LTE will still account for less than 5% of global connections in 2015 but may find an early niche in rural markets as an alternative to fixed broadband said Julio Puschel, senior analyst and head of mobile operator strategy for Informa at the LTE LatAm summit in Rio de Janeiro, Wednesday.
Noting that much maturity was still necessary in terms of the LTE market, Puschel admitted the technology had yet to see any real commercial success, even in early adopter countries in Scandinavia where it was rolled out towards the end of 2009. This has caused many operators with HSPA networks to delay their stated LTE launch dates because they see little benefit in being early to market, he explained.
Taking Scandinavia as an example, Puschel said it was clear that early adopters of LTE were wealthy urban users who proclaimed the need for more video capabilities, and that the high cost of LTE plans was proving prohibitive to most other users.
Having said that, the networks were performing to expectation and showing significant benefits in terms of latency and speed, said Puschel.
The great differential with respect to 3G technology, Puschel proclaimed, was mobility, and operators have learned lessons in terms of how they position LTE to customers, promoting it as offering greater capacity and a better user experience.
Having said that, Puschel argued that LTE device manufacturers also had to make more of an effort to work with network operators to ensure the whole system was optimized towards delivering this high standard of user experience, from call quality to battery life.
The download velocity would remain a major appeal, said Puschel, even though it would come at a large price premium.
In terms of market segments, Puschel said the technology should appeal to consumers and enterprise users alike, but that both would use it in different ways and that operators should be careful to market it accordingly. Video, however, he explained, is one application that will have a significant importance to both segments, especially with enterprise putting more and more emphasis on telepresence and demanding greater reliability from their networks.
With so much expectation riding on LTE, some of the toughest challenges operators are having to face, said Puschel, are demands for more transparency regarding coverage plans. This, he said would help to manage people’s expectations, as would phased deployment strategies, clear outline of future expansion and a clear fall back to legacy technologies if needed.
Unfortunately, while many had hoped that LTE might be a a great opportunity to take connectivity to rural areas, early indicators are that deployments are overwhelmingly targeted at reaching high spending customers in urban areas.
Another disappointment is the spectrum fragmentation, as well as the non-availability of spectrum at 700MHz-900MHz and 1800-1900MHz, which is believed will significantly slow the roll-out of LTE.
Pricing will also act as a significant barrier to entry, with early pricing for LTE data plans demonstrating a significant premium over 3G – some as high as $90 for even a limited experience. Very few operators, said Puschel, would be offering unlimited plans, having learned lessons the hard way with 3G.
Having said that, the pricing is far from being set in stone, Puschel reassured the audience, noting that multi operator LTE markets were already witnessing price based competition and that this pressure added to uncertain user reactions was forcing operators to tinker with tariffs more frequently than planned.
“LTE is driving business model experimentation,” said Puschel who said the early signs showed that LTE is changing the usage behavior of the first users to migrate.
90% of current LTE users, he said, had upgraded from 3G, and 54% said they wouldn’t consider going back to 3G despite the cost reduction. 65% said they had bought LTE as a complement for fixed broadband, while 26% of LTE users admitted they now worked more on a mobile basis.
23% of LTE users said they downloaded large files more often, while 16% said they browsed the internet more often.
