Verizon is considering licensing their 4G spectrum to rural carriers

This item is interesting. It seems that they would be engaging rural carriers as partners in building the LTE infrastructure. I get the distinct impression that the carriers would have to make the infrastructure investments. If so, Verizon is taking a page out of Western Union's playbook (yes, Western Union) by engaging partners to build infrastructure.

Developments regarding LTE

There have been a few interesting things related to LTE that have emerged in the last month or so. I have been rather distracted by other things (IEEE DySPAN among them), so I have not blogged about them. On the other hand, it may be interesting to consider these developments on the whole rather than individually.

First up, this article in the NY Times notes the following:

But the superior efficiency of L.T.E. networks will tend to minimize the overall cost of transmitting voice calls, as conversations are converted into tiny packets of 1s and 0s in a process similar to that used by Internet voice services like Skype that give away some Internet voice service free.

Operators, which generate about 80 percent of their revenue from voice services, want to hinder a new downward price spiral. Revenue from termination fees makes up 15 percent of an operator’s sales and profit, said Jacques de Greling, an analyst at Natixis, a Paris bank.

Many smaller operators would rather adopt the billing regime used by Internet service providers and mobile operators in the United States, called “bill and keep,” which splits the costs of interconnection between the caller and person being called, eliminating additional costs for callers. The U.S. system has enabled flat-rate mobile plans and has promoted cellphone use.

Despite the push by large operators for an L.T.E. standard that would preserve their lucrative billing status quo, it is uncertain whether they will be able to extend the European system of termination rates into the L.T.E. era.

But last year, the European Commission, seeking to encourage the greater use of mobile technology, raised pressure on the operators by adopting rules that would require countries to develop a uniform method of calculating an operator’s costs for delivering voice service when determining the termination rates charged in a country. The new rules are expected to reduce E.U. termination rates from a current average of 7 cents a minute to less than 2 cents by 2012.

In Brussels, an advisory council made up of European national telecom regulators is scheduled to consider a plan in May to switch the European regime from termination rates to one akin to the U.S. system. Most operators remain opposed to the change. But given the rapid decline in mobile termination rates, such a changeover may be superfluous.

Then there is this item about the private equity firm Harbinger, who plans on building a nationwide LTE network in the US. The cited article (from GigaOm) does a bit of analysis of the announcement. Such a network that is not affiliated with a major carrier could serve as a "wholesaler" to MVNOs, which could provide an interesting challenge to the competitive landscape of mobile in the US. It could also serve as "overflow" capacity for the existing carriers, enabling them to roll out a footprint more quickly than if they relied exclusively on their own investment and deployment resources. On the other hand, it has been pointed out that this might be a "smoke and mirrors" strategy to boost the value of the spectrum controlled by Harbinger in advance of a potential sale.

LTE vs. WiMAX: The next standards rivalry?

Standards rivalries have always fascinated me. The dynamics are quite surprising sometimes. Until I saw this item over at GigaOm today, I thought that LTE had won the battle for the next generation mobile standard. What this article points out is that this may well be true for the industrialized world, but it is far from the case globally. So are not going to converge on a single mobile air interface (to facilitate roaming) this generation?

Business models for 4G mobile systems

This article over at Forbes essentially points out that there are two different business models implied by the upcoming technology: one that provides for higher bit rates and new services and another that minimizes costs.

The Big Four are scrambling to offset any drop in calling revenue by shifting their focus to new wireless opportunities. They are just beginning to spend tens of billions of dollars deploying new "fourth generation" cellular technology to greatly expand their data-moving capacity and make all sorts of new wireless devices possible, from e-books to dog collars that let you track Fido's whereabouts. Linquist [of MetroPCS] just signed contracts to buy the same 4G technology for a very different reason: He plans to use it to radically improve his ability to carry phone calls--and do it much more cheaply.

[SNIP]

The new gear is so powerful that he will be able to simultaneously increase the quality of cell phone calls while cutting the cost of providing each minute, from just under a penny today to closer to a tenth of a cent. Linquist charges 2.1 cents a minute, just under half of the industry's average revenue. He'll continue cutting, confident his singular focus on running the cheapest voice network will keep his costs well below those of the rest of the industry.

A decade ago there were three phone businesses: local, long distance and cellular. The first two have already collapsed, done in by advancing Internet and cellular technology and the cutthroat competition they unleashed. Americans paid $110 billion annually for long-distance phone calls nine years ago. It's now down to $55 billion and still shrinking. Local phone companies took in $126 billion at its peak eight years ago; that sum has fallen to $86 billion and is dropping fast.

Another interesting quote (it is always nice when data is included):

MetroPCS has pioneered the use of new technology that lets it pack more bits into high-traffic areas. On a recent afternoon in East Los Angeles, dozens of parents waited to pick up their kids from school, many chatting away on their phones. While most calls linked invisibly to large cell phone towers, the MetroPCS subscribers unknowingly connected to a tiny antenna no bigger than a car radio antenna that dangled from a nearby telephone pole. From there the calls traveled via fiber-optic cables that snaked alongside old phone wires back to a dingy building and then to the main network. These clever minicells are only one way the company keeps chopping the cost of providing each customer with unlimited calls. Providing unlimited calls now costs the company $16.82 per customer per month, down from $18.23 a year ago.

