U.S. has overtaken Japan in terms of 3G subscribers and is now the largest 3G market in the world, according to investment bank Morgan Stanley.
While the U.S. industry executives gathering in Las Vegas this week should be proud of this achievement, they will also need to remain on their toes to ensure they stay one step ahead of the market. Operators’ mobile data revenues are growing strongly, but nowhere near as fast as mobile data traffic. So it is critical that operators make the best use of cutting-edge network technologies that will enable them to lower the cost of delivering each bit of data, while still providing consumers with fast and responsive mobile broadband services.
U.S. operators are contending with an unprecedented uplift in mobile data traffic. AT&T has said its data usage rose an extraordinary 5,000% in the past three years. Market-wide, in 2009 alone, mobile data traffic grew 193% in the U.S. to almost 400 petabtyes (400 million gigabytes), while overall mobile data revenues for the U.S. market grew 29% to $44 billion, according to Chetan Sharma Consulting. The traffic surge is being fuelled by rapid sales of mobile broadband smartphones and USB modems as operators court potential customers with a broad selection of keenly-priced devices and service tariffs. Following the groundbreaking success of the iPhone, each of the major U.S. operators has strengthened their smartphone portfolio as they battle to attract the most affluent consumers.
At the same time, legions of software engineers working for both big and small companies in Silicon Valley and other technology centers are developing thousands of compelling apps that give smartphone owners easy access to social networks, videos, maps and other interactive multimedia content. The domestic market has been the first to benefit from this flowering of innovation, helping the U.S. to once again become a leading force in the global mobile industry.
Although these trends have already led to an explosion in data traffic, there could be much more to come. Approximately 35% of AT&T’s customers had a smartphone at the end of 2009, for example, so there is scope for growth in smartphone penetration. Moreover, Cisco, Morgan Stanley and others are expecting consumers in the U.S. and elsewhere to fully-embrace video-on-demand services, such as YouTube, on mobile phones, just as they have on PCs. Some experts believe video could become the dominant communications, information and entertainment medium for both fixed and mobile Internet users. If mobile apps and web sites do become video-centric that is really going to test the capacity and quality of the operators’ networks.
Given this context, it is not surprising that all of the U.S. operators are moving aggressively to expand the capacity and capabilities of their mobile broadband networks. Deutsche Bank estimates that, in the US, 80% of all mobile-related capital spending, amounting to $19 billion, will be on mobile broadband networks in 2010. AT&T said in January that it will boost capital expenditure by between 5% and 10% this year, increasing its budget for investment in wireless and related backhaul networks by $2 billion. AT&T is rolling out HSPA networks with a peak rate of 7.2 megabits per second, while also doing the groundwork for the launch of Long-Term Evolution (LTE) services in 2011.
Meanwhile, T-Mobile plans in 2010 to upgrade its network in the “top 30 US markets” to offer subscribers a peak downlink speed of 21 Mbps using HSPA+ technology, an upgrade to its existing HSPA network. HSPA+ offers a significant performance advantage over most other mobile technologies in use today. Telstra in Australia advertises its HSPA+ network as offering average data rates of between 550 kilobits per second and 8 Mbps compared with between 550 kbps and 3 Mbps for its HSPA network.
Both AT&T and T-Mobile are benefiting from the growing economies of scale in the HSPA ecosystem, which is pushing down the cost of network equipment and handsets, while increasing the range of devices available to consumers. AT&T said in January, for example, that it was offering ten HSPA devices capable of receiving data at 7.2 Mbps, including the iPhone 3GS.
Globally, uptake of HSPA is accelerating as devices fall in price and network coverage spreads. There are now more than 210 million HSPA connections on 295 live networks (including 37 HSPA+ networks) in 121 countries, according to Wireless Intelligence. Moreover, there are now more than 1,900 HSPA devices available from 156 suppliers.
LTE, supported by the vast GSM ecosystem and now earmarked for deployment by more than 86 mobile operators worldwide, should also ultimately benefit from similar economies of scale. Verizon Wireless, which is set to be one of the pioneers of LTE, plans to deploy the technology commercially in 25 to 30 markets this year. It then intends to double that figure within 15 months of the initial launch and, by the end of 2013, cover its entire 3G footprint with LTE. Verizon has said that its LTE network will initially offer downlink speeds of between 5 Mbps and 12 Mbps.
Meanwhile, Sprint Nextel and Clearwire are rolling out WiMAX services. Although WiMAX obviously has a role in the U.S. market, it seems unlikely that the technology will be able to achieve the economies of scale necessary to play a major part in meeting the mass-market demand for mobile multimedia services. Although more than 500 WiMAX networks are reported to have been deployed worldwide, many of these are fixed-networks, and between them they have only accumulated 6.8 million subscribers, according to Infonetics.
Of course, away from the CTIA show in Las Vegas, most Americans won’t care which network technology their device is connected to. What matters to Joe or Jill Average is whether their device of choice can get connected to the services they want and then the speed and responsiveness of that connection. This will increasingly be the criteria by which Americans choose their service provider, spurring U.S. mobile operators to keep pushing the boundaries of mobile broadband. Vive la R