Could the success of 4.5G have a big influence on operators' 5G strategies?

Iain Morris, International Editor

January 6, 2017

6 Min Read
4.5G Sets High Bar for 5G

The gigabit LTE announcements are coming thick and fast. In the US, both AT&T and T-Mobile have this week revealed plans to launch higher-speed, 4.5G technology in 2017, while rival Sprint promised in late December that it would also introduce gigabit-speed services this year. (See AT&T Gets in the Gigabit LTE Race.)

Going one better, Russia's Mobile TeleSystems OJSC (MTS) (NYSE: MBT) claimed to have switched on LTE-Advanced Pro -- as the standard is officially known -- in December. And with Nokia Corp. (NYSE: NOK) recently boasting of 110 4.5G deals, Europe's operators seem bound to join the fray over the next few weeks. (See Nokia Boasts 4.5G Momentum With 110 Deals.)

But the availability of gigabit-speed LTE services will add to the pressure on 5G developers to come up with a truly game-changing technology. It might even have implications for the 5G strategies on which operators embark.

Figure 1: Vaulting Ambition Gigabit-speed 4G services set a high bar for the forthcoming 5G standard. Gigabit-speed 4G services set a high bar for the forthcoming 5G standard.

The hubbub over the emerging technology is certainly understandable. Because 4.5G is an upgrade, rather than an entirely new technology, it can be deployed relatively economically, using existing 4G assets and spectrum resources. That is critical: Networks are struggling to cope with soaring volumes of mobile video traffic, while revenue growth is still proving elusive.

Included in the 3GPP's Release 13 last year, LTE-Advanced Pro makes use of techniques such as carrier aggregation and MIMO to boost capacity. With the former, spectrum channels in the same or different frequency bands can be combined to improve bandwidth. MIMO (for multiple input, multiple output) adds antenna capabilities for the same effect.

Besides appealing to operators, the technology should also be good news for equipment vendors in need of a post-2016 pick-me-up. Although it will not trigger a big wave of new spending in the same way as the first 4G standard, it may already have helped to dispel some gloom. Ericsson AB (Nasdaq: ERIC) expects industry sales in the mobile infrastructure market to shrink by just 2-6% this year, compared with a 10-15% decline in 2016. Nokia, meanwhile, is guiding for a 2.2% fall in its own network revenues in 2017, after watching them slide 10.5% over the first nine months of last year. (See Is Ekholm Ericsson's Savior or Seller? and Nokia's New Software Unit to 'Redesign' Company.)

Developing market operators, in particular, may be eager to use LTE-Advanced Pro as a fixed wireless access solution in communities poorly served by wireline broadband technologies. Telcos such as Sri Lanka's Dialog GSM have already had success using LTE to provide broadband connectivity to customer premises, says Gabriel Brown, a senior analyst with the Heavy Reading market research business. The 4.5G standard could fortify such offerings.

In more developed markets, meanwhile, 4.5G could hold particular interest for operators prioritizing their mobile TV strategies, including AT&T Inc. (NYSE: T) and UK-based EE (now a part of fixed-line incumbent BT Group plc (NYSE: BT; London: BTA)). Without gigabit-speed mobile connectivity, such players might struggle to support higher-quality video services.

Yet the business case for 5G is similarly predicated partly on demand for such higher-speed connectivity. Unless 5G delivers a substantial improvement over 4.5G in a commercial setting, operators may be in little rush to launch it. Even if it does, could the availability of gigabit-speed LTE, and mid-term lack of mobile applications requiring multi-gigabit-speed networks, take some wind out of 5G's sails, or at least convince operators to pursue a different 5G tack?

Next page: No 5G hurry

No 5G hurry
Bengt Nordström, the CEO of the Northstream consulting firm, is one analyst who doubts most operators are in any kind of 5G hurry. "The bread and butter for this industry from an infrastructure and service perspective is the evolution of 4G," Nordström told Light Reading in the run-up to Christmas. For all the noise about 5G service launches in 2020 -- when a commercial standard is set to appear -- Northstream thinks "mass" 5G deployments are at least six years away. (See 5G Guru Predicts Rollout Disparity.)

If nothing else, the success of 4.5G could set "a high bar for 5G," according to Heavy Reading's Brown. That is something to be welcomed, he says, while pointing out that LTE-Advanced Pro has much to prove. "How good is it going to be, how widely deployed, and what will devices be like?" he says.

Ultimately, Brown does not think 4.5G will change the 5G story "that much." Nordström also dismisses any suggestion that 4.5G could obviate the long-term need for 5G as a mobile broadband technology. What does seem conceivable is that 4.5G's success could influence the manner in which 5G is first introduced. Instead of pursuing mobile broadband opportunities, operators might channel even more effort into serving vertical markets where low latency -- rather than high speed -- is the priority.

Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading.

For Nokia, the vendor that has talked up 4.5G the most, this may well be the expectation. "Low latency is the biggest driver [of 5G]," said Sami Elhage, the president of Nokia's mobile networks, during a press briefing in London in December. "Capacity you can play with in 4G."

Nokia may have a vested interest in painting such a picture. A wide area network geared up for the Internet of Things could represent a much bigger sales opportunity, from a vendor's perspective, than hotspots catering to pockets of mobile broadband demand. For operators, however, the opposite may be true. "There is one tangible business case in 5G that you can run the numbers on and that is fixed wireless access," says Nordström. "The rest of the 5G story around network slicing and building infrastructure for self-driving cars is interesting, but we are not convinced how well it will fly."

Apart from US-based Verizon Communications Inc. (NYSE: VZ), which has become a cheerleader for 5G as a fixed wireless technology, telcos have given little away about their 5G service priorities. With a standardized version of 5G at least three years away from commercial deployment, that is perhaps not surprising. But it will be fascinating to see how their 5G plans evolve as 4.5G takes root.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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