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The advent of LTE technology has been “transformational” for the mobile industry. As carriers build out their LTE networks, users gain the benefit of a faster and richer user experience. Web pages, maps and videos load faster. Once users get the taste for speed, there is little appetite for going backwards. Dropping down to slower speeds evokes feelings of frustration and may hamper a carrier’s reputation. And these experiences are not lost to carriers in terms of the bottom line. At a recent analyst conference, one carrier shared that LTE customers churned less than 3G customers, leading to higher customer satisfaction.
The simple takeaway is that a faster pipe leads to increased data consumption. Customers who use more data are likely to increase their monthly service spend as evidenced by generally increasing data average revenue per user metrics. As data consumption increases, carriers are striving to build out these newer and more efficient LTE networks to acquire customers and meet subscriber demand. While network coverage, service pricing and devices are important factors, speed has been used as an important advertising element in a carrier’s proposition.
Speed positioning
Speed is easy to understand, communicate and market. To borrow a tagline from one carrier’s current ad campaign, “faster is better.” Increasing landline data speeds have framed users’ expectations, progressing from the early days of the glacial 56 kilobits-per-second dial-up modems to tens and hundreds of megabits per second to the bleeding edge fiber-based technologies that promise one gigabit per second. There are similarities in mobile where customers experience data in kilobit-per-second speeds to single digit and tens of megabits per second. Wireless network generation designations which had technical roots, have taken on a marketing role to help general understanding. That is, 4G is better/faster than 3G, which was better/faster than 2G.
Sprint was the first carrier to market a “4G” network in 2008, taking a speed advantage position while competitors were still building out 3G networks. In late 2010, AT&T Mobility, T-Mobile USA and Verizon Wireless tussled over the speed crown. AT&T Mobility took on the fastest 3G network advertising as Verizon Wireless claimed the fastest 4G network. At the same time, T-Mobile USA positioned itself as having the largest 4G network with “download speeds on par with or faster than competing 4G technologies.” Fast forward to the present day and 4G is still prevalent as a term, but LTE technology and marketing the term has been synonymous with the latest, greatest and the fastest. However, carriers have shied away from direct speed claims as they depend on third parties to do the independent tests. PC Magazine and Root Metrics have been doing mobile network drive testing for several years.
Voluntary crowd sourcing data performance using smartphone applications is a new trend that companies such as Root Metrics, OpenSignal and even the Federal Communications Commission is using to understand network speeds. In 2013, AT&T Mobility took advantage of overall performance wins with PC Magazine and Root Metrics and built a marketing campaign around the “the nation’s fastest and most reliable 4G LTE network.”
However, history has shown that speed crowns are short lived as newer technology is introduced. AT&T Mobility’s 2010 “fastest 3G” network claim was tempered by Verizon Wireless LTE launch in late 2010. Suddenly, 3G seemed irrelevant. In 2011, PC Magazine found Verizon Wireless to be the overall speed winner. That year, the speed message was a central corporate theme.
In 2012, Verizon Wireless continued to tout speed, but with AT&T Mobility and Verizon Wireless garnering speed accolades from a variety of sources, marketing shifted to highlight network size with nuanced largest 4G (AT&T Mobility) versus largest 4G LTE (Verizon Wireless) network. With the return of AT&T Mobility’s fastest LTE speed advertising in 2013, other carriers are looking to make a dent in that claim in 2014. T-Mobile US, which has centered around a pro-customer “un-carrier” theme is rumbling about increased data speeds while Sprint will look to push its own Spark initiative that promises to deliver up to 60 Mbps and later, greater than 1 Gbps in subsequent years.
Speed is spectrum and network dependent
Yet a speed promise is only as good as its LTE network. To understand this, one needs to see where each carrier’s network stands and where they’re going. From a population coverage view, Verizon Wireless’ 303 million pops covered have largely mirrored its 3G footprint. By end of year 2013, T-Mobile US exceeded its 203 million pops goal with over 205 million pops covered. Sprint’s target was 200 million pops covered, while AT&T Mobility’s aim was to reach 270 million pops by the end of 2013. For lack of a better metric, population covered is the best apples-to-apples indicator of bringing the LTE to customers. Although many carriers announce market launches, these aren’t usually useful for comparison since each carrier’s market definition varies.
