4G: The Next Frontier for Celluar Networks

Recently, a committee of UK members of parliament criticized mobile operators for fighting over how to share out the airwaves that will deliver the country’s next-generation services. The UK is currently on track to be one of the last European countries to hold its fourth-generation (4G) auction, and politicians do not think should be delayed further by clashes between mobile operators.  This is not surprising given that 4G will change the future of the mobile broadband experience for both consumers and business users, and further delays could be damaging to UK businesses. Beyond the technology evolution, what’s the real business case is for communications service providers (CSPs) to even try and keep up with subscriber demand for mobile data by providing an improved access network?

After all, there is clear expenditure for CSPs with diminishing returns. Indeed, across all regions there is increased pressure for CSPs to consolidate in order to gain the necessary scale to maintain profitability, as significant additional network expenditure is occurring.  As a result, CSPs are exploring what new services 4G can offer with true differentiation and a real chance for premium pricing, above and beyond what 3G can already offer.  In our Special Report, “4G: The Next Frontier for Celluar Networks,” we examine the latest trends, potential uses and best practices regarding the use of fourth-generation technology.

At present, the main technology being used for 4G is Long Term Evolution (LTE), which may not be quite 4G but is the first logical step on the road to it. Although the optimal pricing model and business case for the use of 4G by CSPs is still being worked out, the high speeds and lower latency offered should provide CSPs with an opportunity to serve the enterprise segment. This represents a new departure for CSPs who should make sure that they develop clear use cases for the enterprise market that illustrate the potential value of 4G.

Through 2020, as both the volume of connected things increases and the use of the data received from things gets used meaningfully, things will create the majority of meaningful interactions on the Internet and utilize the Internet in ways that save money, create value, improve products, and enhance experiences for enterprises and consumers.  This will have massive implications for not only the amounts of data being moved across mobile networks, but also the signaling load – as the majority of connections will be wireless, rather than fixed. This is a unique opportunity for CSPs to provide the necessary wireless connectivity using 4G – first LTE and then LTE Advanced (LTE-A).  The bottom line is that fourth-generation technology offers many opportunities to communications service providers in several verticals, beyond just telecommunications. But it also requires that significant changes are made to network and business models.

It turns out that even though LTE is being rolled-out at a lower frequency than 3G (700MHz vs. 3G at 850/1900 MHz in the U.S.), to gain the promised higher speeds, you need to be closer to the center of the cell site.  It has a more precipitous drop-off in speed than today’s 3G technologies–meaning the farther away you are from the base station, the slower your data speeds will be.  That also means it may have a harder time penetrating inside our houses and offices, also delivering lower speeds unless there is a higher density of tower build-outs than there is for 3G today.  Or, service providers can install in-building technologies–like femtocells or distributed antenna systems. But providing every building this capability is expensive, right?  Yes, but AT&T thinks building out the right ones can offer quite the payback. I just came back from its annual industry analyst conference, and in a separate meeting, head of business solutions John Stankey told me they are all-in on distributed antenna systems (DAS).  He gave us an example where they provided a DAS for one large building in Manhattan, and switch 40% of the traffic of its macro network and onto the private DAS.  DAS usually costs $1-$3 per square foot, so it’s not the right solution everywhere, in my opinion, but one AT&T is getting firmly behind.  This isn’t new in the industry, under its Custom Network Solutions group, Sprint Nextel has been quietly lighting up hundreds of locations a year.

I think for certain instances, DAS can be a great solution, especially a vendor neutral system that can support multiple operators and technologies over a single antenna system.  But it is too expensive to extensively build-out, so most operators will have to rely on other technologies like Wi-Fi, femto and picocells to create the largest possible network as possible and provide the best in-building coverage.  So this is going to take some time.  As LTE is just rolling out today, don’t expect ubiquitous coverage to happen overnight, but with a multiple technology approach, we could see improvements in coverage and speed when it finally begins to mature five years from now.

I believe it makes sense for most companies to support a diversity of devices, since in reality, there is no alternative. No standard OS means no standard device. But it is key to create a framework of support and define the IT and user requirements for devices and platforms. Companies should review our managed diversity framework for guidance on this (see: Use Managed Diversity to Support Endpoint Devices, May 2010). Most companies should continue to support corporate liability in order to retain control over security, costs and the future direction of mobility in the enterprise (see: Companies Should Keep Control of Cellular Users Through Corporate Liability, January 2010) and develop policy that helps guide users and the company in supporting mobility.

The good news, there is an ever expanding set of enterprise tools and services to help companies manage mobility. As service price continues to decline, as device and network capability continues to increase–it is inevitable that for many business users, the mobile device will become the primary communications tool, if it hasn’t already. Now is the time to acknowledge and manage it.

