LTE versus WiMax debate rumbles on

The LTE versus WiMax debate won’t be silenced, but there’s really just one question that needs to be answered. Does LTE offer a more natural evolution path than WiMax for existing 3G players? If it does, WiMax will struggle to ever get the support it needs to become a mass-market offer, even with its time-to-market advantage.

The fact that more 3G operators are coming out of the woodwork and backing LTE suggests there is some commonality, but Intel – the daddy of WiMax – continues to insist LTE is an entirely different technology.

I put this point to Jeanette Fridberg, head of product marketing for chief LTE backer Ericsson, earlier today. Fridberg accepts that LTE cannot re-use 3G radio technology or base stations, and has no advantage over WiMax in that respect (it is, in fact, based on the same air interface as WiMax). But she says LTE can be deployed at 3G base station sites, which account for up to 80% of the capital expenditure.

So what’s to stop an operator from deploying WiMax at 3G sites? Not much, apparently, except that WiMax base stations provide less coverage than LTE and 3G ones. That means a 3G operator rolling out WiMax would have to build more sites to fill the gaps in coverage, which could be not only costly but also inefficient, leaving it with sites that overlap in coverage.

The unresolved question is how much of this coverage advantage stems from LTE’s reliance on FDD technology, as opposed to the TDD used by WiMax (FDD uses two spectrum channels, one for sending information and one for receiving it, while TDD uses a single channel for both). If an FDD version of WiMax would level the playing field then Ericsson will have to be on its toes. Supporters of WiMax say they are working on an FDD system now.

Shattering the mobile experience

There’s been a lot of activity around mobile software platforms and application development this week. Microsoft has made its Silverlight web platform available on some of Nokia’s phones, Google has revealed that its own Gears platform can now be used on Windows Mobile devices and Apple is getting ready to launch its software development kit for the iPhone later today.

It makes the mobile sector sound like a rich emporium for the end user. But it really goes to show just how fragmented the industry has become. Take the iPhone, for example. It may be a great-looking device – possibly even a revolutionary design – but it presents third-party application developers with a tough choice. Do they invest precious time in writing a version of an existing application for the iPhone? Or is it better to invest those resources in coming up with a new application for a Symbian handset?

Making that decision probably means spending even more time analysing the market and trying to figure out whether the iPhone will become a serious rival to Symbian smartphones. And meanwhile the customer is left waiting.

Sadly, things look set to get even worse with the summer arrival of Android, Google’s hyped operating system for mobile phones. Android is eagerly awaited by those who reckon it will lower pricing and improve the experience of using mobile applications. Yet it’s described as “another bloody platform” by Carl Uminski, the chief technology officer of Trutap. That’s telling, because Trutap is exactly one of the third-party application developers Google would assume is on its side.

Uminski’s not the only one feeling exasperated. Charles Wiles says he’s working to bring Windows-compatible software to Android and other capable web browsers. Who is he? The product manager for Google Gears.

Fibre comes cheap in Hong Kong

One data point really stuck out at this week’s FTTH Council Europe Conference. In a presentation by Alice Wong, the financial controller for Hong Kong’s City Telecom, the figure of €88 was cited as the cost per home of building a fibre network in Hong Kong. That’s a tenth the cost facing most European and US operators.

As Wong explained to perplexed members of her audience, the cost is so low because most of Hong Kong’s residents live in tower blocks, or what the telecoms industry calls ‘multi-dwelling units’. These can be connected with a single fibre and some nifty in-building wiring, which makes installation relatively cheap. Operators in some European countries, on the other hand, are looking at streets full of detached, one-family homes, and a hefty capex bill to boot.

City Telecom claims to have covered 1.4m homes with its network and to have around 650,000 customers using services that cost from €26 per month. A back-of-an-envelope calculation shows that even if all those customers are on the base offer, payback on capex is just over seven months. By contrast, it will take many companies in the Western hemisphere more than seven years to pay off their capex investments.

Geography can be so unfair.

VDSL is a ‘lame duck’

It’s maybe no wonder Deutsche Telekom has fewer than 150,000 customers for its IPTV offer. According to Thomas Langer, who heads equity research into communications for investment bank WestLB, the German incumbent has been telling customers on its website that it can only guarantee them a service after they have placed an order.

