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  4. > The Irresistible Force Meets the Immovable Object: State of the U.S. 4G LTE Market

The LTE market is a case of irresistible demand versus immovable frequency constraints. The near-term market for LTE services will be defined by these dynamics, and will largely be addressed with innovative new ways to manage mobility. This report explores the state of the market and the short-term fixes necessary to keep it growing.

Executive Summary

Long Term Evolution (LTE) is the platform on which future wireless broadband networks will be built. Currently being deployed as a replacement technology for GSM and CDMA networks, it will be largely universally deployed in the U.S. market by the end of 2014. Promising end-to-end Internet Protocol (IP) connections to wireless users, it will fundamentally change the relationship between wireless devices and the Internet, and will enable many services that are currently either too complicated or too expensive to provide on other network platforms—but only if . . .

The big if is associated with spectrum. LTE is a better, more efficient way to use scarce spectrum; but only if there is enough spectrum. If there isn’t, then LTE can be a significantly poorer performing solution than earlier GSM technologies such as HSPA+.

Yet, technologies such as HSPA+ do not have the capability to adequately service the exponentially expanding consumer demand for mobile broadband. Projections currently, by Stratecast and others, put spectrum exhaustion in the 2014 to 2017 timeframe. However, public policy solutions, through regulatory actions to free up new spectrum, will probably take much longer to work out—depending on the spectra and the state of current usage, perhaps not until 2020.

What is to be done? LTE is setting records for uptake; for example, Frost & Sullivan notes that LTE has had the fastest consumer adoption curve of any wireless technology to date. It is unclear whether this is simply because, as people upgrade their smartphones, they simply adopt what is perceived as the latest thing, or if there truly is a perception of enhanced service quality with LTE. Regardless, this unprecedented demand, on the one hand, and limited spectrum, on the other, is forcing industry and public policy maneuvering that may lead to such things as incentive auctions for existing broadcast television spectrum. However the palliatives, such as they are, will not be quick fixes.

In the meantime, mobility continues to drive much of the interest in the consumer communication services space. The power of wireless is sufficient to incent changes in carrier and in service packages. Wireless also continues to consume a disproportionate share of the consumer’s wallet.

Nevertheless, LTE is the predominant wireless technology, and will increasingly define the consumer experience. With virtually percent coverage of subscriber pops, 4G LTE is here to stay. Although carrier solutions using creative Wi-Fi offloading and dynamic roaming approaches will ameliorate many of the most pressing issues associated with spectrum, eventually, more spectrum will be required to deliver the LTE experience that is promised in carrier advertising.

Introduction

There is an old logical puzzle that asks what happens when an immovable object confronts an irresistible force.2 As much as anything in nature can be said to represent such a problem, the deployment of long term evolution (LTE) 4G technology in the wireless space is a good example.

As virtually all the readers of this piece know, LTE is the next generation of wireless technology. Built on the GSM standards base, it represents a quantum jump in data throughput, as well as enabling end-to-end Internet Protocol (IP) connectivity. LTE has been adopted by every major carrier in the United States, and is achieving significant acceptance in other regions too.

Not surprisingly, demand for LTE is significant as well. Most new smartphones either are exclusively LTE or can be obtained in an LTE configuration. Consumers are beginning to look for LTE as a consideration for carrier and device selection. Similarly, carriers are promoting their LTE coverage footprint.

The LTE story is not all sweetness and light. LTE’s dark secret is that its higher performance comes at a price: faster throughput and higher data rates are achieved through higher bandwidth consumption. LTE channels are wider; and, consequently, LTE spectrum requirements are higher.

Yet, spectrum, especially in the US, is a scarce commodity. As an early adopter of radio technology, virtually all practical frequency spectra have long since been assigned to either specific uses or specific users. The U.S. military, in particular, uses wide swaths of spectrum, and is especially sensitive to interference or incursions into its communications space.

Although spectrum is available, it is not unoccupied. Broadcast television has substantial amounts of spectrum that could be reassigned to wireless, now that most television has been shifted to digital broadcasting. However, the spectrum still carries transmissions in many markets; so, reassigning that spectrum will necessitate the movement of existing services. This, as one might expect, is not going to be quick or inexpensive: if spectrum reassignment were quick and inexpensive to accomplish, it would have been already accomplished.

So, to reformulate the logical puzzle: the LTE market is a case of irresistible demand versus immovable frequency constraints. The near-term market for LTE services will be defined by these dynamics, and will largely be addressed with innovative new ways to manage mobility. This report explores the state of the market and the short-term fixes necessary to keep it growing. This discussion will be of great interest to the carriers, as well as their technology providers.

Consumer Demand Dynamics

It is quite clear that wireless services are very popular with consumers. In the year-over-year tracking that Stratecast has conducted, the market continues to grow robustly; and, although the rate of increase is declining, the dynamic is still positive. Interestingly, both postpaid and prepaid subscribership is increasing, and there is some indication that the distinction is starting to blur. For example, frequently, an individual will have both a postpaid account and will obtain and use prepaid service for special situations—such as when traveling in a different state, or when on vacation.

Table Of Contents

The Irresistible Force Meets the Immovable Object: State of the U.S. 4G LTE Market
Table of Contents

Executive Summary 4
Introduction 5
Consumer Demand Dynamics 6
State of LTE Deployment in the United States 9
Spectrum Issues 10
Potential Stopgaps 12
Carrier Opportunities and Challenges 14
The Last Word 16



List of Figures

Figure 1: Subscriber Growth U.S. Wireless (Second Quarter Subscriber Counts) 6
Figure 2: Smartphone Use 7
Figure 3: Importance of Smartphone Characteristics 8
Figure 4: Importance of Wireless Characteristics When Choosing a Carrier 8
Figure 5: ATandT LTE Deployment Status (as of April 2013) 9
Figure 6: Verizon LTE Coverage (as of March 2013) 10
Figure 7: U.S. Spectrum Demand versus Supply 11
Figure 8: Mobile Wireless Global Revenue and Investment Projections (2003-2012 Actual) 12
Figure 9: Wi-Fi Offloading 13
Figure 10: Small Cell Architecture 14
Figure 11: Carrier Challenges and Opportunities 15

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