4G LTE: Who will win the battle for market share in the US?

16 October 2012 | Kavit Majithia


North America has firmly positioned itself as one of the leading adopters of 4G LTE technology. Kavit Majithia investigates how the big hitters are shaping up in the battle for market share.

 

For a network provider, the biggest drive towards maintaining and upgrading a service has always been consistent with coverage and reach expectations.

But, in line with a changing ecosystem, market watchers now argue that carriers are fast-tracking upgrades to networks to meet the demands of the new data-capable devices being made available on the market.

Apple Inc’s long awaited iPhone 5 launch, announced last month, left consumers licking their lips at the potential of the handset to provide almost ridiculous capabilities for next-generation data transfer speed.

And while the iPhone 5 will be available universally (perhaps bar China), the opportunity to utilise the handset’s true potential will remain largely elusive to consumers in numerous markets.

Subscribers on an O2 or Vodafone network in the UK may as well hold on to their pounds and upgrade to the phone next year when the UK finally holds its 4G spectrum auction. Those, however, paying their bucks to AT&T, Verizon or Sprint will be queuing outside Apple stores across the country.

North America was first introduced to Long Term Evolution (LTE) in 2008, and it came as an inherent shock to most that it was Sprint, the third largest operator in the US, which delivered its 4G LTE network first.

Initially trumping larger rivals AT&T and Verizon, Sprint provided services in Atlanta, Dallas, Houston, San Antonio and other surrounding cities. Fast forward four years, however, and 4G LTE in the US is about as common as a Starbucks coffee house.

Verizon claims to have rolled out the network to over 370 markets, covering 75% of the US population, with the company telling Capacity it plans to cover over 400 markets by the end of the year.

AT&T has also aggressively targeted growth in its 4G LTE roll-out, with plans to reach 100 markets by the end of this year, and complete its roll-out by the end of 2013.

Sprint, despite its initial ‘quick-to-market’ strategy, has been relatively slower in its roll-out, but did announce to the market last month that it has commenced building out 4G LTE networks across its 3G footprint, addressing over 100 markets. T-Mobile USA, still seemingly plagued by its failed takeover by AT&T, will deploy 4G next year.

Fittingly, it is Bob Azzi, VP of networks at Sprint, who heralds the US as the world’s LTE market leader. “It’s funny that we have between three and four operators rolling out LTE and some countries haven’t even allocated the spectrum yet,” he says.

Operators ready to rumble

“There is no carrier in the US willing to be left behind on LTE,” claims Richard Karpinski, senior analyst at research company Yankee Group. He believes the technology is perfectly timed to coincide with a new consumer trend in the US that will largely be driven by the increased availability of LTE capable phones.

“Up to this point, consumers have opted for device over network speeds when making their mobile service decisions. The next wave of mobile broadband users will look more at 4G network coverage and capability – essentially the battle is starting to move to LTE,” he says.

If the battle lines have been drawn, market leader Verizon is already claiming to have taken first blood. Thomas Pica, spokesman for the company, states bluntly that Verizon’s “4G LTE network is larger than all our competitors LTE networks combined and that is our biggest differentiation”.

He told Capacity: “It is also the fastest 4G network since some competitors include their HSPA+ footprint in their 4G calculations, reducing the overall average speed of their networks.”

AT&T, its biggest rival in the space, refutes Verizon’s claim that integrating 4G within a HSPA+ roll-out compromises network speed, stating that implementing speed upgrades on existing networks provides a consistent speed experience.

By failing to deliver consistent speed upgrades on wireless networks, an AT&T spokesperson says 4G LTE customers on other networks “will have experienced steep and jarring drop-offs in speed” as they fall back to 3G.

“We feel like our timing has been perfect to deliver a great customer experience, a finely tuned network and must-have devices from the start,” continues the spokesperson. Perhaps in a clear jibe at its biggest rival, the insider concludes that “a faster roll-out isn’t always a better roll-out”.

This early sparring is an indication of the fierce competition between operators with these high investment roll-outs. AT&T says its 4G network covers “275 million people and 2,000 more cities and towns than Verizon”, while Verizon claims it has “the largest single commercial 4G LTE network on the planet”.

