4G

AT&T to jump to 4G, abandon HSPA+

AT&T has abandoned its HSPA+ (high speed packet access) plans in favor of a migration to 4G LTE, a move that isn’t at all surprising, given Verizon’s commitment to LTE and the extreme competition between the two companies. Sprint promoting 4G (via WiMAX) would have left AT&T at risk of being the only 3G provider of note in the U.S.

The big issue, we think, is likely the stress that the iPhone success places on AT&T’s cellular network. The move to 4G will have major repercussions in the infrastructure space because it will likely divert even more capex to the wireless side and to cell towers and RF modernization. It will also make evolved packet core a very hot metro issue, hot enough to change procurement plans for some operators.

Another impact of the decision will be to make the whole procurement zone purchase strategy of operators more important because wireless is likely to be its own zone and drive other product decisions, including FMC and VoIP.

Market pressure could cost AT&T Apple iPhone exclusivity

There’s growing speculation that AT&T’s honeymoon with iPhone may be coming to an end. Pressure from the government on the wireless industry is mounting, and Apple is no longer doing exclusive deals with iPhone. In fact, it can’t afford to.

With iPhone in the U.S. locked to AT&T, there’s too much of a risk that the U.S. market (the number-one smartphone market) will end up validating a host of iPhone competitors that might have little chance under normal circumstances. AT&T has relied on iPhone to gain some market share, however, and has won some Verizon customers. Since Verizon would be likely to get the iPhone next, the loss could send a bunch running back.

We’re hearing some speculation that Apple and Verizon will do a 4G deal, though, so the opening of the iPhone won’t be imminent.

Huawei’s T-Mobile LTE win shows revenue concerns

Huawei, which recently appeared to reaffirm its guidance on sales growth for the year, has won an important T-Mobile trial in Austria. The deal gives Huawei the largest LTE field trial in Europe to date and reaffirms that the Chinese equipment giant is making real strides in the important mobile market.

We think Huawei’s rise in mobile is also an indicator that operators are concerned mobile margins won’t last, perhaps due to the inevitable commoditization of services created by mobile web, smartphones and netbooks. The pricing pressure in mobile is ominous for equipment vendors overall, we think, because it shows that there is little chance that any basic infrastructure will hold margins anywhere over time. That means it’s service layer or nothing

FCC wireless market inquiries overdue, could affect spending

The FCC’s agenda for its August 27 meeting shows a commitment to a broad review of the wireless market, from its role in the national broadband policy to the state of competition and some wireless practices.

Both these activities are being considered for a Notice of Inquiry, which would launch a formal FCC process here. The interest in wireless is overdue. The FCC has far better data on and oversight of the wireline communications services, and yet wireless is becoming the prime mechanism for communications for a large segment of the population.

Operators hate this sort of thing; it raises the risk that the wireless cash cow will be shut off by the FCC in the form of new rules. The problem is that most U.S. operators are profitable because of wireless, and it’s not clear what would happen if the FCC were to curtail revenue/profit growth there through new regulation. The process will take time, and it’s not likely to impact 2010 budget planning, but it may keep wireless infrastructure spending plans tilted to the conservative side.

NSN’s 4G plans and strategic location for LTE center

NSN is opening a new LTE development center in Dallas, next door to the Nortel facilities, in effect, and thus able to draw on the labor pool from Nortel, much of which is willing to jump first and see how Ericsson might do second.

NSN had been an unsuccessful bidder for the Nortel wireless assets, but the move to set up its own development center might actually do the company more good by forcing it to devise a true LTE strategy of its own, integrated with its own assets and strategies.

Assimilating Nortel would not have been an easy task, in our view, and would have distracted management from the critical positioning exercises that are absolutely essential to getting a story ready for the fall planning cycle.

Verizon completes LTE test, discusses plans

Verizon completed a two-city test of its LTE service to the hype and hyperbole of the press, but there are still no indications of what LTE will really mean to users because its price and performance levels are not yet announced.

While LTE is theoretically capable of much higher speeds, few in the industry expect Verizon to unleash full LTE performance, and in any event, at higher speeds, users just use up their monthly cap in fewer seconds.

