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Inside Telecommunications: 2Q 2012 trends

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Figure 5. Commercial LTE networks worldwide

Figure 6. Global status of LTE network trials, deployments and launches

The use of 4G spectrum will allow for the provision of high-speed internet services in areas of low population density where fixed networks would be prohibitively expensive.

Carriers and vendors boost their Wi-Fi credentials

With rising demand for Wi-Fi access in urban settings, cable operators are supplementing their broadband offerings with Wi-Fi connectivity. By 2016, 30% of the global population is expected to be living in 1% of the world’s land area, generating 60% of its mobile data traffic. Location-specific use cases for Wi-Fi are well established.

In May, US cable companies Comcast, Time Warner, Cablevision Systems, Cox Communications and Bright House Networks announced they would allow each others’ customers to roam on their Wi-Fi networks for free when traveling outside their home network areas. In June, Google announced a tie-up with Boingo Wireless to offer free Wi-Fi in New York until September.

According to a survey, 87% of mobile users want greater Wi-Fi availability for their devices. For tablet users, Wi-Fi is the preferred connectivity option. Operators are responding in kind from both established and emerging markets.

Looking ahead, Wi-Fi’s importance to technology, media and telecom players will continue to grow. Initiatives to integrate Wi-Fi with cellular underline that hotspots will play a key role in service innovation, besides reducing network costs. Increased efforts to provide security, metering and policy tools will help operators harness Wi-Fi functionality better as part of existing data price plans.

Sharp increase in global LTE network deployments

Latest figures from the Global mobile Suppliers Association (GSA) show that LTE is the fastest-developing mobile technology system yet. The number of commercial networks has more than quadrupled in the past 12 months. By the beginning of July, 280 operators had made firm commitments to deploy LTE networks in 90 countries while an additional 58 operators in 11 more countries are engaging in LTE technology tests and trials.

So far, 89 operators have launched commercial services in 45 countries. This includes nine commercial LTE-TDD systems that are now available in Australia, Brazil, India, Japan, Poland, Saudi Arabia, Sweden and the UK. Of these LTE networks, 63 have been launched in the last 12 months. The GSA has raised its forecast of the number of commercial networks available by the end of 2012 to 150 systems in 64 countries.

In the three months to June, a number of countries saw commercial LTE services made available for the first time. In Russia, MegaFon switched on its LTE network in the city of Novosibirsk in April. In May, 4G services became available in Azerbaijan through Azercell using 1800 MHz spectrum.

Figure 5. Commercial LTE networks worldwide

Source: Global mobile Suppliers Association, “GSA confirms LTE investments by telecoms operators in more than 100 countries,” 12 July 2012

Figure 6. Global status of LTE network trials, deployments and launches

Figure 2

Source: Global mobile Suppliers Association, “Update on Status of LTE deployment,” GSA website, 8 July 2012; EY analysis

Peter Arnold Peter Arnold
Director, Economic Advisory
Ernst & Young LLP | United Kingdom

The UK communications regulator, Ofcom, announced in July 2012 that the auction of 4G spectrum in the 800 Mhz and 2.6 Ghz bands will take place in early 2013. The auction will be the largest spectrum sale in UK history, placing on the block the equivalent of three quarters of the UK mobile spectrum in use today — some 80% more than released in the 3G auction which took place in 2000.

Ofcom is following a trend that began about five years ago of auctioning spectrum for 4G services. The first commercial 4G services were launched in Sweden and Norway in 2009, and around 45 countries now have operational 4G networks.

In Europe, 800 Mhz spectrum has been freed as a result of switching off analog broadcasting services. The departure of television broadcasters has created a “digital dividend” of extremely useful bandwidth. European Union policy makers have long been concerned about the growing “digital divide” between rural and urban users and see 4G mobile (primarily based on LTE technology) as a key tool to close this gap.

Spectrum in the 800 Mhz range is highly sought after. It has superior propagation characteristics compared with higher frequency spectrum, which will make it cheaper for operators to roll out data services to rural areas compared with existing 3G spectrum.

In contrast, 2.6 Ghz band spectrum is more suited to urban locations. It will be in demand by operators seeking to bolster their spectrum in high-density, high-demand areas to accommodate the rapid increase in data volumes brought on by the explosion in smartphone and tablet ownership.

Rural opportunities

Primary research conducted as part of our upcoming Mobile maze report found that 64% of customers in urban environments own smartphones compared to 49% in rural areas.

Those living in urban areas used 50% more services than those living in rural areas. Opening the rural market could be a boon to providers, as smartphone owners are much better customers than owners of conventional phones.

The use of 4G spectrum in markets without ubiquitous fixed broadband networks will allow for the provision of high-speed internet services in low population density areas.

The 4G auction in the UK is expected to raise up to £4b for the government. This is in stark contrast to the 3G auction in 2000, in which the government raised £22.5b in a series of sealed bid auctions.

The 3G auctions had left telecoms providers with significant debt burdens due to the high license fees. Ofcom’s rules for the new auction will seek to strike a three-way balance between revenue maximization, encouraging ongoing competition and ensuring future investment in the industry.

Next steps for operators:

  • Develop a spectrum strategy
    Operators will increasingly own a variety of different blocs of spectrum. Maximizing the efficiency of usage will be critical to achieving strong return on investment.
  • Engage with governments
    Encouraging governments to release more spectrum and to allow greater flexibility in usage of existing holdings will benefit operators and the industry.
  • Value with caution
    Acquiring 4G spectrum will be a necessity for mobile operators, but they should be realistic about the commercial benefits and avoid overpaying. Business cases should demonstrate incremental value, and valuations should be conservative.


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