Last year Quocirca commented on the slow emergence of 4G LTE, noting that many 3G users are deja-vuing their 2.5 GPRS experiences of getting good signal strength on their radio connection to the cell tower, but still getting only a limited capacity for moving data over the telco backbone. A year on we should be seeing some important shifts in the market on the back of 4G LTE launches in 75 countries (3G in 159 countries), and many hundreds of new, and in some case quite cheap LTE devices—so this should be a good opportunity for telcos and mobile operators to ramp up customer numbers and turn on those data blasting new LTE capabilities.
And why not, indeed? Take-up has been good in the US, Japan, Canada and South Korea, where KT reports a 350x growth in mobile data traffic from 2009 to today, and that their 6 million LTE users generally use twice as much mobile data as their 9 million 3G customers. The world’s largest LTE operators are Verizon Wireless (US), NTT DoCoMo (Japan) and AT&T (US), and the latest quarterly finanacial performance data from Verizon bodes well: Verizon Communications saw its third-quarter profit improve 40% and Verizon Wireless added 1.06 million total subscribers during the quarter, and now has a 36 million LTE subscriber base.
In contrast to upbeat US LTE estimates, European take-up has been much slower, lagging the US by at least 12 months. The global LTE user base is reckoned to reach 200 million at the end of 2013, which doesn’t actually represent more than 5% of the subscriber base.
So if it’s not LTE device or service costs that are holding punters back, then what is? Besides a ‘can’t be bothered’ attitude in a very large segment of the subscriber base, and limited geo-availability, it’s probably down to "why do I need it?" and "does it really help me if capacity on the core network is still constrained?" Certainly, carrier infrastructure investments have been down during the financial crisis period. It has been hard to monetise infrastructure investment In Europe, where telco concerns have been compounded by determined national and EU regulatory efforts to reduce telecom tariffs—especially mobile roaming tariffs.
So telcos need to look for new apps that will drive up revenue-generating bandwidth usage, combined with more cost-efficient infrastructure technologies. The recent Next Generation Optical Networking (NGON) conference in Dallas focused on next generation optical broadband access: 100 G deployments, coherent technology & ROADMs migration (Reconfigurable Optical Add-Drop Multiplexer used in WDM—Wavelength Division Multiplexing), and the relative merits of 400G vs. 1 Terabit signalling! For the cloud heads, the focus was on the evolution of optical networks to support data centres (a topic also addressed by the Cloud Ethernet Forum, cloud services & high bandwidth services and what Cloud & SDN (Software Defined Networking) mean for optical networking. For everyone else it was about the practical economics of evolving legacy networks and OTN (Optical Transport Net) evolution.
So what is going to make 4G LTE performance more enticing for European mobile users? One of the participants at the conference in Dallas was Coriant, a German company that was created by combining the optical network business of former Nokia Siemens Networks with the US Sycamore Networks—now Coriant America. Coriant is betting on coherent technology, which blends optics and electronics, transforming the optical signal to the electrical domain by mixing it with a reference of the carrier frequency. Coherent systems typically use a 50 GHz grid and have a reach in excess of 2,500 km depending on fiber type and system configuration. That has significant implications for the telcos’ capex and opex equation. The Coriant WDM solutions deliver 100Gbps with 400Gbps trails on-going at Telecom Austria.
On the future and definition of SDN, there is still considerable debate and little in the way of agreement on standards—or even where the standards focus should be. The trend emerging at the NGON conference was to standardise the higher OSI layers while leaving the lowest Physical Layer more open to proprietary optimisation solutions. That will allow the SDN vendors to extract value and generate more revenue from the network. We are not seeing any SDN standards in the Transport Layer either, but this is where the intelligent optical controllers come in. One set of industry SDN standards comes from the Open Networking Foundation (ONF) founded by Deutsche Telekom, Facebook, Google, Microsoft, Verizon, and Yahoo! seeking to improve networking through SDN. Coriant has launched the Intelligent Optical Control to complement SDN for the optical layer and works with Juniper on an integrated IP transport solution.
So will this speed up consumer adoption of 4G services, and will service providers be able to cope—maintaining high speeds and low latencies with a surge in customer adoption? Certainly with the continued growth of everything-as-a-service, it is in the very best interest of the public and hybrid cloud service providers to deliver that improved customer experience, as their revenues depend on traffic levels and the performance of the apps they host. With telcos themselves deeply involved in cloud service provisioning, they should be able to evolve business models that balance apps revenues with transport and delivery revenues.
For German-American Coriant, to avoid in the revenue short falls that plague French-America Alcatel-Lucent, the trick will be to develop and sell intelligent network controllers that are able to sit on top of and manage 40/100/400 GB traffic across multi-core, multi-mode solid cores and multi-mode hollow core fibres. For telcos to make a profit, they are going to have to grow in the everything-as-a-service business such as the recent announcement from Verizon of their mobile health platform, or the rapidly emerging 4K ultra HD video market that KT is betting on.