The intense UK media coverage around Everything Everywhere’s (EE) LTE service launch could have fooled people into thinking it was the first launch of its kind. There are, in fact, a total of 113 operators with live networks across 51 countries, according to the Global Mobile Suppliers Association. EE is trailblazing a new path for the UK mobile industry, but this route is not without its controversies and challenges. Bengt Nordstrom, co-founder and CEO of strategic wireless business consultancy Northstream, discusses the UK’s first LTE network launch and whether EE’s gamble to go early will pay off.
4G or not 4G….
The UK regulator Ofcom, much to the consternation of rival operators, allowed EE to re-farm its 1800MHz spectrum to launch LTE services in October. However, prior to this, the regulator had earned widespread condemnation for displaying a lack of leadership in allowing the UK operator community to constantly appeal its decisions. This led to massive delays in the UK spectrum auctions taking place; which in turn has prevented commercial LTE service availability and left the UK trailing its European neighbours.
However, the UK is now catching up, with its first live LTE network. More are now set to follow, with the news that Ofcom will auction LTE spectrum licences, at a reserve of £1.3 billion. It is likely that the auctions will raise three of four times this amount of money. A staggering amount given the state of the global economy; and considering how energised the UK Government appear to be regarding LTE deployment. It seems an enigma why regulators make sense of taxing operators who are prepared to build out critical mobile infrastructure.
Despite the cost, these auctions will have the positive outcome that Vodafone, O2 and 3UK will now get their chance to launch LTE. At the moment though a marketing war has erupted – in which EE’s rivals scramble to differentiate themselves and retain their subscribers. For example, Vodafone has launched a £4.5m national newspaper campaign with the tagline “not all 4G networks are the same”; claiming that Vodafone’s signal will travel “further into your home” and is the only mobile network to “own a nationwide fibre backbone”.
A war of words is one thing, but it will be difficult for competitors to respond to EE’s latest move. Although UK 4G coverage is currently limited there is a genuine buzz among consumers about LTE, following the huge amount of publicity it has received. LTE is the service subscribers are keen on; and EE is offering that now. The reality is that operators will not have a fitting response to EE’s LTE offering, until they deploy LTE themselves next year.
The Price is Right?
EE’s 24 month LTE tariffs, ranging from £36 for 500MB up to £56 for 8GB, have drawn criticism on price and how much data they provide. Downloading a one hour programme on BBC’s iPlayer consumes roughly half the 500MB data allowance the lowest priced EE plan offers. It is commonplace for the first mover in the market to have the advantage. EE has done this by setting the bar high on its LTE tariff plans. However, this premium period should only last a short time. There will be a decline in LTE price plans as other operators enter the market. EE may potentially make an early move to lower prices as they seek to control the market as Vodafone, O2 and 3UK plan their entry.
Higher prices for LTE won’t trouble the initial audience; predominantly early adopters and corporate subscribers. There is also a huge market for LTE USB dongles. EE’s dongle tariffs start at £15.99 for 2GB, up to £25.99 for 5GB, and the device is available from free up to £49.99. This is an attractive alternative to ADSL from fixed line providers. Especially for residents of semi-rural areas who suffer slow speeds as they are far away from the switch. Young professionals living in shared accommodation will also find LTE dongles an easy, convenient and cost effective way to get online. This is a market in which EE can really outperform and provide challenging competition to fixed line players. Traditional telcos would have to deploy an increased amount of fibre to compete with LTE coverage; making it very costly for them to stay in touching distance of EE.
The Challenge Ahead
But deploying LTE does pose some technical challenges; and one of the biggest is backhaul. Fibre to the base stations is required to ensure they leverage LTE’s throughput capabilities. EE will need a lot of lead time to deploy fibre; and it is not an easily available off-the-shelf product. WiFi, a rapidly maturing and familiar technology, is not perfect, but could plug coverage gaps and be a solid foil for EE and its macro LTE network.
The other challenge is one that is unique to LTE over 1800MHz – limited indoor coverage. An 1800MHz base station grid just doesn’t penetrate buildings as well. It will be important for EE to deal with this issue as the majority of smartphone usage occurs indoors. Deploying base stations in buildings is not practical or affordable. Small cells remain a remote concept and a great deal more unrealistic than many perceive. Their unit cost, and the amount required, makes them increasingly unviable solution for operators. In order to provide a good user experience EE needs the combination of 1800MHz and 800MHz; with LTE deployed over 800MHz for better indoor coverage.
It will take time for EE’s LTE network to mature, but there was no reason it took such a long time to launch LTE in the UK. However, the country has not suffered due to the delay. Now 4G is live, the UK has a good chance of reaching the level the rest of Europe is at by 2014. But for a market with such a long tradition of being influential in mobile, the UK’s LTE delay has certainly dented its prestige.
Bengt Nordström biography
Bengt co-founded Northstream in 1998 and has been its CEO ever since. Prior to founding Northsream, Bengt held the position of CTO and Executive Director of Smartone in Hong Kong. Other management positions include Ericsson, Comviq and Netcom consultants. Bengt has also held been on the Executive Committee of the GSM Association as well as chairing its Asia Pacific Interest Group.
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