As 2014 begins, each company will continue investing in their LTE networks. Though Verizon Wireless seems to meet a geographic goal, customer data demand has the carrier increasing capacity with 1.7/2.1 GHz (advanced wireless services) spectrum assets with a 50 city target in the first half of 2014, complementing its national LTE 700 MHz network. Though T-Mobile US hasn’t publicly stated its 2014 LTE pop intentions, it has mentioned an LTE expansion number of up to 230 million pops. AT&T Mobility’s LTE network is expected to reach 300 million pops covered by mid-2014 while it has already been deploying AWS spectrum to augment capacity demands. Mid-2014 also should see Sprint meet 250 million pops covered on its 1.9 GHz (personal communications services) LTE network while it seeks to cover 150 million with its 800 MHz repurposed iDEN spectrum. Its real speed card based on the 2.5 GHz portfolio will target 100 million pops covered with LTE by the end of 2014.
The marketing benchmark for true national coverage appears to be the 300 million pops covered mark. Ideally, all carriers can come close to this benchmark. In the past roaming agreements allowed competitors to bring a seamless mobile experience to the customer. Domestic LTE roaming may take some time to iron out. However, carriers will continue to improve their networks after pop coverage goals are reached. While timing and network equipment vary, carriers will eventually migrate to LTE-Advanced, which employs esoteric “under the hood” technical network features such as carrier aggregation, multiple-input/multiple-output antenna technology and support of heterogeneous networks, all of which will help operational efficiencies, capacity, latency and speed propositions.
As part of network improvement, carriers continually strive to optimize their spectrum portfolios. The most obvious is to put into service previously un-deployed spectrum, such as Verizon Wireless and AT&T with their AWS assets. Another way is through acquisitions.Some 2013 examples include Verizon Wireless’ and T-Mobile US’ purchases of US Cellular spectrum; AT&T’s bids for Leap and Alltel and the purchase of Verizon Wireless spectrum.
Yet another option is through spectrum swap. Verizon Wireless and T-Mobile US agreed to swap AWS and PCS spectrum at the end of 2013. While many of these actions still await regulatory approval, carriers have long employed these tactics. In the end, the spectrum moves enable carriers to improve their competitiveness by fortifying operating markets or entering new ones. Market strengthening from a spectrum view is to bring the most available to serve the customer base. This means expanding the “data pipe” to increase speed with the feature known as carrier aggregation. CA allows for flexibility so that carriers can, for example, join disparate frequencies (e.g., AWS and 700 MHz) or channels within the same frequency band (e.g., 2.5 GHz block) to realize a “larger pipe.” In the near term, carriers’ pipes range from five-megahertz channels to 10-megahertz channels. Theoretical unloaded throughput with good signal with a total of 10 megahertz yields about 37 Mbps, while doubling that to a total of 20 megahertz used brings about 75 Mbps. Of course, a loaded network and varying signal strength challenge customers from fully realizing these speeds. Carriers have been conservative in their speed promises knowing that a loaded network impacts the brand. Verizon Wireless, for example, has stated that it wants to provide a consistent five to 12 Mbps downlink and two to five Mbps on the uplink. For its part, to keep in the forefront of speed marketing, T-Mobile US has been very vocal about deploying up to 40 megahertz to support LTE in specific markets with a theoretical maximum of 150 Mbps. Verizon Wireless has already implemented 40 megahertz of AWS spectrum in New York to augment its 20 megahertz of 700 MHz network capacity.
