Wireless Watch: Korean and US carriers vye to offer world’s most advanced LTE Aug 9, 2012 – Rethink Research
Operators have got past the stage of merely racing to deploy LTE in key markets and, at least in some parts of the world, are now introducing next generation platforms to enhance the services they can offer to customers, and the potential returns. Two key new elements which are expected to be hallmarks of LTE-Advanced – VoLTE and small cells - are coming early to certain cellcos, notably the most advanced players in Korea, Japan and the US. Two Korean providers and the US’s MetroPCS have gone live with VoLTE this week, while SKT and Sprint are racing ahead with 4G metrocells. Such early stage deployments carry risk, but also help the carriers to differentiate against their rivals and web players – while also stimulating activity across the whole supply chain, to turn important concepts into working reality.
Mobile carriers are as susceptible as anyone to one-upmanship, especially if it will encourage shareholders and boost their global influence. In LTE, TeliaSonera was the first to deploy commercially, MetroPCS first in the US, Verizon Wireless has by far the largest network by coverage and subscribers. In contrast to the first 3G wave, dominated by Japan’s Docomo, these gold medallists contain no Asian carriers - but that is changing as the LTE race shifts from mere roll-out, to which cellco can deploy the most sophisticated new features. That competition is being dominated by Korea and Japan, and particularly SKT, which is introducing many elements to its network which will not be commonplace for several more years and the upgrade to LTE-Advanced. Among these are voice over LTE (VoLTE) and dense small cell networks – both promising but complex enhancements for raw 4G. In both areas, though, the US operators are not far behind.
Indeed, this week turned into something of a dead heat in the VoLTE race, with Korea’s SKT and the US’s MetroPCS both claiming to be the world’s first to offer the IP-based voice service commercially. VoLTE will be an important carrier weapon in 4G. It saves them having to support fallback to 3G for voice calls, which can be clumsy – Verizon has said it will not even bother to implement fallback, so extensive will its LTE network be by year end. If an operator can break the reliance on 2G or 3G for voice coverage, it can more quickly refarm part of all of that spectrum for mobile broadband. And as part of a broader IP services platform, VoLTE can deliver enhanced services. Because it is a VoIP technology, it frees voice from its usual silo and allows it to be integrated with other IP services like presence and real time video, which can help cellcos continue to differentiate their voice offerings from those of over-the-top players – and defend a crucial source of revenue and cashflow.
The stakes are high, then, and some carriers are moving quickly, despite a small number of available handsets and, in some cases, limited LTE coverage (so fallback or roaming becomes necessary outside the 4G zones anyway). At the start of the week, SKT said it would be the first carrier to offer VoLTE, turning on the service on Wednesday, but then MetroPCS piped up to say its own service went live the day before that. The prepaid operator is maintaining its reputation for pipping the world’s largest LTE operator, Verizon Wireless, to the post – just as it activated its first LTE network ahead of its larger rival in 2010, Verizon does not expect to turn on 4G voice until next year.
MetroPCS’s first VoLTE smartphone will be the Android LG Connect, while SKT has launched with the Samsung Galaxy S III. The third largest Korean cellco, LG U+, will also offer VoLTE from this week, at least in the capital Seoul, debuting with the LG Optimus LTE2 model. KT will join its rivals in October.
MetroPCS said it would “continue to roll out VoLTE services and phones in the coming weeks”, while recent job adverts from T-Mobile USA suggested it might add voice to its 4G networks at an early stage, once it switches on LTE next year.
Both SKT and MetroPCS said their VoLTE roll-outs would be the foundation of a broader set of IP-based services using the RCS (Rich Communication Services) platform, which can support added value real time options such as videoconferencing, content sharing in calls, or voice-to-video call switching.
It is vital that VoLTE has demonstrable benefits for consumers, not just improve network efficiency for carriers. Marketing it effectively may accelerate the migration of customers to 4G networks, and keep them away from Skype and the others. So, SKT will brand its VoLTE offering as ‘HD Voice’ (despite potential confusion with the GSMA-backed technology of that name), and says it will “dramatically” improve audio quality, as it will use high quality audio codecs able to handle 2.2 times wider frequency bandwidth than 3G voice. SKT also says call connection time will be up to 20 times quicker, at 0.25 to 2.5 seconds, than the five second average for 3G.
To gain these benefits, both parties on the call will have to use HD Voice devices and subscribe to the service on SKT’s network. Therefore, the service will gain greater usefulness once it can be used across different carriers’ networks. In Korea, that will happen far more quickly than in the US, with all three cellcos offering VoLTE by the end of October.
