Leapfrogging to LTE

Ray Owen
02 Apr 2009

The finalization of standards for the next generation high-speed mobile technology LTE is near completion. On 11 December 2008, the 3rd Generation Partnership Project (3GPP) approved the functional freeze of LTE as part of Release 8. This rapid progress in finalizing a new standard enables vendors to quickly commercialize the technology. LTE not only helps 3G service providers to upgrade telecom networks, but also gives Asian non-3G operators the ability to leapfrog a technology standard, migrating their legacy GSM and CDMA networks directly to LTE.

The migration path from 2G to LTE is critical as 3G mobile handset data services have not had the impact operators expected in most Asian countries, especially in emerging markets until quite recently. Today only 15% of mobile subscribers in Asia are currently connected to 3G services with the majority of users concentrated in the developed markets of Singapore, Japan, Hong Kong, Korea and Australia.

Legacy applications for 2G / 3G

The world has been waiting to discover the large revenue generating applications for 3G mobile handsets since the first 3G service was launched many years ago, and it is now clear that voice commands the largest share of ARPU on these advanced data networks today. Recently multi-media phones such as the iPhone have just started to have more of an impact on 3G handset data volumes. Although advanced applications like real time video conferencing created high expectations for 3G in the past, the fact is that SMS and ring tones generate the largest portion of ARPU among non-voice 2G/3G services today in Asia. The revenue is so significant that the global SMS revenue outstripped worldwide sales of the recorded music industry by over three times in 2007.

Given that 3G services haven fallen short of operators\' expectations until a few years ago, how will 3G develop in the emerging markets of Asia where 3G is yet to be deployed‾ There are two divergent views in the telecom industry. Some operators welcome the chance to leapfrog the investment in 3G infrastructure, while others believe that business opportunities will be missed if they do not launch 3G services as soon as possible.

To evaluate future mobile broadband development, we should look at current market trends. It is clear that mobile broadband uptake, especially on laptops and Netbooks, is on the rise across the world although it only accounts for a lower percentage of the current voice ARPU base. It is clear that add-on dongles used by laptop users enjoying unlimited usage at a fixed cost - flat fee based plans are driving wireless broadband data volumes.

It is even more important for operators to notice that the increase of 3G data usage does not correspond to an equivalent increase in data revenue or profit. Data from 3 UK shows that while their mobile network data traffic increased at a rate of six to 14 times a year from 2007 onwards, the revenue derived from this data usage only increased 10% to 30% on a yearly basis.

Flat fee challenge

Flat fee based plans are putting pressure on network efficiencies, especially as mobile broadband services don\'t command much of a price premium over the DSL equivalent services. If laptops and Netbooks drive the growth of mobile broadband data usage as expected, it bodes well for the LTE and Wimax community.

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