In our view, the primary driver behind LTE is the need to create a wireless network that’s designed primary for smartphones and netbooks, which will be more data-heavy than today’s devices, even if stringent rate limiting and pricing levels constrain user behavior. Remember, both 100 Mbps of LTE and 3 Mbps of 3G are shared among all the users in the cell, but LTE supports more users per cell than 3G. That’s what’s critical as the number of wireless devices and data-ready devices increases.

Verizon expects to have LTE rolled out nationally some time in 2013 and its first commercial services will be available in 2010.

Mobile broadband growth has upside and problems

Mobile broadband traffic, primarily to smartphones, is growing primarily due to increased use of video content. Research shows a 30% increase worldwide, and this is both a driver for LTE and a source of concern for mobile operators.

At present, mobile data plans aren’t uniformly all-you-can-eat, so most operators have some revenue upside to traffic growth in mobile services, but it’s clear that mobile content will threaten the older 3G network paradigms and force 4G migration at the current pace of growth. Operators may thus have to accelerate LTE, a trend that is already becoming visible, and the current plans may be inadequate if smartphone wars among providers stimulate further content viewing and traffic growth. The trend may also keep mobile tied to usage pricing as a defensive move.

Operators look to more effective traffic analysis and management

O2 has been deploying DPI for traffic analysis (and possibly management) in its upgraded 7 Mbps upgrade to 3G, and some of the information the company has gained could have a significant impact on 3G/4G planning worldwide.

The company found, not surprisingly, that 5% of users consumed 80% of bandwidth. This skewing of the old 80-20 rule is one of the primary reasons why operators say that some form of traffic management is essential to insure that the broad population gets good service at a fair price. The data also shows that most usage is in the evening and at home, however, which means that femtocells would offload considerable traffic were they widely deployed.

Many operators tell us that while 3G femtocells are possible, the application of IMS and 4G would make it far easier, particularly if self-organizing principles were applied to cell setup. How valuable all this intelligence will be may depend on regulatory trends, though; many countries are seeing considerable public advocacy pressure against traffic management.

Femtocell deployment to test 4G pricing and ROI

Vodafone is planning to release the first European femtocell offering in about a week, using Alcatel-Lucent products. AT&T is also planning to expand its currently limited set of trials immediately, and to have a national offering in late 2009. The moves will be an important step in the evolution of femtocells, and may prove a trial balloon for the 4G deployment of femtocell technology that we’re hearing is an absolutely critical part of nearly everyone’s 4G plans.

With 4G deployment there is a need to manage total first-cost and at the same time give users a reasonable experience. Femtocells in each 4G home would give users an in-home experience with 4G as a baseline even if their own home area wasn’t yet covered by 4G cells, or was covered sparsely. If we see more with femtocells in 2009, we’ll also have a chance to see how carriers propose to price femtocell airtime: Will they discount it or make it free given that their network isn’t really being used? That will tell us a lot about whether femtocells will be a means of encouraging high-bit-rate applications at home where traffic won’t hurt the provider network, or whether providers will try to use femtocells only to get a better ROI by reducing the demand for true 4G cells.

Senate FCC hearings tied to open handset & broadband policy

Obama’s pick to chair the FCC starts his confirmation hearing today, and there’ll certainly be a lot of inane questions and evasive answers. The primary focus is likely to be the national broadband policy that’s on the FCC’s plate and is even to be featured as a topic in the next open meeting. There’s been a lot of comment on the issue already, most of which ignores the practical realities of U.S. market demography. In any case, it’s unlikely that Genachowski would tip his hand on an issue the FCC needs to vote on. In short, it’s theater.

Another issue is more complex and potentially even more important. Open handset policy has become a major target of many since the AT&T iPhone 3GS upgrade plan was announced. There is little question that consumers would like an open handset ruling, but given the role that smartphones have played in mobile service evolution, it would be a major setback for operators to lose the ability to link a hot phone to their data service.

Could a 4G initiative be promoted without any captive handsets to ensure some quick ROI? Again, we’re not going to know at the hearings, though we may catch a hint of Congress’s own position; they can always pass legislation to overrule the FCC. The Senate is looking at exclusive deals between handsets and providers now.