LTE – when will it arrive in New Zealand?

Suella Hansen takes a look at the technology

Long Term Evolution (LTE) really is the Holy Grail of the mobile industry. It is said HSPA+ can’t match LTE in terms of speed. Telstra, currently trialling LTE over 1.8 GHz and 2.6 GHz, has already achieved 100 Mbit/s. In theory LTE could achieve around 300 Mbit/s with a 20 MHz carrier in ideal conditions.

Naturally LTE needs spectrum and preferably large contiguous amounts of it. With the switchoff of analogue television as the world moves to digital television a ‘digital dividend’ is being delivered in the form of substantial blocks of spectrum. This potentially offers suitable spectrum for LTE without the need for disruptive ‘refarming’ of existing holdings. As in many other places, lower frequency bands offer the most economical solution for LTE in this country. This is due to the more favourable propagation characteristics in less populated or rural areas, and also it is better ‘in building’ penetration in urban areas.

LTE is already a reality. The first commercial LTE network was launched in December 2009 by TeliaSonera in Oslo and Stockholm. By the end of 2010 the Global Mobile Suppliers Association anticipates 22 commercial launches of LTE. These commercial offerings require substantial capital funding. In Japan NTT DoCoMo, for example, will invest US$3.4 billion overlaying the existing 3G network to be up-and-running with an LTE service.

Eventually there will be many LTE networks and customers so vendors will be offering more competitive prices and options with a broad range of handsets and capabilities.

The arrival of the more spectrally efficient 4G technology in the form of LTE, bodes well for more attractive and affordable offerings for the mobile customer. So the future is looking good for mobile data services. But do we really need them? Current trends indicate that demand is out there.

In Sweden and Denmark mobile broadband traffic tripled over the year to June 2009. In the US AT&T announced that mobile data traffic had increased by 5000 percent from 2006 to 2009. Across the Tasman a glance at the annual reports of Telstra, Optus and 3 reveals that in the past year mobile revenue grew by 10 to 25 percent, while mobile data revenue grew by 40 to 80 percent.

So can New Zealand operators afford the investments required to deliver LTE? Naturally, it’s a commercial and strategic decision for the operators, and we’ve noted that LTE is already commercially available in Norway – a country with similar features to New Zealand in terms of population and geography. However, one school of thought suggests that sharing might be the way to go in New Zealand for economical rollout. Operators would potentially share infrastructure, cell sites and even spectrum, so that we have just one nationwide LTE network.

The idea of sharing a network is not new: mobile operators around the world already share cell sites and towers. However, we don’t see many instances today of sharing active elements like base stations, antennae or spectrum. In one example Tele2 Sweden and Telenor Sweden plan in a joint venture to pool their spectrum resources and build one nationwide LTE network. This move is however a competitive strategy as TeliaSonera has already rolled out its LTE network in Sweden. So Sweden will have competitive offerings, with product differentiation possible on many fronts, such as price and quality. With just one nationwide LTE network, product differentiation may become rather challenging. There would be no difference in coverage or service quality. Of course recently in this country we have seen aggressive mobile marketing on the basis of service quality, and coverage differentials have been important too.

Another possibility is for one operator to deploy the LTE network and wholesale it to others. NTT DoCoMo in Japan intends to wholesale in order to increase its customer base more rapidly and also to claw back some of its outgoings at a faster rate.

At least two parties in the US have also indicated interest in the prospect of wholesaling LTE. It is an interesting proposition for consideration here, but once again it must be taken into account that in countries like the US and Japan these initiatives will be against a backdrop of highly competitive markets.

So with the single LTE network the key issue is price in the absence of a competitive landscape. There is no reason to suppose that New Zealanders wouldn’t want mobile data at the right price. Remember a few years ago when DSL prices were high locally by international standards and uptake was correspondingly low? Some folk said uptake was low because no one wanted fast internet here. As those billboards say: ‘Yeah right’. The price went down and up went penetration.

So if mobile data is slow and expensive we won’t want it, but if much better offers are available it will be quite a different story.

LTE is on 2degrees' horizon.