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LTE Has Arrived – But Don’t Expect Too Much Too Soon

The Dell’Oro Group (News - Alert)’s Mobility Infrastructure 4Q09 Report has just been released. Based on worldwide shipments from manufacturers during 4Q09, it includes detailed global and regional data and analysis on WCDMA, GSM/GPRS/EDGE, CDMA and WiMAX sales. For the first time, LTE sales are also featured in the report, with TeliaSonera (News - Alert) deploying the first commercial LTE network in Oslo and Stockholm during December 2009.

It’s exciting news, after all of the LTE buzz over the past two years, that we expect four more operators to launch LTE services later in 2010. Verizon (News - Alert) Wireless alone plans to launch services in up to 30 markets by the end of 2010. As a result, the report forecasts equipment manufacturers will finally begin recognizing their initial revenue streams in 3Q10 (see figure). However, the very fact that LTE (News - Alert) is now real means that it’s time for realism. It is going to take time for the whole ecosystem – including the radio access network, the packet core network and the LTE-enabled handsets and devices – to be developed and rolled out.

That implies the classic chicken-and-egg situation: Without the infrastructure in place, there is little incentive to launch LTE-enabled equipment, and without a market there is less to be gained by pioneering the service. Of course the providers are well aware of this – it happens each time the technology advances – but in this case we should remember that the majority of operators currently planning to deploy LTE already have robust and extensive HSPA networks in place. Bear in mind that doing an LTE rollout entails purchasing new spectrum in addition to the brand new infrastructure, so it requires a major investment. Although our 5-year forecast, published in January this year, anticipates a strong future for LTE – especially in 2012 when European operators begin to deploy their first LTE networks – initial investment will be restrained because there are other attractive alternatives, with many operators planning to upgrade to HSPA+ as an interim, cost-effective measure.

With only a software upgrade to the current infrastructure supporting HSPA and using the existing 3G spectrum operators already own, HSPA+ can support peak downlink rates of 21mbps. Spend a little more and operators can upgrade their HSPA+ networks to support peak downlink rates of 42mbps. The report’s figures show that the overwhelming majority of WCDMA networks have already been upgraded to HSPA, with over half of these networks supporting peak data rates of at least 7.2mbps. And there are already more than 40 networks supporting HSPA+. So, on the one hand there is the prestige advantage of launching an LTE service; on the other hand there is the pragmatic short-term option of better ROI in existing infrastructure, and the report suggests that many will prefer the pragmatic option for the next several of years.

Our findings have made us skeptical of the somewhat aggressive timelines given for deploying initial LTE networks in 2010, but we have also gained a deeper understanding of the operators’ situation. On the one hand in the five-year forecast report we increased our forecasted eNode B shipments for 2010 from the previous forecast report; on the other hand we lowered the forecasted shipments for 2011 and 2012 for the reasons given above. We do still maintain that the rate at which operators migrate their networks from 3G to 4G will be more rapid than the 2G to 3G transition – especially after expected initial LTE deployments in China in 2012 and 2013 when the growth will accelerate significantly.

While we anticipate strong growth in the LTE market over the next five years, with average revenue growth of more than 100 percent, the 3G WCDMA market is going to be the most dominant driver of the mobile infrastructure market. Before the LTE market can really take off, the LTE device ecosystem will need to become more mature. Initial LTE devices will be targeted toward mobile data access via PC connectivity, with initial LTE handsets expected in 2011. Although revenue will start to come in toward the end of 2010, we are not expecting the market to experience its inflection point until 2012.

These and other results are detailed in our latest Mobility Infrastructure 4Q09 report – together with some surprising findings on the GSM and WCDMA markets. IT

Scott Siegler is senior analyst of mobility infrastructure market research at Dell’Oro Group (

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