NANOG 47

There are some interesting presentations up at the NANOG 47 website. In particular, this paper is an interesting global look at network traffic, and this one seems to be a nice presentation on LTE.

Update: Here is an article that discusses the first presentation.

The future of WiMAX

I find it worthwhile looking in the financial literature when it comes to new technologies since it is often a more worthwhile predictor of where things are going than the technology press. Thus, I found this item interesting. The article states:

The much-hyped next-generation (4G) technology of WiMAX is quickly losing ground to the alternative technology of Long-Term Evolution (LTE). Large telecom infrastructure equipment makers are gradually shifting from WiMAX to LTE, and as a result the WiMAX field is getting less crowded day by day.

Later, the article notes that there is a role for fixed WiMAX even as the fortunes for mobile WiMAX seem to be fading. If this is true, it seems as though perhaps Sprint erred in choosing mobile WiMAX as its 4G technology to gain first mover advantage!

AT&T and LTE

There were some interesting bits in this article that I think are worth highlighting:

The upgrade to 7.2 Mb/s [HSPA] along with the addition of new HSPA data carriers and removing choke points in the backhaul network will ease many of those problems. But the advent of LTE in 2011 will provide the ultimate antidote. Not only will AT&T be able to deliver far more capacity over the new network, it will be able to deliver it much more efficiently and cheaply. Rinne estimated that the cost of delivering a megabit per second of capacity over LTE was just 3% the cost of delivering that same megabit on an EDGE network, compared to the 14% of the EDGE’s cost on the HSPA network.

Rinne does not define what "cost" is here. I suspect it is spectrum use rather than capital and operating cost, but it is hard to know for sure.

Future of WiMAX

I am not quite as pessimistic about WiMAX as this item is. Instead, I think it will serve a role as a wireline replacement technology rather than as a competitor for LTE.

LTE testing in the US

If you're interested in technology migration in the wireless industry, you might find this item over at Ars Technica interesting. The article reports on this news release:

Verizon Wireless today completed its first successful Long Term Evolution (LTE) fourth generation (4G) data call in Boston based on the 3GPP Release 8 standard; the company also announced today that it had earlier completed the first LTE 4G data call based on the 3GPP Release 8 standard in Seattle. The successful data calls involved streaming video, file uploads and downloads, and Web browsing. Significantly, Verizon Wireless has successfully made data calls using Voice over Internet Protocol (VoIP) to enable voice transmissions over the LTE 4G network.

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Boston and Seattle each now have 10 LTE 4G cell sites up and running on the 700 MHz spectrum. These LTE 4G markets were selected by network planners due to their geographic configuration of suburban and urban areas as well as the areas’ high-technology population. The trials will help Verizon Wireless and its LTE 4G network partners understand issues that include how to best prepare cell sites and how to add the new technology to the network.

Surely Verizon is interested in LTE because it provides a bridge to the GSM world, which it now lacks.

In regards to the competition with WiMAX in the race to 4G, Ars observed:

The announcement also made one of LTE's advantages over WiMax clear: a number of traditional wireless telecom powers were backing it. The tests' description read a bit like a who's who of the cellular world. Network equipment came from Starent Networks and Nokia Siemens Networks, Alcatel-Lucent and Ericsson provided the base station hardware, and devices were provided by LG and Samsung.

But a key factor may ultimately wind up being bank balances. Verizon has continued to grow its earnings throughout the financial crisis, and wireless services account for nearly 90 percent of its income; it can't afford to appear as an also-ran, and has the money to make sure that it doesn't. Clearwire benefits from the deep pockets of its backers, most notably Intel, and has nearly $2.5 billion in the bank, according to its recent earnings release. But, at its current rate of operating losses, that cash will last it less than three years.

In other words, it may have little or nothing to do with the technical benefits of one versus the other, but rather with the ability to sustain the technological conversion. This reveals one of the essential features of telecom: that large capital investments are required before revenue can be earned, giving incumbents a powerful advantage.

Here is a related article from GigaOM.

CDMA as an end-of-life technology?

This article in Telecom Magazine and written by Phil Marshall of the Yankee Group is interesting. Marshall writes:

The CDMA market is under long-term pressure in Brazil and is being swapped out for 3GSM in Australia. In Venezuela, Mobilnet has announced plans to overlay GSM on its CDMA network to reach low-end subscribers. In India, Reliance is migrating its CDMA network to GSM in urban areas. Neither Verizon nor Sprint has opted for long-term CDMA migration strategies. Sprint is planning a commercial launch of mobile WiMAX in April, and last November Verizon announced it will implement long-term evolution (LTE), a 3GSM migratory technology.

This, combined with the improvements in GSM technology, has removed many of the advantages that CDMA once had. This graph (from the article) shows CDMA slowing. Since LTE and other technologies don't enter into the technology mix until after 2011, it doesn't show a decline.

More on Sprint/Clearwire and WiMAX

As I have mentioned earlier, Sprint and Clearwire have ended their partnership plans. Several articles (see this and this, for example) are wondering what the future of mobile WiMAX is, especially in light of the recent LTE test. BusinessWeek has speculated about investment by Intel, in light of the strategic importance of this technology (see this), or a significant engagement with Google (see this as well).

Do you think that this is another case of analysts falling over themselves to get attention (i.e. a lot of hot air)? Or, is this truly a deep blow to mobile WiMAX prospects?