When Langer told senior managers at Deutsche Telekom that such a clause probably wasn’t the best way to attract new business, he fully expected them to remove it. But nine months on it’s still there.

It shows just how bad Deutsche Telekom is at marketing and external communications, says Langer. And he doesn’t stop there, describing the high-speed VDSL network it is building to support IPTV as a ‘lame duck’. It’s little surprise to Langer that Deutsche Telekom is scaling back its national rollout to 40 cities, down from the 50 it planned to serve originally.

Chief executive René Obermann was quick to blame competition for a lacklustre set of quarterly results earlier today. But if his marketing managers don’t wake up soon, competition could be the last of his worries.

Build it and they might come

An obscure French economist from the eighteenth century would seem unlikely to pop up at a present-day conference about cutting-edge telecoms. But the rather grizzled image of Jean-Baptiste Say, born in Lyon in 1767, made a hard-to-miss appearance at the FTTH Council Europe Conference being held in Paris today.

 

Say hit the big presentation screen at the Palais de Congrès courtesy of Brett Swanson, the senior director of a thinktank called the Centre for Global Innovation. During his keynote speech this morning, and in front of a giant projection of Say’s portrait, Swanson reckoned the Frenchman would have been a major advocate of the investments in high-speed fibre networks that are the topic of this trade show. Known in some circles for his belief that ‘supply creates demand’, Say thought producers and entrepreneurs were the key drivers of any economy and far better at anticipating the needs of a society than the consumers within it.

 

The ‘build it and they will come’ philosophy has a encouraging ring to it, but delegates at this conference probably didn’t need reminding. Many of them are already deploying fibre networks without any firm evidence that a mass market either wants or needs more bandwidth.

 

In some cases, though, early indications are not promising. France Telecom says just 5–10% of customers in areas now served by fibre have immediately taken up the new offer. One wonders what Say would make of that.

Mugged in Barcelona

I can’t help feeling the Mobile World Congress has become rather like a juggernaut whose driver has fallen asleep at the wheel. Every year it slams into Barcelona in northern Spain (or Catalonia, if you’re from Barcelona), dragging more delegates and organisers along for a journey that seems to have no clear destination. There was a time when companies would use the event to announce a market-changing deal, or at least unveil an exciting new product. These days it seems to be an expensive post-Christmas distraction from the main business of running a telecoms organisation. ‘Unremarkable’ was the word a number of attendees used to describe this year’s bash.

It’s also gotten too big to be manageable. I found it harder than ever to book suitable accommodation, despite scouring hotels weeks in advance. A PR rep I know had to make do with a dormitory bed in a youth hostel, and ended up sharing the room with five or six other be-suited telecoms executives. Could it soon outgrow Barcelona, just as it spilled out of Cannes in southern France a few years back? OK, that’s unlikely to happen for some time. But I can certainly see a day when the GSM Association, which organises the event, is annexing island states or small countries with the MWC in mind.

I’m probably sour because I was an unlucky victim of crime during my trip. I was enjoying a cold beer in a café near the conference centre – after a hard day of slogging it out on the exhibition floors – when my bag was snatched from under the table. The wily thief got away with a laptop, two recording devices and all my notes from the first two days, rendering a large portion of the event a complete write-off from a personal perspective.

As I understand it, however, I wasn’t the only one. Several journalists had wallets and phones stolen by pickpockets, and one unfortunate soul was mugged near Las Ramblas, the main tourist thoroughfare. While Barcelona has always been a hotspot for petty theft, such crime seems to have spun out of control last week – much like the MWC itself. Sure, the police were sympathetic, but few appeared to be on patrol when all this was happening. If Barcelona is to play host again next year – as we all expect – I’d hope the city authorities do a better job of ensuring it’s relatively safe.

No doubt, despite all my griping, I’ll be there at next year’s conference, hoping somebody says something of interest while keeping a watchful eye on my possessions.

