The financial crisis is putting the squeeze on business budgets, but interest in LTE is building, and the first operators are expected to launch services in 2010.
For some network operators, LTE cannot come soon enough. In the period to 2015, wireless data traffic is forecast to increase tenfold in developed countries and sevenfold in emerging markets. These growth rates would require substantial increases in mobile spectrum or amount of mobile infrastructure in order to be provided over HSPA. At the same time, revenue per megabyte continues to fall, driven down by increasing competition and the introduction of flat-rate pricing.
Realistically, LTE will be the only way to profitably manage data traffic: the technology can deliver data at a sixth of the cost of UMTS over a 5 × 5MHz channel.
Compared with previous network technologies, LTE offers capex and opex savings, and considerable performance improvements, including higher data rates and reduced latency, which will support new services such as gaming, TV and video. As such, LTE will not only be necessary, but it will also represent a valuable opportunity for those operators that want to differentiate their mobile data offerings.
LTE will offer great benefits to consumers, but it will not be without its challenges. It will fundamentally change the way operators and vendors do business. The value chain will be extended and segmented, and space will need to be made for application and content providers. LTE will be deployed almost on a site-by-site basis and deployment policies will be quite different to those of the past. Integrating LTE into the existing operator access infrastructure will also be challenging and will have a very important operational impact if the operator is to make the most of what LTE offers.
Operators face complex strategic choices. Operators’ strategies will be delimited by their individual business objectives, as well as legacy infrastructure, local spectrum availability, the availability of devices and the demand for data services. This results in seemingly conflicting opinions. Telefónica believes that depending on traffic evolution, the origin of usage, and the maturity of LTE solutions, the window of opportunity for HSPA+ may not be significant. Telefónica plans to evolve its HSPA networks by including HSPA+ features, but believes that "some of the features that require significant investment (like MIMO) may be difficult to justify economically in most cases." Conversely, Orange plans to upgrade to HSPA+ "whenever suitable, as soon as the technology becomes available."
Informed by interviews with key operators, Analysys Mason’s recent report, Operator strategies for network evolution: the road to LTE, explores the story behind these apparent contradictions by examining the key factors driving LTE deployment: operator timelines for deployment, legacy issues, device availability, spectrum and technology choices. While there are as many pathways to LTE as there are operators, this report concludes with four of the most likely operator strategies.