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3G vs LTE: No Contest

Heavy Lifting Analyst Notes
Heavy Lifting Analyst Notes
Heavy Lifting Analyst Notes

As operator CTO teams around the world evaluate the performance of LTE technology and attempt to estimate the billions of dollars it will cost to deploy, the inescapable question is: To what extent does LTE compete with the 3G networks already in the market? This was the recurring theme at the LTE World Summit I attended in London last week.

At first glance, it's simple: LTE is better, newer, and faster than 3G. With initial versions of LTE expected to offer more than three times the average cell capacity of today's 3G/HSPA technology (assuming constant channel widths), this makes the decision to deploy it relatively straightforward – and doubly so, given the absolute requirement to drive down the delivery cost per bit of mobile broadband.

If only life were that easy. The upcoming upgrade to HSPA Evolved (a.k.a. HSPA+) reduces the performance gap to somewhere between 20 percent and 40 percent, depending on how exactly the upgrade is implemented. At this point, the question becomes: Is LTE really worth all the time, money, and energy? Wouldn't a 3G/HSPA upgrade strategy be more financially responsible?

This, in essence, is the bind in which mobile operator CTOs find themselves. Should they go early and go big on next-generation technology, as T-Mobile Germany, Verizon Wireless , and NTT DoCoMo Inc. (NYSE: DCM) propose with LTE? Or should they wring every last drop of productivity from 3G, as Hutchison 3G HK Ltd. , Telstra Corp. Ltd. (ASX: TLS; NZK: TLS), and AT&T Mobility LLC propose, before embarking on yet another multibillion-dollar network buildout?

I believe that the most efficient solution will be to deploy and evolve both 3G/HSPA and LTE in parallel.

What we do know is that new capacity will be needed to support the growth of mobile broadband. Three UK U.K. said earlier this month that it has seen traffic increase more than 40-fold since it launched affordable, flat-rate tariffs in September 2007. And although that's an extreme example off a low base, traffic is growing rapidly in almost every 3G network in the world. Clearly, something has to give.

With at least a year's time-to-market advantage over LTE, HSPA+ can help to significantly relieve pending mobile capacity shortages. With an initial focus on cost-effective, software-only upgrades to 64-QAM modulation, and then a later upgrade to more hardware-intensive MIMO and multi-carrier technology, 3G/HSPA has years of productive life ahead of it. We're only now at the start of the golden years of 3G, and to write off investment in that asset is not an option.

Efficiency gains on existing technologies will only go so far, however. The surest way to increase network capacity is to "activate" new spectrum. In this "new spectrum scenario," HSPA looks far less attractive, and operators have all the incentive in the world to adopt LTE technology and the superior performance that comes with it.

So where new frequency bands are being pressed into service, LTE is the clear choice. This is exactly the deployment strategy that Verizon Wireless and AT&T Mobility are expected to adopt in the AWS and 700MHz bands, and what European operators will do with 2.6GHz spectrum and with digital-dividend spectrum from 2012 onwards.

True, operators will ultimately want to refarm today's 3G spectrum for LTE or its successor, but save for a few examples, I don't see that happening in big way for at least five years. For now, the debate between LTE and HSPA+ really is no contest: If you have both, use both.

— Gabriel Brown, Senior Analyst, Heavy Reading

For more on this topic, register for the upcoming Webinar, "LTE/SAE: A Progress Report."

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