What is Sprint’s strategy here? In the past few years, Sprint’s strategy seems to have been to not have one specifically–but be all things to all people. How’s that working out? Not so good it seems. Even though Sprint has improved financially in 2009, it still lags its competitors in net subscriber additions, leads in churn for some segments–and continues to lose enterprise mobile market share to AT&T, Verizon–and even to T-Mobile this year.

I’m glad to see Sprint has a strategy for iDEN, CDMA, WiMAX (through it’s Clearwire venture) I just don’t know think if it’s the right one. Rather than be all things, it should really pick one and just be the best. A focus would surely turn both its reputation in the enterprise and its finances around.

Surely the growth of the Internet and the use of wireless wide area networks to access these networks are driving new rules. As cellular network spectrum is finite and expensive compared to wireline, some controls are needed to inhibit use. Right? Well not really. In a rush to drive data service revenue growth, U.S. wireless operators have increasingly reduced the price of 3G broadband access from around $75 retail, to under $45 per month on average for negotiated rates. The laws of price elasticity say the lower the price, the higher the volume. So demand has surged with a million new subscribers each month. Though providers tried to present their service as a wireline replacement by offering “unlimited” data downloads, the number of new users has put a crush on some networks, causing slower than average speeds and a strain on network capacity. In fact, operators have already changed their terms from “unlimited” to a maximum of 5GB per month–forced by several lawsuits. Operators routinely throttle (slow down) bandwidth of some users during peak times, which doesn’t give an optimum experience. And most users don’t even know it, blaming it instead on poor connections or some other problem that is difficult to trace back to the provider. So wireless, it turns out, is a different service than wireline–and should be priced differently.

Wireless operators are a bit to blame for all of this. In their rush to replace wireline services (particularly cable) they forgot the valuable, limited asset they have and that all networks aren’t created equal. Even newer wireless technologies like 3G and 4G will have a hard time keeping up with increasing demand as data shifts from low end messaging to multimedia. Not to mention the increasing cost of backhaul connections to get to the Internet. They would be wise to keep these lessons in mind as new services are launched–be upfront about pricing, throughput, data caps, throttling–or government regulations will get stricter. New laws will only make carriers think twice about additional investments in this area. In the end, a compromise will need to be reached to satisfy both sides, but wireless operators need to bring full disclosure to the table first, and that has never been easy in this industry.

It’s not over yet.  Congress, which has a chance to correct this in the past year, must now pass a law repealing it.  In the end, the tax loss is minimal since it is rarely enforced, and the loss of productivity is a bigger hit than what we gain anyway.  It’s your time to act.  Write your Congressman and get their support.  Until Congress acts, you better figure out a way to manage this or if you do get audited, you are liable.

But some questions remain.  Until a new law is passed will the IRS still pursue it in an audit?  What about those that got heavy fines for non-compliance, will they get their money back, will they be able to contest it in court?  Does this open a new problem now?  Is it wise or will Congress even look to pass a law eliminating a tax and a revenue stream during the recession, even a small one?  Many questions remain and answers are still to come.

Will we see the same in the United States?  One of the most frequent questions I get from all sized enterprises is how to reduce the cost of international roaming, especially between the U.S. and Europe.  There are some management best practices, but basically the two most successful methods are educating users about the costs so they can be more considerate and negotiating country-level discounts.  I’ve seen U.S. carriers discount up to 40% for international roaming.  Still, prices per country can be as high as $5 per minute.  Carriers claim they are passing through costs negotiated with those international carriers, and in some cases that is true, but not all.  There is room to reduce current costs for many countries while maintaining a decent profit.

This is more and more a growing problem.  Even as it is usually a small percentage of users at most companies, international roaming can cost 30-40% of a total bill.  Previous administrations have held out on regulating wireless service pricing, but current thought is that President Obama’s administration would be more likely to take another look at this (and the taxation issues!).  Just fair warning to the U.S. carriers, don’t wait to do something before regulation, like in Europe, forces you to do it.  It’s time to be more proactive here.

For those that are full-time work-at-home (WAH) or on the road (meaning not in a home or office location) greater than five days per month, or routinely customer facing, I think it makes more sense to make sure you are meeting the requirements of the user with current programs versus cutting right away.  These users are already saving money by not taking up costly real estate and are already subsidizing some work costs, electricity, heat/air conditioning, etc.—it wouldn’t be right to ask them to pick up more.

Look to pare down or eliminate services for other users that may have occasional needs but are currently fully reimbursed.  Many companies have not put guidelines on who gets what services or how much is spent.  No time like the present to get started.

There’s no doubt that everyone wants to save a job and help the company by saving money.  But it’s important to do it the right way.  Many companies are just finding out how much they are spending on telecom services,  wholesale cutting of telecom reimbursements may drive those costs to be hidden again under creative accounting.  It’s better to know about it than not.

Are you considering cutting cellular or home broadband reimbursements for your remote and mobile workers?  If so, or not, tell me why, would love to hear both sides.