What will extend 3G networks- topology tricks or price and policy controls?

We’ve previously written that  "the pump is primed for mobile broadband, " but investments in next-generation networks will be needed to deliver on the true promise of the mobile internet experience.   While we still believe that, we now offer an alternate hypotesis.  That the 4G mobile Internet is many years away.

After some investigation and a few interviews, this author now believes the mobile Internet will remain 3G/3.5G complemented by WiFi for some time to come.  I predict it will be at least 4 or 5 years until we have any substantial number of mobile LTE or mobile WiMAX subscribers.

Pico-cells, more cell towers, self -organizing- networks (SONs), and other network topology changes have been proposed to alleviate the mobile bandwidth crunch.  We think that 3G operators will try some combination of these to provide more bandwidth per mobile data subscriber.   In addition, they will put in much higher capacity backhaul- both microwave radio and fiber based (where available).

In addition, we see increasing use being made of WiFi hotspots and femtocells to offload 3G traffic to broadband wireline network access.  We like femto-cells as a way of getting both voice and data traffic off cellular networks and onto the wireline broadband network at home or a small office.  Moreover, voice quality will be better, as the femtocell signal doesn’t have to penetrate the building walls.

However, I think the main methods that will be used to extend the life of 3G/3.5G mobile networks will be by a combination of pricing plans and policy initiatives from the mobile operators.  Specifically, look for:

  1. Tiered Pricing plans that discourage all you can eat mobile broadband access for all but high powered users/road warriors.
  2. Blocking high bandwidth/high throughput apps, esp. video
  3. Metering traffic to comply with data caps on monthly bytes transferred.
  4. Use of WiFi hot spots, home networks, and femtocells (later) to offload 3G/3.5G traffic to the broadband wireline network.
  5. Encouraging more smart phone apps that don’t use a lot of bandwidth (vs. those that do).

The net result will be the same – 4G will be delayed for many years. As corroboration of this view, why haven’t any mobile operators announced a firm date for their mobile LTE deployments?  We have been unable to get any dates for the introduction of mobile LTE from any mobile operator, including Verizon who plans to roll out fixed LTE late in 2010. 

Can anyone disagree with what Ray Abrishami recently wrote: "the current 3G technologies are technologically deficient for addressing the demands of the mobile internet. Therefore, 4G is needed to earn the rites of passage for competing in the mobile internet space.  The delays in working out the necessary business models for mobile internet have slowed the realization of broadband internet business case and deployments."

 

0 thoughts on “What will extend 3G networks- topology tricks or price and policy controls?

  1. Here is what Professor Andrew Odlyzko says:

    “A wide consensus holds that mobile data will lead to the next telecom revolution. The volume of data transmitted over wireless is skyrocketing, growing at rates that are almost surely unsustainable. This is in contrast to wireline data volumes, which are growing vigorously, but at a sufficiently slow rate that capex does not need to grow to accommodate them. However, this growth in mobile data is not accompanied by a similar willingness to pay.”

    So if subscribers are unwilling to pay higher rates for mobile broadband, where will the network operators get the money for the massive 4G forklift upgrades- new RAN, higher capacity backhaul, new network management, etc?

    Here are a few bullet points from Prof. Odlyzko:

    · -Wireless traffic growing at over 100% per year, far faster than technology is progressing

    · -Low willingness to pay for mobile data

    · -Voice is a cash cow and likely to remain so

    · -Wireless service providers have incentives to use kludgy technology solutions to protect the voice cash cow

    · -Seemless mobility between wireline and wireless is not achievable

    · -Strong tension between incentives to build walled gardens and ones to encourage innovation.

  2. Good article. It’s no wonder that mobile carriers are not in any rush to open up their networks and let themselves be disintermediated, the way the broadband has done for wireline carriers.

  3. The metering of Internet traffic results in a data cap charging model, rather than a flat rate for “all you can eat” traffic. Prof. Odlyzko compares this metering of mobile Internet traffic to traffic lights that are strategically placed at the on- ramps of highways to slow down the flow of cars. Giving mobile Internet users unlimited downstream and upstream data transport would most likely result in saturation of network capacity, which would jeopardize highly profitable voice traffic on 2G or 3G cellular networks. Clearly, that must be avoided at all costs. Hence, metering, data caps, and blocking high bandwidth video apps is to be expected by 3G mobile network operators.

  4. Most operators are either spending a lot of money on 3G build-outs (e.g. China Telecom-see below) and/or paying subsidies to subscribers that purchase smart phones (e.g. ATT for the iPhone). That being the case, where are they going to get the money to invest in LTE? This is one reason, we think mobile LTE- on a large scale – will be delayed for several years.

    Here’s a great example of costly 3G expansion from the world’s largest cellular operator (# subscribers):

    FT: China Telecom profits plunge on 3G expenses

    China Telecom, the country’s biggest fixed-line operator, reported a 27.5 per cent drop in first-half net profit amid heated competition, as the company increased spending to promote its 3G service

    http://link.ft.com/r/J0VG55/0338A/QNG3Y/B66B5/ODV0S/9A/h

    From Wireless Week’s latest print edition:

    • As of December 2008, wireless carriers have deployed more than 240,000 cell sites across the country.
    • To achieve full 3G mobile broadband coverage, about 16,000 new cell sites will need to be constructed and 55,000 existing sites will need to be upgraded.

    http://wirelessweek.com/By-The-Numbers/2009/08/By-The-Numbers-July-August-2009/

  5. WSJ: Cell phone networks won’t be able to cope with increased data traffic

    “The limits of wireless capacity suggest cellphone networks won’t be able to handle smoothly the expanding volume of downloads from the Internet as smart phones and netbook computers proliferate. As Sanford C. Bernstein analyst Craig Moffett has argued, services such as (mobile) video, which use lots of bandwidth, are likely “to remain the province” of wired networks. Wireless carriers already are putting some of their traffic onto them through Wi-Fi networks.”

    Cable’s moment in the sun
    By Martin Peers,
    The Wall Street Journal (subscription required)
    Friday 28 August 2009

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