LTE Summit in Amsterdam May 17-18, 2011

Amsterdam’s LTE Summit on 17 – 18 May was filled with numerous ultra-positive presentations on LTE. I believe it is unavoidable in events like this since they are – in essence – industry promotions. However, the summit provided several key messages that are of importance to the mobile business in general. I feel the key messages were the following:

  • Network sharing and wholesale business models are gaining importance;
  • Offloading from macro networks to Wi-Fi is inevitable; and
  • Mobile operators need more frequencies.

It seems that continuous investments in network technologies have made many operators to look for network sharing. It is a natural option to control production costs: sharing provides economies of scale, improves efficiency and increases bargaining power of the operators. However, interest to network sharing signals that networks have become standardised production engines that no longer serve as a key source of competitive advantage. Wholesale model goes even further: the idea is to have an independent network operator to provide network capacity to the service operators. Again, this is based on an assumption that networks are not the key in differentiation between the service operators; instead, the service operators should focus on services and customer interface.

Another option to control production costs is to offload part of mobile data from macro cells to Wi-Fi or femtocell networks. Since the key capacity challenge is due to peak hour traffic, voluntary and even free offload to Wi-Fi may be a viable option to mobile operators; savings in capacity investments may more than compensate for the loss of revenues during the peak hour.

About every speaker demanded more frequencies. The key interest is focused on low frequencies with the most wanted band being the digital dividend (790 – 862 MHz in ITU region 1). In addition, some speakers stated that even more spectrum should be re-allocated from terrestrial TV to mobile; in short, they believed that another digital dividend is a necessity. The requests for additional frequencies were complemented by requests for strong international spectrum harmonisation.

In short, the key messages in the LTE summit are fully in line with our own findings in discussions with the operators. Increase in data traffic requires investments in new technologies but at the same time revenues are either declining or at least difficult to predict. Since new sources of revenues are hard to find, optimization of the production engines becomes critical. We have found in our exercises that smart utilisation of the existing infrastructure as well as optimization of frequency portfolio can make a material difference in LTE migration. It seems clear that LTE without a solid migration strategy does not solve the current imbalance between investments and revenues.

Ari Ojaniemi

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