Mobile operators team up to take on next-gen DSL.

Some of the world’s biggest mobile operators are teaming up to take on fixed broadband and try to avoid the expensive mistakes of 3G.

That has highlighted the fierce debate over which standards will win out, and the most cost effective way to move to the next generation of mobile technology.

“We are competing against DSL,” says Joachim Horn, managing director of technology at T-Mobile in Germany. “The world will become copperless. Everything will be mobile at the edge.”

T-Mobile is a founder member of NGMN Ltd, set up by the operator members of the Next Generation Mobile Networks industry body in September. Other founder members include KPN, Orange, Vodafone, Sprint Nextel, NTT DoCoMo and China Mobile.

The body is an important step towards plans to roll out 3G LTE (long-term evolution) services—the next stage in the development of cellular networks based on GSM/WCDMA—as early as 2010.

But there are still hurdles to be overcome before trials can get underway, including standards and intellectual property issues. Nokia says the standard for LTE technology should be completed in 2007, and that it will begin offering commercial solutions from around 2009.

But some players are reluctant to wait, and are forging ahead with the deployment of alternative “3G-plus” technologies.

Japan’s NTT DoCoMo is working on technology it has dubbed Super 3G, which will deliver a new core network architecture and air interface (Total Telecom, July p.22). In June, Miki Nakajima McCants, international spokesperson for NTT DoCoMo, told Total Telecom the operator was “at the stage of testing the components and technologies that will constitute the 4G system.”

And in August, Sprint Nextel pinned its colours to the mobile WiMAX standard announcing it plans to invest US$3 billion to implement a nationwide network.

“Sprint’s strategy is largely predicated on high levels of demand for ‘personal broadband’ services, which will essentially provide cable or DSL-like broadband speed and always-on IP connectivity in a mobile environment,” says Philip Marshall, VP, enabling technologies, at Yankee Group.

The ability to compete head-on with fixed broadband services will be critical for all mobile operators.

But not everyone is convinced that operators will commit to costly 3G LTE.

“Rolling out LTE will require high spending in both network infrastructure and handset subsidies, so operators really need to be convinced of the necessity of the technology upgrade,” says Ovum analyst Julien Grivolas. “Based on today’s applications in the mobile field, nothing really justifies it.”

Dresdner Kleinwort sees a significantly larger potential market for LTE than it does for WiMAX, however.

“We believe the acceptance of WCDMA is so formidable that the case for using the LTE version of OFDM…should be highly compelling,” says Dresdner Kleinwort analyst Per Lindberg.

A big leap LTE will be part of 3GPP Release 8, and is expected to enable data speeds of 100 megabits per second on the downlink and 50 Mbps on the uplink. The new networks will be based on packet-switched technology as well as a new OFDM air interface, meaning the move to LTE will represent a bigger leap for carriers than the upgrade from WCDMA to HSDPA/HSUPA.

“NGMN must start to eliminate some of the earlier technologies,” says T-Mobile’s Horn, working towards one integrated network. “We have increased complexity by adding layers of technologies.”

Last month, T-Mobile USA announced it will spend 2.1 billion ($2.7 billion) building out a 3G UMTS network in the US. It said services will begin mid-2007 using spectrum acquired for $4.2 billion in recent FCC auctions.

But the cost of rolling out 3G LTE—and other next-generation broadband mobile technologies—will be critical to carriers’ investment decisions (Total Telecom, January p.26). Operators are keen to avoid repeating the levels of investment ploughed into the migration to 3G.

“We cannot afford to do that again,” says Christoph Caselitz, president of mobile networks at Siemens Communications. Spectrum will be another key issue. No-one wants a repeat of the European 3G auctions, “taking 100 billion out of the economy,” says Klaus-Dieter Kohrt, senior vice president, government and industry relations, at Siemens.

In addition to spend on new radio equipment, operators will have additional costs to contend with.

“Backhaul has to be significantly enhanced, as we are speaking about theoretical speeds of up to 100Mbit/s in the downlink,” says Grivolas.

“Backhaul networks already represent one of the biggest operating expenses to mobile operators,” says Jeremy Steventon-Barnes, director of strategic solutions at Tellabs. “3G LTE running costs could easily spiral out of control resulting in high pricing and reduced profitability.”

Intellectual property rights are also vexing some operators. “We are not happy today with the IPR regime,” says Horn at T-Mobile. Royalties and patents are necessary to drive innovation, he concedes, but operators need to be able to figure out the cost level in advance.

According to Ovum’s Grivolas, IPR is a “big collateral issue” for LTE. “Service providers…clearly want to limit the influence of IPR licensing on equipment pricing and avoid what happened with WCDMA.”

Kohrt at Siemens says the US has five standards already and does not need another. “Multiple radio standards fragment the market and drive up the cost of interoperability,” he says. In the long term, that could also fragment operators’ next-generation mobile strategies.

“Although Sprint has selected Mobile WiMAX 802.16e as its path to 4G during the next 24 to 36 months, other mobile operators will follow the long-term evolution of the 3G standard,” says Yankee’s Marshall. “This will create a high-stakes game of leapfrog.”

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