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LTE: The Future of Mobile Data

by Steven Hartley, Senior Analyst, Ovum, & Julien Grivolas, Principal Analyst, Ovum


Long Term Evolution (LTE), a new generation of mobile network technology, promises to revolutionize the use of data services on the move. Over the past year, it has gained unparalleled support from mobile operators around the world, particularly in North America. Its introduction is now inevitable, despite the major investment needed.


An Overview

LTE is a wireless technology often discussed alongside its more mature alternative, WiMAX, in relation to the evolution of mobile telecom networks to “4G.”* Both LTE and WiMAX technologies can deliver wireless data connectivity that is able to compete with fixed-line broadband services provided by DSL or cable. LTE’s proponents state that it may allow customers to drop their fixed-line broadband connections altogether.


LTE’s primary objective is to enable operators to better and more cost-effectively transport the rapidly growing volume of mobile IP data traffic on their networks. This mobile data traffic is growing exponentially, while the service revenues paid by end users are either flat or falling due to intense competition. This disconnection between income and costs is threatening to undermine the positive revenue-generating potential of mobile data services for operators.


Therefore, LTE offers a long-term route to financial security. Nonetheless, migrating to LTE does require significant investment from mobile operators, and not just in upgrading base stations. For example, operators’ core networks, which carry the consolidated traffic from all base stations, will also need to evolve. Operators will also have to deploy SAE/EPC (System Architecture Evolution/Evolved Packet Core) network elements in parallel with LTE.


LTE technical specifications are defined by the 3GPP (3rd-Generation Partnership Project). The 3GPP’s role is important because it provides the technology with an enormous addressable market. In 2008, 89% of mobile connections worldwide, including those from AT&T and T-Mobile in the U.S., used one of the standards defined by the 3GPP. In addition, in an unprecedented move in the industry, many operators are shifting away from rival technologies and converging on LTE. For example, several CDMA operators, including Verizon Wireless and MetroPCS in the U.S. or Bell and TELUS in Canada, have stated publicly that they will migrate to LTE. LTE offers the next stage in the evolution of the networks on which these users depend for mobile connectivity. Such a large addressable market ensures:



*Technically speaking, “4G“ refers to technology defined by the International Telecoms Union (ITU) as IMT-Advanced. For LTE, this refers to the next step in the evolutionary process, LTE Advanced, while for WiMAX this actually refers to 802.16m, the successor of mobile WiMAX.



The Market for LTE Services

LTE gained significant momentum as the dominant next-generation mobile access technology throughout 2008. Commercial LTE launches will initially appear on a small scale in Japan, the U.S. and Sweden in 2010, with larger players in Western Europe following in 2011 to 2012.


The ramp-up in LTE deployments can be seen in the massive year-on-year connections growth forecast for both 2013 (219%) and 2014 (175%). We expect to see 109 million LTE connections worldwide by 2014, as shown in Figure 1. We estimate that the number of LTE connections will almost equal those for mobile WiMAX in 2013 and will be double the number of mobile WiMAX connections in 2014. Clearly, the window of opportunity for mobile WiMAX is closing rapidly with such widespread support for LTE.


However, challenges remain as to the business case for LTE at an individual operator level. In the current economic climate, investors will frown upon the significant investments required to deploy LTE if sufficient return on that investment cannot be proven. There are market circumstances that favor a more aggressive deployment, such as evolving to LTE from CDMA, particularly if faced with an operator deploying HSPA+. But operators need to take a very hard look at the business case, especially when the evolution of HSPA offers a potential alternative on existing infrastructure. HSPA will remain the dominant data-optimized network technology, accounting for 79% of high-speed data connections in 2014.


Key Suppliers of Mobile LTE Network Equipment

All the major mobile infrastructure vendors consider LTE the strategic technology for future mobile broadband communications and therefore are actively targeting this business opportunity. However, differences remain in the way they approach this opportunity due to several parameters:


The increased maturity of the technology is reflected in the announcement of the first contracts between LTE and SAE. However, the industry must avoid raising expectations too far. It did this with the expensive deployment of 3G, which is only now reaping dividends, thanks to HSPA—and not the oversold UMTS. Many issues still need to be addressed.

