Mobile operators worldwide are readying for the next technological gear-change as fourth-generation (4G) networks begin to be deployed, potentially offering a four-fold increase in data transmission rates that will herald a new era in mobile internet services. Hundreds of millions of dollars are set to be spent on building out the core equipment platforms that will deliver these services, on top of the millions more being spent on the requisite licences and spectrum.

My colleagues in BMI’s telecoms team are watching developments closely, for the investment decisions made here and now will affect the industry and its key players for the rest of the decade. Our industry forecasts and core views are being revised to reflect these trends.

Insufficient Capacity Necessitates Overhaul

While mobile phone users can already access the internet, send and receive emails and watch streamed video content over 3G networks, there are now so many of us doing all these things that the networks simply cannot cope with the demands being placed on them.

More than one billion mobile phones were sold around the world in 2009, of which approximately 15% were smartphones, according to market leader Nokia. Meanwhile, there were nearly four billion mobile subscribers (many customers buy a new phone every year). Smartphones are expected to account for around one third of sales by 2014, further adding to the pressure on mobile networks.

But it doesn’t stop there… With wireless technology increasingly being embedded in all kinds of non-telecoms devices – think eReaders, laptops/netbooks, gaming consoles and satellite navigation devices – capacity is in short supply.

What Are The Options?

Two competing technology standards are available to operators looking to make the move to 4G. WiMAX got a head start and has been employed as both a fixed and a mobile broadband platform, but limitations with regards to mobility and the fact that it cannot be grafted onto existing 3G networks mean it has already been relegated to the role of a low-cost wireless access system for rural and remote areas. LTE (Long Term Evolution) represents a more obvious migration path from existing 3G systems, and is therefore now receiving the full attention of the world’s largest operators.

TeliaSonera was the first to launch a commercial LTE network, covering both Sweden and Norway, at the end of 2009, but it has yet to attract many users, possibly due to a lack of handsets and a lack of an obvious ‘killer application’ above and beyond what is already available on 3G.

But 4G is now arriving elsewhere. Verizon Wireless will launch a service later in 2010 aimed at mobile computer users in the US. Rivals AT&T and MetroPCS will follow suit in 2011. In Asia, the Singapore Telecom group is to use LTE for operations in Australia, Indonesia and Singapore. Other operators will follow in their wake. Equipment vendor Nokia Siemens Networks (NSN) claims to have 30 operators trialling its LTE equipment, around half of which will certainly progress to commercial operation.

However, selling 4G may be a tricky proposition and the BMI telecoms team believes that, as speed is at the heart of the 3G issue, the emphasis should be placed on the very high data throughput rates, rather than trying to sell 4G as a discrete product.