Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
To quote Bob Dylan. mobile networks are a-changin’. As more and more mobile users download more and more YouTube videos, and interact with sites like MySpace, 3G technologies like W-CDMA/HSPA that provide the lightning speeds they crave are starting to take off. Operators are rushing to choose their next-generation (4G) path, so they will be sure to be ready for this expected explosion of growth in mobile data. Whether that next-generation technology is WiMAX or LTE, 4G promises two kinds of rewards. For subscribers, 4G will provide faster data rates and much lower latency than 3G. For operators, 4G will allow for more cost-effective networks, thanks to its IP-based, flatter architecture and the higher spectral efficiencies (30% greater than HSPA) provided by OFDM technology.
W-CDMA/HSPA
In the first quarter of this year, W-CDMA – the dominant 3G technology – broke $2 billion in revenues and finally began to achieve the traction many had been expecting since early 2007. As W-CDMA networks evolve and continue to support ever faster data rates, W-CDMA will become by far the largest driver of the mobile infrastructure market over the next five to ten years. Unlike older mobile networks that expanded largely in response to increased voice traffic, W-CDMA market growth will be fueled by an increasing appetite for data communication. Data traffic on W-CDMA networks already exceeds voice traffic, and should increasingly outpace it over time as the broadband speeds provided by HSPA networks encourage subscribers not only to e-mail (which is the dominant data application today), but also to use more data-intensive applications (such as streaming video, mobile gaming, music downloads, and social networking).
Operators have been focusing on increasing the capacity and data rates of their networks, with the result that over 90% of W-CDMA networks have now been upgraded to HSDPA. Over 60% of current HSPA networks support peak data rates of at least 3.6 Mbps, and over 20% can support peak data rates of at least 7.2 Mbps. In addition, nearly 20% of W-CDMA networks have launched HSUPA, supporting uplink data rates of approximately 800 Kbps. The evolutionary path of HSPA promises peak data rates of up to 20 Mbps in 2009 and 42 Mbps by 2012 as 3G networks are successively upgraded.
Operators may be preparing for the onslaught of data subscribers – but there is still the matter of attracting them. Diverse, cool (like the 3G iPhone), and affordable HSPA devices, will be crucial to enticing subscribers to W-CDMA networks. There are over 600 HSDPA devices available today, and their prices continue to drop. The smartphone is a great example; with advanced browsing capabilities and slicker user interfaces, subscribers using smartphones access significantly more data that subscribers using other mobile phones.
While the increase in mobile devices is a significant driver of the growth in W-CDMA networks, personal computers remain the largest “consumer” of data on these networks. Currently, PC users must use a PC card or a USB dongle to connect to 3G networks. However, manufacturers like Lenovo, Dell and Fujitsu have plans to ship laptops with embedded HSDPA modules. The increased availability of laptops with built-in HSPA will increase both subscribers and data-usage on 3G networks.
WiMAX
Though 3G is just starting to take off, operators are already planning for their next generation technology. WiMAX was the first 4G technology to be deployed in commercial service, and LTE – just a few short years away from initial commercial service – is coming hard on its heels.
Given WiMAX’s significantly lower deployment costs, we expect it to be used primarily as a last-mile substitute for fixed broadband in emerging regions. Demand for broadband access in these regions is growing; however, fixed-line infrastructure is almost non-existent because it’s so costly to deploy it. We forecast that over 60% of WiMAX infrastructure will be shipped to emerging regions as early as 2009. While Mobile WiMAX 802.16e infrastructure will be deployed in these regions, we expect it will primarily be used for fixed application use. Many operators have been waiting for Wave 2 certified equipment; now that the certification process has begun, we expect that the number of operators turning on WiMAX service will increase significantly in 2009.
While Sprint Nextel has become the marketing face for WiMAX, we expect the US to be a niche market for commercial service. Interestingly, beating Sprint to the punch, however, is DigitalBridge Communications which, in June, launched the first commercial Mobile WiMAX service in the US. Sprint is expected to launch its first commercial WiMAX service in Baltimore in September; this launch originally was scheduled for April but was delayed by billing and backhaul issues. Sprint plans to turn on commercial service by the end of the year in Washington, DC and Chicago, as well. Sprint and Clearwire are in the process of pooling their WiMAX assets and forming a new company, which will take the name Clearwire. Clearwire plans to turn on its commercial service in Portland by the end of the year. Depending on the timing of the formation of the new company, Clearwire may expand its Mobile WiMAX service to Atlanta, Las Vegas and Grand Rapids by the end of the year, as well. We believe the merger of Sprint and Clearwire will benefit the national buildout of the new Clearwire’s WiMAX network, as it will increase and consolidate the resources directed toward network-building. The new Clearwire plans to population coverage of 60 to 80 million by the end of 2009.
As with W-CDMA, the availability of Mobile WiMAX devices will be essential to the growth of worldwide WiMAX networks. With WiMAX primarily being used as a broadband data service, CPE and PC cards (rather than phones) will be the first devices to hit the market. Currently, the only consumer electronics device that makes use of Mobile WiMAX is the Nokia N810 Tablet (though this still lacks Wave 2 certification). Intel’s next generation CPU, the Centrino 2, will help drive WiMAX growth. The Centrino 2 started shipping in July, but it won’t be until later this year, that it will include a built-in dual-mode module that supports Wi-Fi 802.11n/WiMAX.
LTE
Time-to-market can be crucial in the mobile industry, and WiMAX should enjoy an advantage here over LTE, if only for a while. Despite this advantage, we do not expect WiMAX to emerge as the dominant 4G technology in the end. Instead, we believe LTE will claim this position, though not until beyond 2012.
The 3GPP is expected to ratify the LTE standard by the end of 2008. Typically, there is a lag of at least two years between the time a cellular standard becomes finalized and the time it is deployed in commercial networks. A few operators began LTE trials in 2008; therefore, based on this historical two-year lag, we expect to see limited commercial service begin in 2010.
NTT DoCoMo, typically the leader in deploying new technology, will likely be the first operator to launch limited LTE service in 2010. However, in the absence of a killer application that requires the 300+ Mbps that LTE will provide, the majority of operators won’t feel an urgent need to migrate to LTE. Indeed, operators worldwide have been investing heavily in their HSPA networks, including upgrading their networks to support the newer release of HSPA. By 2012, HSPA+, promises to support peak data rates of up to 42 Mbps.
In the United States, Verizon Wireless likely will be the first to deploy LTE – probably in 2011. Verizon’s EV-DO Rev. A network provides average downlink speeds of only 1 Mbps; LTE’s (much faster) data rates will prove too enticing for Verizon to resist. AT&T should follow suit a y
ear or so later; its need for LTE’s speed isn’t as urgent, because its HSPA+ network will be capable of supporting speeds of 42 Mbps by 2012.
Commercial LTE service in Western Europe will begin sometime after 2012, as operators in that region also will continue supporting HSPA+ and will attempt to optimize their investment in these networks.
While HSPA still will be the dominant mobile technology in 2012, the majority of GSM/W-CDMA and CDMA operators are committed to LTE as their next generation technology, so it seems clear that LTE will become the prevailing 4G technology over the long-term.
Questions or comments about this column? Contact Scott at scott@delloro.com or contact RCR Wireless News at rcrwebhelp@crain.com.