For now, Verizon appears to be in pole position with LTE in the US, but there is merit in AT&T and Sprint’s softer approach. Both companies have ensured they have wrangled out every last bit of value from their WiMAX and HSPA+ networks before dipping their toes into the proverbial LTE minefield.

Karpinski supports AT&T’s view that Verizon’s early roll-out was not without its problems. “They have certainly seen performance blips as they learned to manage signalling on these new, more disintegrated networks,” he says. “These challenges will rear up again and again as more LTE networks get deployed.”

The infrastructure challenges remain

As Karpinski points out, in spite of all the hype, LTE remains largely in its infancy. Sprint’s Azzi outlines the inherent challenges operators face in replacing infrastructure to accommodate LTE capacity.

On top of a normal upgrade process, Sprint is presently going through the motions of adding fibre and microwave connections to provide higher bandwidth backhaul to support incremental data rates.

“We are also removing and replacing all the base stations, antennas and radios, which add to the 4G core, so upgrading 3G data and voice core comes together which is specific to LTE.” Azzi says, because of Sprint’s later ‘go-to-market’ strategy to build its LTE core, compared to four years ago when LTE first came to the fore, there is a wider availability of fibre in local networks in the last mile. “If we’d have tried to do this 3-4 years ago we’d probably have been doing a much heavier microwave deployment, not unlike what Clearwire did.”

Sprint’s move to LTE has come at a loss to its partner Clearwire. In the second quarter of this year, Clearwire saw its WiMAX subscriber growth decline for the first time as it feels the results of Sprint discontinuing contract WiMAX device sales.

“We learnt from this partnership and it was beneficial because of cost and availability, but now we find a higher availability of fibre, making us less dependent on microwave deployment,” says Azzi.

Like its rival operators in the US, Sprint expresses a commitment to rolling out 4G LTE networks across the company’s entire footprint, with Azzi claiming almost 90% of its CDMA cell site footprint will be LTE equipped in the near future.

The location of the remaining 10%, Azzi says, is where the demand stops and the need to upgrade the sites for fibre backhaul becomes redundant.

“An example of a part of the remaining 10% is a remote location in the heart of a cornfield in western Illinois, about 100 miles outside of Chicago, and the cost to build fibre and launch 4G there is approximately $10 million. This is why we don’t claim or desire to roll-out to 100% of our existing footprint – simply because it is not worth it.”

Cornfields aside, one city in the US that is abuzz with next-generation network activity is Sprint’s corporate headquarters of Kansas City. Google’s announcement, to launch its Google Fiber project there in middle of this year, was welcome news for Sprint, and Azzi did not rule out a future tie-up with the internet powerhouse.

“This could certainly be a future capability,” he says. “On this occasion their fibre deployment wasn’t going to be available on the timelines we needed but we are certainly talking to them.”

Sprint’s initial LTE roll-out, which was centered on six key locations, included Kansas City because “it made strategic sense for the company to launch LTE services there, despite it not being a core market.”


 

Spectrum: why the debate?



The fact that the US is in prime position to sell LTE devices to consumers and capitalise on the availability of spectrum is a further testament to the country’s regulators and government commitment in enabling faster networks for data hungry consumers.

And it would appear that on the surface the big hitters, such as Verizon, AT&T and Sprint, have established a business model to roll out their LTE offering across the US, with the network infrastructure chasing after it.

The same operators, however, will also be quick to point out the restrictions they have faced when attempting to secure more spectrum to cope with data demands.

It took Verizon almost nine months to secure approval by US regulators to acquire spectrum from a group of cable companies, conversely AT&T failed in its bid to acquire T-Mobile USA, in effect, a bid to acquire additional spectrum.

Regulators then cited the fact that such an acquisition would limit competition in the US market, and for the smaller players in the US, the ecosystem of spectrum and infrastructure sharing could be the only way they will be able to launch 4G LTE services.

In effect, the US could potentially see the emergence of a wholesale 4G market where the larger operators lease network capacity to the smaller players.

One thing is for sure, the bigwigs at Apple Inc’s California headquarters have timed the launch of its next-generation device perfectly. Verizon, AT&T and Sprint are likely to fight tooth and nail to provide the best possible 4G LTE access on the much sought after handset.