Verizon is looking at early 2013 but it is not under pressure to shut down CDMA carriers to make space for LTE, as MetroPCS is, as its own capacity crunch lies somewhat further ahead (especially if it gets the cablecos’ AWS frequencies). It is keen to accelerate migration of all services to 4G, but its first VoLTE launches are likely to be focused on enterprise customers, with significant added value capabilities and high charges. AT&T has also said 2013 will be the year for VoLTE, but as a GSM carrier it can use CSFB (circuit switched fallback) to support seamless voice (though not enhanced IP services) – however, it will not feel urgency to upgrade on a wide scale yet. T-Mobile and Sprint may wait until late 2013 or even early the following year. Similarly, in other parts of the world, many 4G cellcos, especially those in the GSM world, plan to rely on fallback to 3G for a longer period.
Another key element of the new-look 4G network will be mass deployment of small cells, to create public access metrozones either indoors (often in venues like stadiums) or outdoors, to add capacity in high usage regions. Although carriers are showing a high degree of interest in this approach, most are, in reality, using small cells for private access in homes or enterprises, for 3G enhancement, or in limited LTE trials. Some want to wait until essential elements like self-organization are more standardized, at the LTE-Advanced stage, or until thorny issues of interference and interoperability are better addressed.
But in this case too, Korea and the US are tussling to be the pioneers in LTE metrozones, along with major roll-outs by the main Japanese players. These small cells do not just add capacity and coverage, but can provide the foundation for the future evolution of HetNet (heterogeneous networks), in which multiple layers of cells of different sizes, potentially supporting different air interfaces and frequency bands, are combined to create a pool of capacity.
In this area, SKT has been a frontrunner, announcing one of the first HetNets at the turn of this year. It is rolling out a system which enables the simultaneous use of different networks to deliver data services at the combined speed of both standards, claiming a world-first deployment which supports simultaneous 3G, Wi-Fi and LTE. This will then be upgraded next year to LTE-Advanced standards, boosting peak data rates beyond 100Mbps and staying a step ahead of main rival KT, which has its own multinetwork strategy, called ‘3W’ (Wi-Fi, WiBRO and W-CDMA) and recently embarked on its own LTE moves.
SKT also promises the world’s first smartphone to support HetNet – not just the ability to move between the different networks but to harness the sum of their speeds and capacity. All its new smartphones will support the new approach from the start of 2013 and the cellco aims to push for the standardization of its Heterogeneous Network Integration Solution through groups including 3GPP and the ITU.
To support its push for a super-advanced network – and the influence over standards bodies and other operators that brings – it has also developed a femtocell which supports LTE and Wi-Fi simultaneously. This will be used to boost service quality and as a step towards the HetNet.
Its rival KT is also taking innovative approaches as it adds LTE to its ‘3W’ program. Although it was the third carrier to go live with the standard, after SKT and LG U+, partly because it was waiting for permission to shut down its 2G network to free up spectrum, its new system makes heavy use of small cells and ‘virtual’ or software programmable base stations (a platform KT calls LTE Warp). This indicates how the Korean operators – like their counterparts in Japan and China - are pioneering new approaches to network design, such as cloud RAN and HetNet. By contrast, early movers in the US and Europe are tending to build their first 4G networks conventionally and aim to introduce the new topologies as data demand requires, in phase two, and often in tandem with an LTE-Advanced upgrade.
The strategy to introduce advanced small cells at an early stage puts pressure on the Korean cellcos’ supply chains, but has opened valuable opportunities for specialist chipmakers to show off their paces in the LTE arena. Mindspeed and Cavium, two chip firms looking for a goldmine in small cells, have been racing to be the first to announce commercial LTE wins, and are both involved in the Korean projects.
On its fiscal Q3 earnings call last week, Mindspeed’s CEO Raouf Halim said: “In a strong confirmation of our leadership position in small cell wireless base stations, we are pleased to report that we have production orders on backlog for our 4G LTE Transcede products and the first wave of Korean deployments for this coming calendar fourth quarter.” Just over a week later, Cavium announced it was “first with production orders for LTE small cells”. Both suppliers’ chips seem to be going into the 4G small cells for SKT and KT, which will be implemented from this quarter.
The competing announcements highlight an important aspect of the small cell trend – that many networks will be composed of access points and chips from a mixture of suppliers. Many operators see the development as a way to reduce their reliance on major incumbent OEMs, and to be able to mix and match base stations, boosting price competition in their supply chains. They will also have the option to purchase from ODMs and low cost manufacturers, of the kind which could previously only address domestic equipment.
This could change the cost structure of 4G, though only if interoperability standards for multivendor small cells are sufficiently functional, and universally supported. The Small Cell Forum recently set up a taskgroup to examine the additional capabilities needed to make the 3GPP’s X2 standard fit for purpose. This interface supports communication between base stations to support various functions such as handover and load balancing, but it is inadequate for complex networks of many cells, raising the risk that vendors will step in with proprietary alternatives.
