LTE

Sprint & WiMAX partners to invest more in technology development

Sprint and others in the WiMAX partnership have agreed to contribute more money to the 4G wireless technology despite the view by some that WiMAX is the poor stepchild of 4G and that LTE is the anointed. The problem is that they have fallen into a nomenclature trap. 4G technologies are alike in that they’re the generation after 3G, but WiMAX and LTE are in different families, and in truth are not likely to be very competitive.

WiMAX is aimed at migratory users who operate from a small number of fixed locations in some random sequence—hence our name for the group and the behavior. LTE is a successor to 3G mobile service, largely aimed at a mobile or at least a regularly moving population. The preferred LTE instrument is the smartphone; for WiMAX, it’s the tablet or the netbook.

We think Sprint and its allies are on to something here. Wireless behavior is constrained by its device support, and little devices are not great vehicles with which to view content or even web pages. Yes, there will be many iPhone and Android lovers who will use their mobile devices from fixed locations, but we think a large number of users will adopt a larger device designed for sedentary applications in cafes and other locations.

There’s still plenty of time (and ways) to mess this up, but we think Sprint could redeem its position with WiMAX. In fact, it’s the only way it can do that. Sprint is cutting its workforce, which hardly speaks favorably about its prospects with normal cellular services.

Juniper/NSN joint venture and the LTE connection

Cries that Juniper must now match Cisco and Tellabs and buy a mobile-core player are ignoring a critical reality — and it’s not that Juniper’s new superchip can make its universal edge portfolio into an Enhanced Packet Core box (though it can).

The real issue with wireless, guys, is that you need a radio network. Through its close relationship with NSN (including metro, which after all is the “core” of Enhanced Packet Core, through its joint venture), Juniper has direct linkage with the radio network. NSN and Juniper actually make a pretty credible total mobile solution provider, stronger than either Tellabs or Cisco, providing that they can make the joint venture work effectively in that light.

NSN also adds professional services, which virtually all LTE deals are likely to mandate. All of this, to us, means that the real question is whether the Juniper/NSN joint venture will work effectively. While both companies blow kisses at the joint venture in their public comments, we’re still waiting to see substantive cooperation emerge.

NSN professional services a plus for carrier procurement zone strategy

The head of NSN’s North America operation said the company would be an LTE leader in North America, and said it rather emphatically, to be sure. The comments came at NSN’s analyst event this week, which was a parade of optimism on NSN’s prospects in the market, not only in North America but elsewhere.

NSN’s greatest strength is its professional services business, and second on the list comes its credibility with operators in multi-vendor integration. The company also has a strong service-layer story, though that story is built on tools used by its consulting and professional services staff to create one-off solutions for operators and not productized (at least for now).

The value of professionals services in the U.S. today is based on the procurement zone trend, already formally in place at AT&T, and in process (we’re told) at both Verizon and Qwest, and being considered even by Sprint. This program creates what’s effectively a mandatory systems integration position in each zone, which in turn means that those with strong capabilities in that area can expect to get a prime vendor position.

Verizon quarterly financials tell classic telco story

Verizon delivered a classic US-telco story in the third quareter: Wireless was doing very well, telco TV was doing better, enterprise services were under price pressure, and wireline losses continued.

For Verizon, the net was better than Street expectations. Most encouraging were revenue gains of more than 10%, though about half of that was from the Alltel acquisition. Customer churn was up slightly in wireless, and DSL broadband subscribers continued to decline, but the latter was more than offset by broadband FiOS growth, suggesting that Verizon FiOS is attracting broadband users beyond its own DSL base.

The company promised investors that LTE would not generate a big capex surge, a relief given that the large up-front FiOS load is finally tapering down. In all, the story was good but not great. You can see that Verizon, like AT&T, is spending a ton of money on wireless and making a big bet it will be able to capitalize on that investment. We think that in the near term, that is almost certain. But the long-term viability of wireless depends on the ability of the operators to create value beyond voice and Internet.

Cisco’s Starent acquisition could be LTE procurement zone play

Cisco wrote another big check, this time to acquire Starent, a major player in the mobile/LTE space. And with the move, it may have leapfrogged a number of competitors. Starent and Cisco were somewhat competing previously, and Wall Street reports that it expected Juniper to announce a partnership with Starent that would have played in the AT&T procurement zone for mobile IP. Motorola was also a Starent partner, and to the extent that either of these deals was meaningful, they now have to be re-evaluated.

What may be most significant here is the procurement zone angle, in fact. Since we’re hearing that network operators worldwide are moving to a zone strategy, the acquisition of critical product mass in key zones is now vital for vendors. Cisco’s move signals an M&A wave to pluck up key components, since it’s now clear that major players will acquire vendors and thus kill simple partnership agreements.

The move will solidify a truth that’s been pretty visible for the last six months: LTE is where most investment focus will be in 2010 through 2012, so having a strong position there will be critical. LTE will accelerate disintermediation of operators, however, unless it’s coupled with a rational service-layer strategy.

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.

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

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.