Sprint’s 2.5 GHz unpaired spectrum approach and corresponding LTE technology is different. Sprint is able to use 20 megahertz, half that of the competition, to deliver the same 150 Mbps theoretical speeds, promising a conservative 50 to 60 Mbps downlink user experience. As data demand increases, Sprint is able to draw from its 2.5 GHz portfolio for additional 20-megahertz blocks to maintain the user experience. Sprint has stated that with 60 MHz of 2.5 GHz aggregated, they have seen up to 1.3 Gbps in the labs. Competitors with increased data loading will experience decreased speeds as they cannot add more spectrum. The result could have Sprint becoming a formidable contender for the speed crown.
AT&T Mobility and Verizon Wireless have planned ahead to address speed with carrier aggregation as part of LTE-A equipment upgrades. With potential 2014 implementation, Verizon Wireless will combine their 700 MHz with their AWS spectrum, where appropriate. AT&T Mobility, however, is expanding the capability with flexibility to combine not only AWS, but also PCS and low band 850 MHz cellular. AT&T also has designs on bringing other spectrum to bear beyond 2015 as they are planning for WCS 2.3 GHz, 700 and AWS. In 2015, or later, T-Mobile US will get the chance to aggregate their AWS and PCS spectrum to stay in the speed game. It remains to be seen if any competitor can catch up to Sprint’s potential speed capabilities. If not, then Sprint looks to grabbing the speed crown.
Different speeds in metros and outside
If Sprint can deliver consistent 50 to 60 Mbps speeds in the near term – coupled with an unlimited proposition – it has the potential to draw early adopters and heavy data users, switching from competitors’ (relatively) slower LTE speeds. If Sprint were to deliver consistent 1 Gbps service at a competitive price point to wireline carriers, the service would threaten wireline incumbents (i.e., cable companies, Verizon Communications and AT&T). While it seems to paint an advantage for Sprint, its challenge is in execution and building out a substantial national footprint. Unless Sprint can deploy its speed beyond dense metropolitan markets, its users will suffer a substantial speed drop. Building out a full geographic national network is problematic given the poor propagation characteristics of 2.5 GHz spectrum. As such, it would require much more capital to cover less dense markets. The former iDEN 800 MHz band spectrum may be a candidate, but with only about 14 megahertz total – with Sprint splitting some for voice – that leaves only about five megahertz for LTE data, similar to its current PCS-based LTE network. Given this possibility, there may be some markets and growth areas that Sprint will be at a speed disadvantage, losing out to AT&T Mobility’s and Verizon Wireless’ sub-1 GHz spectrum strength.
Where the two larger carriers will lead is in the potentially high-growth machine-to-machine/connect-car segment. Currently, the connected car looks to provide telematics services such as sending scheduled maintenance reminders, car tracking or remote unlocking. All this consumes low-speed data, but the potential for higher data consumption use through in-car infotainment. Even today, applications such as Pandora and Spotify have found their places in new cars’ dashboards. However, these applications are less data intensive and not speed sensitive. As cars roll off assembly lines with built-in LTE-based Wi-Fi hotspots and entertainment screens running streamed video, throughput and latency become hugely important and thus impact customer usability. A consistent experience is expected, especially on the roads between large markets. This is where AT&T Mobility and Verizon Wireless’ future ability to deliver speed to the connected car using carrier aggregation of low-band (700 MHz and 850 MHz) spectrum gives them a leg up over Sprint and T-Mobile US. Again, although Sprint has LTE on 800 MHz, a speed gap would exist. The lack of any low-band spectrum would preclude T-Mobile US in this growth segment. To even the speed gap in this segment, Sprint and T-Mobile US will need to have access to upcoming low-band broadcast spectrum from the 2015 incentive auction.
Looking ahead, there may be multiple speed crowns. Sprint stands to win in metropolitan markets while AT&T Mobility and Verizon Wireless can provide a more uniform speed experience across a national footprint. Speed may be dismissed as but one component out of many that shape the mobile user experience. However, speed is easy to understand, communicate, market and use as a competitive tool.
William Ho is principal analyst at 556 Ventures. Ho has over 20 years experience in the telecom, Internet and government markets. Previously, Ho was VP of Consumer and Small Business research at Current Analysis. You can see Ho’s blog Mobile Musings and Analysis at: billho888.blogspot.com.