As we have seen, some carriers are not waiting for such political issues to be resolved. While the Korean majors can usually be relied upon to move very quickly into new technologies, sometimes even ahead of standards, they will soon be followed into 4G small cells by US carriers too, as in VoLTE. AT&T has said it will test LTE small cells this year, and Sprint - which recently said it had 950,000 femtocells (mainly indoor) on its CDMA system - is particularly committed. Rupert Baines, VP of strategic marketing at Mindspeed, said: “Beyond Korean carriers, AT&T and Verizon in North America, we're also seeing that Sprint, Telefonica, Vodafone are clearly developing and finalizing their plans for LTE and dual-mode small cell roll-outs.”
Sprint put more detail behind its commitment this week when it delivered the first publicly announced commercial order to Alcatel-Lucent for its high profile, and radical, lightRadio architecture. Sprint, which is just starting to roll out LTE as part of its complex Network Vision modernization program, says it will deploy lightRadio metrocells to "augment coverage" in the 4G network.
Initially, these small base stations will be used indoors, though for public access, in high traffic venues such as stadiums (Sprint has been an early and enthusiastic users of indoor, private femtocells, which have set many of the antecedents for the metrocell). Later the cells are expected to move outdoors to create hotzones of capacity in areas where the macro network is struggling to cope with user demand. ALU says it has 39 commercial deals for small cells.
The ALU flagship product can support combinations of 2G, 3G, LTE and Wi-Fi, but "this particular contract is specific to the LTE network”, said a spokesperson. LightRadio uses an architecture developed in ALU’s Bell Labs unit to deconstruct the base station into its component parts and then distribute them into both the antenna and throughout a network in which baseband processing is virtualized in the cloud. Antennas supporting combinations of 2G, 3G, LTE and carrier Wi-Fi are incorporated into a small unit, basically a multi-standard wideband active array antenna, which can be mounted on poles or sides of buildings.
The vendor is already one of three suppliers, along with Ericsson and Samsung, of Sprint’s Network Vision infrastructure, which will support multiple networks and frequencies including the new LTE roll-out. But this is its first US deal for lightRadio and the financial terms are expected to be additional to the contract on network modernization.
The other two Network Vision vendors are also likely to get a share of the small cell action. Shortly after announcing the lightRadio deal, Sprint said it would also procure small cells from Samsung, though with fewer details revealed. This is likely to mean that each of its three RAN vendors will also provide miniature base stations within their allocated markets, though Ericsson is far behind the other two in this respect. It has acquired Wi-Fi infrastructure maker BelAir, which has fledgling plans to integrated LTE into its cells, but this offering might not be sufficiently mature for Sprint’s timescales, perhaps forcing Ericsson to find a partner. Such challenges make the carriers’ desire for interoperable metrocells even more significant, even if Sprint’s apparent strategy suggests it is favouring the simplicity of letting each supplier provide an end-to-end solution within the selected territories. However, a three-vendor project for LTE metrocells will still be an interesting test in terms of issues like national roaming and multivendor network management.
For Samsung, a small cell deal is a further endorsement of its confidence that it can become a significant LTE infrastructure player, despite its failure in 3G. It has been building on its TDD experience, gained in its WiMAX leadership, to carve out a position among operators migrating from the older standard to TD-LTE, but its inclusion in Network Vision gave it a higher profile than any of those contracts. It may have been selected mainly for its knowledge of, and ability to integrate with, the Clearwire systems, but its role has since broadened and has helped it win other non-WiMAX related deals round the world. Like fellow 4G challenger NEC, it is gearing its strategy heavily around metrozones and HetNet.
“We will be able to increase our coverage and capacity where it’s needed," said Sprint’s head of networks, Bob Azzi, in a statement. "This is a really important public milestone for all of the carriers, Sprint included, that says the small cell solutions are no longer just a vision. They are a concrete part of the strategy going forward," Michael Schabel, VP of ALU’s lightRadio, told Wireless Week.
Efforts like those of SKT, MetroPCS and Sprint will be closely watched by their counterparts in more cautious regions like – in contrast to 3G – Europe. They will be keen to see whether deployment of cutting edge technology will deliver better profits and ARPU, not just brownie points. In the early stages, there are certainly penalties for being an advanced operator – the higher risk and cost of deploying technologies before they are widely tested in the real world, and before they have reached critical mass, and the shortage of roaming partners to make the services truly useful across a wide area or internationally.
SKT’s second quarter reflected that, with a 74% year-on-year profit fall blamed partly on LTE costs, as well as price competition and increased marketing costs. Net income was KRW120.6bn ($106.8m) on revenue down 0.6% to KRW4.015 trillion. The firm’s statement cited “increased marketing expenses for LTE subscriber acquisition” and other LTE investment costs, but it has achieved a total of 4.22m 4G subscribers as of the end of July, with a target of 7m by year end. “With wider adoption of LTE smartphones backed by a wide range of attractive LTE services, SK Telecom expects to achieve stronger growth in the mid to long term,” said CFO Ahn Seung-yun, and 4G will also drive a revival in ARPU. If his predictions prove true, more cellcos will be following its lead in 2013.
Wireless Watch: Korean and US carriers vye to offer world’s most advanced LTE
