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.

But T-Mobile USA is now changing its strategy, following Sprint Nextel and its “Simply Everything” down the “high-value, low cost” path by bundling everything  and the kitchen sink into a high-end, unlimited voice and data plan.  This plan would cost more than 6x what the average T-Mobile USA user spends today (which was $12.80 as of Q4 2010), and about 10% more than the average business user.  It has a high value because the unlimited plan ensures a consistent spend and costs less than the sum of its parts.  Sprint Nextel has seen some success going down this path, with the majority of its postpaid users are in these plans.  But customers going to T-Mobile are not looking to spend more.  Instead of trying to add more plans to an already confusing menu, I’d like to see a bigger focus on innovative development and services built around mobility.  If that happened, then you could almost charge whatever you want.

Blackberry is arguably the most successful solution focused on the enterprise messaging market.  That success was driven by end-to-end development and support from the client, to the server (BES) and the network.   Having the control and the ability to provide an end-to-end solution made it a success.  The only other platform to see that level of success, albeit focused more on consumers than business users, has been the Apple iPhone.  It’s funny to see all the complaints about the iPhone and iPad platform, especially from developers, trying to get their applications  approved for the device.  Apple feels it needs to control the user experience and the applications in order to provide a more compelling alternative– and it’s right.  The market success it has achieved, growing in three years from 0% to 15% marketshare by the end of 1Q 2010, and number three in global smartphone sales proves it.  And users agree Apple provides a more compelling Internet, user and application experience.  Apple is not going to give up control.  However there is good news for enterprises.  Those that join the Apple Enterprise Developers program will get to create, certify and download home-grown applications for iOS4, bypassing Apple and iTunes.  The challenge will be whether enterprises will be able to create a compelling experience for its mobile workers.

So, having end-to-end control supports a better mobile experience.  BlackBerry users see this with increased battery life, reliability and manageability (security) on their platform.  Apple users reap the benefits of a better mobile browsing experience and a plethora of safe, secure mobile applications from which to choose.  Android still has a lot to prove in this market and has no guarantee of success.  One thing I do know for sure, it is going to continue to be an interesting next 15 years!

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.

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.