LTE Business Model

At the LTE World Summit in 2008, the whole telecom industry weighed the choice between LTE and WiMAX. At that time, LTE was only vaguely understood, and much was made of its fast 150Mbps downlink rate.

At the LTE World Summit in 2009, the industry came to understand the importance of LTE and began discussing the challenges faced by LTE. Such challenges included the 2.6GHz band coverage and voice over LTE (VoLTE).

At the LTE World Summit in 2010, the focus of attention shifted from networking to utilizing LTE for in-service operation with the view of a commercial rollout by TeliaSonera—a tier-one operator in Scandanavia. TeliaSonera’s report on LTE commercial operation has aroused discussion about LTE business models.

Drivers of LTE

Radio technologies are moving from voice to data, from narrowband to broadband, from single-mode to multimode, from multiple technologies to key technologies dominated by OFDM and MIMO. However, there is only one goal underlying these trends: to provide more wireless bandwidth. LTE is an important stepping stone on this evolutionary path.

What has driven the rapid development of LTE in recent years? One of the most important factors has been growing market demands for wireless data services. Users need fast and convenient data services through their terminals, and operators need all-IP networks for high-speed data connectivity. Competition between fixed-line and mobile operators has also driven the evolution of radio technologies. Moreover, the growth of wireless data traffic has brought in more revenue for operators which have, in turn, pushed forward radio technologies. Another driving force has been operators seeking higher benefits and lower costs.

When to Deploy LTE

The timing of LTE network deployment is affected by the progress of LTE standardization and maturity of commercial LTE terminals and systems and also by the economic level, demands for wireless data services, user habits, and spectrum licenses issued by governments. This means the timing of LTE deployment may vary from country to country.

Only deploying at the right time brings the best return on investment. This is fundamental to a profitable LTE business model.  As evidenced by the premature deployment of 3G,  there are risks related to unfinalized 3GPP specifications, poor interoperability (even between terminals and systems of the same manufacturer), mobility of 2G and 3G, poor coverage, and lack of terminals and services. These issues can well be regarded as a checklist for successful LTE deployment. So too, late deployment might mean that good market opportunities slip by.

How should an operator decide the proper time to deploy LTE? This is a hard question. The following points should be considered:

■    3G services have grown rapidly, wireless broadband data traffic is surging, and user habits have been fully developed. Sales of 3G terminals and data cards have also grown rapidly.

■    Wireless data revenues have risen substantially and now account for a larger portion of operators’ total income. Statistics collected by Qualcomm from Vodafone, Telstra, Verizon, and AT&T show that wireless data services increased by an average of 30% from 2008 to 2009. These tier-one mobile operators are all running LTE trials. Verizon announced its commercial LTE network in December 2010.

■    Wireless data volume exceeds that of voice, and data revenue is now greater than voice revenue. CSL, Hong Kong’s largest mobile operator, has seen an explosive growth in data traffic since the launch of commercial HSPA+ in March 2009. CSL continued its LTE cooperation with ZTE, aiming at future mobile applications that can meet strong demands for high-speed broadband services.

■    Trial and commercial LTE plans of competitors should be considered. Tier-one operators, multinationals, and the largest operator in a country are always leaders in LTE deployment. LTE trials are usually run to build a high-end brand image. The second largest operator in a country also usually develops LTE in order to catch up with or even surpass the leader.

Business Models

An LTE network provides a data rate of up to 100Mbps in the downlink and 50Mbps in the uplink. These high data rates greatly enhance user experience. Studies on LTE business models are ongoing, and recent studies have focused on mobile Internet. In the foreseeable future, LTE business models may be found in high-speed and high-bandwidth Internet services, mobile Internet platforms, on-line wireless communities, and Machine-to-Machine (M2M) communications.

■   High-speed and high-bandwidth Internet services

LTE gives users a high-speed service experience. TeliaSonera carried out a user survey 100 days after it launched LTE. According to the survey, those who subscribed to LTE early had begun to like the technology. Over 90% of those surveyed were originally 3G users and 43% owned iPhones. 65% used LTE to supplement fixed bandwidth and 54% would not consider turning back to 3G. The new technology is shaping mobile Internet usage habits: 26% of those surveyed said they would use their mobile more for work, 23% downloaded larger files than before, 19% would watch on-line TV or streaming movies, and 16% were using Internet more often as a result of subscribing to LTE. 

All this shows that users are demanding better mobile broadband experience whenever conditions allow. Once they have the improved experience, it is hard to turn back to the lower-rate service. As the old Chinese saying goes, “It is hard to become frugal after being accustomed to luxury.” The emergence of cloud computing is further boosting the prosperous development of Internet data services.

■   Mobile Internet platforms

From voice only mobile phones to multimedia phones and iPhone and Android terminals, mobiles have tended to develop into Internet platforms. This is also the developmental trend of computers. Terminals are evolving into Internet service platforms where all processing is completed via service plug-ins to the cloud and using a background high-speed mobile data network.

■   Online wireless communities and M2M communications

The ultimate goal of communications is to connect anything or anyone to anything or anyone from anywhere at any time. New technologies such as network convergence, all-IP, and RFID have made this goal possible. LTE and LTE-Advanced are important stepping stones in the path toward this ultimate goal.

Mobile Internet platforms have been introduced to provide users with fast and easy access to a variety of local and Internet applications. People will change from using fixed terminals to using mobile terminals and from point-to-point connections to online communities and games circles.

With the trend towards high-bandwidth all-IP networks, M2M technology—which allows the flow of data to be transferred in real time between machines or between people and machines using wireless networks and background server networks―has been commercially deployed in Europe, Korea, and Japan. M2M applications can be found in safety monitoring, mechanical and repair service, public transportation, fleet management, industrial automation, and citywide information networks. Operators currently providing M2M services include BT, Vodafone UK, T-Mobile, NTT-Docomo, and SK. The development of M2M services has just started in China.

Conclusion

Evolution in the telecommunications industry is unceasing. There will be challenges accompanied by opportunities. In the LTE age, operators and equipment suppliers must understand the latest changes and quickly adapt by preparing for new business models and new sources of profit.