I often talk about LTE with network innovation people. LTE carries a great promise for a world where distance and geography no longer hinder data traffic. In an LTE world, our cars can 'talk' to each other; we can transport holograms of ourselves across the world and play 3D HD video games with our friends.

In July 2011, the GSA reported that 24 LTE networks have commercially launched in 16 countries, and they forecast at least 91 LTE networks will be in commercial service by the end of 2012.  There is no doubt in anyone’s mind that LTE is the mandatory next step in mobile networks evolution. However, there are a few myths related to LTE that I would like to challenge.

Myth #1: LTE will provide limitless broadband

Currently HSPA delivers throughputs of 7.2 or 14.4 mbs at most. LTE promises between four to six times more. However, as our MobileTrends Report, H1 2011 found, the annual growth rate (CAGR) of mobile broadband consumption is already at 213%. In other words, the evolution of mobile broadband networks is simply lagging behind the rate of data consumption – and unlikely to catch up in the foreseeable future.
 
LTE implements new radio technologies such as OFDM to better utilize spectrum. A theoretical throughput of 50 to 100 Mbps is achievable with LTE, but these radio resources are shared by hundreds of users per cell site, hence the average bandwidth per user is far from limitless and will eventually fall below broadband consumption necessities.

Myth #2: LTE will solve all congestion problems

Experience has taught us that the increase in bandwidth will spawn a new generation of bandwidth-intensive applications that were previously insupportable. We already see Video applications shifting to higher definition modes, given the right access opportunity. Consequently, content providers are seizing the opportunity to offer even more HD, 3D and other premium video content. Finally, tethering is proliferating (to the extent that it is now separately charged for by some operators), unleashing bandwidth-hogging, made-for-fixed applications like P2P upon mobile networks.

Some people suggest that one possible solution is using smaller cells and closer proximity cell sites. However, this is only moving the  congestion bottleneck either to the backhaul infrastructure or deeper into the network core. For example, in many cases the backhaul of nearby cell sites needs to be chained or meshed between them due to the coverage limitations of such networks. Hence, the same infrastructure is now required to carry the traffic of more cell sites.  In other cases, the core network capacity is challenged, by the need to support more cell sites.

Myth #3: In LTE subscribers will pay more for speed

In the pre-data era, mobile operators have perfected charging for services based on value to the subscriber, not actual serving cost. Take SMS for example, an average message ‘weighs’ about 100 bytes and is priced at a few cents. That's a few hundreds of dollars for 1 Megabyte. Now imagine operators trying to charge a $500 for every Megabyte of video data they deliver.

As providers of fixed Internet already experienced, the cost per unit of mobile data has only decreased over time. In June 2011, Nielsen reported that for Smartphone users in the U.S., cost per Megabyte decreased by 46% between 2010 and 2011.

Mobile data charging is a pickle for most operators. When offered quota-based plans, subscribers react with confusion (not at the least alleviated by data plan calculators and other visualization aids). Frustration comes next, when they are offered 'unlimited' data plans, but those are too slow or get throttled. Selling bits and bytes simply doesn’t cut it anymore. Strand Consult is already predicting pricing model failure, suggesting that "any operators that believe they can increase prices by [simply] introducing LTE are in our opinion naïve."  

Mobile Internet usage is driven by application, content and quality, not by raw speed. Much like the financial Big Mac Index, the industry will soon come up with its own ‘Charlie’ Index to differentiate the QoE (Quality of Experience) between operators’ networks by the viewing quality of a particular YouTube video. QoE is no longer nice-to-have, but a differentiating MUST. LTE represents an opportunity for operators to come up with charging innovation and value-based pricing. Services like HD video, or Operator charging for OTT, deliver added value for which subscribers would be much more inclined to pay.

 

 

 


 

 

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