Device Development Lagging Behind Networks

Commercial launches of LTE networks are expected to start in 2010. However, the first devices will be data-only external modem devices such as data cards and USB modems. For operators, data-only devices are more significant for LTE compared to previous network rollouts, since voice services are now provided by legacy technologies.


Initial LTE handsets will follow after about a year, but are still most likely to rely on the existing network for voice calls and therefore only use LTE for data. Handsets that natively support voice over the LTE network will take approximately one year longer to appear on the market. In the meantime, handsets will need to support multiple mobile technologies to support voice services.


This highlights one of the primary obstacles to device development: Initial chipsets for LTE handsets will all need to be multimode. This means they must support 3G services alongside LTE, so that users can still receive a service even if they move to a location outside of LTE coverage, and to ensure that the handover between two technologies during a voice call or data session is seamless.


The technical complexity of the new technology means that LTE devices will be more expensive than their 3G counterparts. Costs will start to fall only once a volume market has been established. A premium associated with LTE devices will exist for some time due to the increased memory and processor requirements needed to process the volume of data enabled by LTE. Nonetheless, LTE will encourage smartphone adoption as service providers look to drive up data usage and offer superior browsing experiences.


Nokia Siemens Networks

An Interview with Sue Spradley, Head of Nokia Siemens Networks for North America


Sue Spradley, Head of Nokia Siemens Networks for North America

Broadband is everywhere. The Internet already plays a pivotal role in our daily lives, and it will become even more pervasive as the Internet goes mobile. Nokia Siemens Networks (NSN) has been at the forefront of LTE or 4G wireless technology development for many years. The company is the first network provider in the world to complete a number of LTE milestones, including the world’s first LTE call using commercial hardware and software. With its global scope and scale and deep understanding of network operation requirements, Nokia Siemens Networks is continually devising innovative ways to use this technology strategically to address its customers’ key business challenges and lead industry growth.


What do you see as the main trends in the mobile industry? How can LTE help in addressing the associated network issues?

Over the past few years, we have seen explosive data traffic growth as millions of services and billions of devices come online. As more and more people use mobile data for work, entertainment and social networking, service providers have to find ways to optimize their assets, like spectrum, and do so as efficiently as possible. This is where LTE comes in.


Our opportunity is to help operators discover new ways to leverage their networks to give their customers a unique experience that differentiates them. NSN’s vision of a “Network of One” puts the customer at the center of the network and allows service providers to create an environment that delivers a personalized experience easily and efficiently. Our Subscriber Data Management (SDM) solution is a game changer for our company. It plays a critical role in helping service providers tailor the user experience for each subscriber.


What is your view on LTE market development in the U.S. and globally?

Being involved in the LTE deployment for the provider NTT DoCoMo in Japan, we see Japan, along with the U.S., aggressively leading the world toward commercial LTE services. These operators want to move quickly. Knowing that companies like Verizon and AT&T are leading the way to LTE in the U.S., we have established our Next-Generation Lab and LTE Center of Competence in Dallas so that we have R&D, interoperability testing and much more in our own backyard.


What specific challenges will operators face when migrating to LTE?

It is critical to understand that LTE migration means an end-to-end evolution. People tend to only think about radio access, but it is really the tip of the iceberg of what is involved in 4G migration. For example, core network and backhaul also have to be considered. Everything has to be 100% IP, which means that wireless operators need to be, or at least need network partners who are, well versed in IP technology and its characteristics. We’re basically seeing the worlds of telecom and IT fusing together, so in some sense, many companies are entering uncharted territory, which can be an exciting adventure.


What is Nokia Siemens Networks’ key value proposition to support operators migrating to LTE?

In North America, Nokia Siemens Networks’ unique value proposition is providing a network advantage that makes the network a catalyst for communication service provider innovation. We do this in many ways, but key differentiators for us are the core networks and SDM solutions that we’ve delivered to the majority of tier one operators in the U.S. and Canada. This is actually the most critical part of the transition to get right, and it’s what we do best. We are leading the way in LTE as we help service providers create the best user experience for their customers.