Mobile broadband is growing rapidly. What isn’t so clear is what it really means. In what sense does Long Term Evolution and 4G mean for end users and service providers?

In a practical sense, “more bandwidth,” and easier ability to do work remotely, and on the go, is what 3G and 4G represents to users. For mobile service providers 3G and 4G represent mobile broadband revenue that is displacing lost voice, and declining messaging revenue.

In a broader sense, many expect that high-bandwidth mobile Internet access will cause disruptions of the fixed-line broadband access business, or support uptake of some brand-new killer app. But that was said for quite some time about 3G as well, and for a long time, no new unique application developed.

Advertisement

In fact, some would argue there was no killer app for 3G, nor will there be a killer app for 4G. Whether that is true, or proves to be sure, there is no question but that “volume” is a change, even if we cannot determine the broader impact.

Some might argue the existence of a “killer app” does not matter, in part because the “killer app is Internet access at high speed.” But is might also be accurate to say that email was the killer app for dial-up Internet access, while access to the web was the driver for adoption of fixed-line broadband.

That also seems to be true now for 3G services, with the new twist that, since most smart phone sales these days require a mobile broadband plan, that smart phone use is the driver for mobile broadband services, in an immediate sense.

In the United States, mobile data traffic at AT&T Mobility was up 8,000 per cent from 2007 through 2010, according to the mobile division’s CEO, Ralph de La Vega.

“No operator can expect voice revenues any more in 10 years time.” Yoshihiko Nodera, the head of the Softbank Mobile’s Technology Development Center. LTE revolutionary?:

WiseHarbor likewise forecasts mobile broadband increasing worldwide 1,000-fold between 2010 and 2025. In some markets, perhaps many markets, new spectrum has allowed, and will allow, new competitors to enter markets.

On the other hand, the high costs paid by mobile operators in their bids to acquire spectrum for 3G services also affected the competitive landscape in a negative way, according to international law firm Freshfields Bruckhaus Deringer.

Mobile operators paid more than $150 billion for 3G mobile licenses worldwide during the preceding decade but 28 percent of auctions examined involved license winners which failed to deliver 3G services. Where deadlines for roll-out were imposed, more than half (55 percent) were not met by one or more of the license winners, Freshfields Bruckhaus Deringer says. Can many afford to bid for spectrum?

“Competition and expectations of charging consumers for data services encouraged operators to pay high prices for 3G licenses. But they also paid the price of finding it difficult to fund 3G infrastructure. In extreme cases, the combined cost meant some mobile operators failed to roll-out 3G services at all, to the detriment of consumers and the industry’s competitive landscape.”

In Germany $46 billion was spent to acquire spectrum, while in the United Kingdom $34 billion was spent. The high cost of rolling out 3G services affected two of the six license winners in Germany. One operator returned its license and another froze development of its planned 3G network. The spectrum usage rights have meanwhile been revoked, without any refund of the $10 billion paid for the spectrum.

While the five UK license winners achieved the coverage levels prescribed, one mobile operator missed the deadline to achieve this level of coverage. The UK’s competitive landscape has also reduced post-3G following the merger of Orange and T-Mobile.

Recent 4G spectrum auctions have encountered similar challenges. “The three dominant players emerged as the key winners in the 4G spectrum race in Germany. A fourth operator had to pull out of bidding for spectrum in the 800 MHz bandwidth – the frequency likely to be used for new 4G networks – which has fuelled rumours about consolidation in the Germany mobile market,” says Freshfields Bruckhaus Deringer.

“The UK’s draft auction rules explicitly aim to preserve competition but as we’ve seen with 3G and Germany’s auction of 4G, it’s debatable whether the UK mobile market will realistically continue long term in its current form post-4G. Mobile termination rates are being squeezed, voice is declining and there’s a huge amount of data coming across the networks. Where will the revenue come from?”

The point is that auctions of 4G spectrum might, or might not, affect competition in a material way, whatever the other benefits.

But there are lots of other potential changes that could emerge over time, ranging from the ways people work to the way they play, shop and entertain themselves.

Join the Conversation

Leave a Reply

Your email address will not be published. Required fields are marked *

Don’t Miss Any of Our Content

What’s happening with broadband and why is it important? Find out by subscribing to Telecompetitor’s newsletter today.

You have Successfully Subscribed!