Of Reding and shindigs…

Iain Morris, currently at the GSMA’s Mobile World Congress in Barcelona, has sent in the following report:

Viviane Reding is at it again. Just months after she roped in Europe’s unruly mobile operators over their roaming charges, the EC commissioner istaking aim at the fees they extort from data customers travelling abroad. Disrupting the GSM Association’s official press conference during the Mobile World Congress, Reding told a group of journalists that if operators didn’t significantly improve their pricing behaviour she would be forced to take remedial steps. She’s given them until the summer.

Chances are Reding won’t be invited back next year - at least not as a panellist again. That would be a pity, because her outburst and uncompromising views are exactly what this event needs. Every year, the world’s mobile industry descends on  Barcelona  for its equivalent of the Oscars. Awards are dished out (categories include the catchy-sounding Most Innovative Wireless Device-Centric Technology and Most Innovative Mobile Application in a Vertical Market), champagne is drunk,  and platitudes are exchanged. Behind the scenes some hard deal-making is going on, but very little is actually said of any real substance. Most of the “breaking news” broke the day before.

While Yahoo! turned down Microsoft’s US$44.6bn bid back in Silicon Valley, Microsoft was categorically not answering questions about Yahoo! during its press conference (which, er, would have revealed that Sony Ericsson is to ship smartphones using Windows Mobile if the story hadn’t gone out that morning).  Nokia talked aplenty about Ovi and unveiled handsets that look just like the N95. Rousing stuff.

Several sessions from day two are given over to mobile advertising, but it’s unlikely, that any operator will actually say how it expects to generate significant revenues from advertising when up against the likes of Google and, possibly, Microhoo. Services that attach adverts to incoming text messages sound like a promising lead for operators, but a properly “open” mobile internet would put them at a big disadvantage to the web players.

 Virtually all of this will pass unnoticed to the people that matter the most - the customers. The iPhone’s proud parent, Apple, is nowhere to be seen, having already given away its secrets at its own self-congratulatory shindig. Nokia’s N95 must sound like a postcode to many. The hardest truth most operators must accept is that 3G - for all the recent hype - is far from being a mass-market service. Although data revenues are on the up, they still account for only 20% of total revenues in the most developed markets. And the people nudging them along are all here at MWC, fiddling with their HSPA data cards and USB modems. No wonder they’re so worried about VoIP. 

 

Orascom invades North Korea

Take a  look at this photo. It’s a from an official North Korean site and if you look closely, you’ll see that no one in this photo is using a mobile phone. That’s because no one in North Korea has one. Not yet, anyway. The North Koreans may be lacking in the basics, like food and fuel, but it appears that they will soon be able to buy a mobile - and a 3G phone to boot.

According to an announcement today from Orascom Telecom, the Egyptian group has been granted the first license to provide mobile services in the Democratic People’s Republic of Korea. The license is for providing a service using WCDMA (3G) technology.

Although not exactly. This access was, in fact, given to a new JV company, CHEO Technology, which is 75% controlled by Orascom and 25% owned by the state-owned Korea Post and Telecommunications Corp. The terms of the license will allow CHEO to offer services throughout the country. The duration of the license is 25 years with an exclusivity period of just four years.

Still, Orascom says it will spend up to US$400m in network infrastructure and fees over the first three years in order to build a network which will offer voice, data and value added services at “accessible prices to the Korean people”.  Given that North Korea’s GDP per capita in US$1400 a person, those are going to have to be mighty low prices.

In case you were wondering, there are 23m North Koreans. While Orascom is no stranger to difficult markets - it has operations in Algeria, Pakistan, and Bangladesh - it pulled out of a license battle in Iraq at the end of last year. Now we know why.

Broadband blues

AT&T and Verizon may have provided early  evidence that an economic slump is having a knock-on effect on the telecoms sector. Despite posting pretty stellar results, on the whole, both reported weaker broadband growth than expected. AT&T saw a rise in access line losses during December, and a fall in the rate of broadband adoption. And Verizon, which announced its quarterly results today, witnessed virtually no DSL growth at all, according to bankers at JP Morgan.

 

As a household service, broadband was always going to be vulnerable to a slowdown in the housing market. Luckily for AT&T, only 18% of revenues come from consumer wireline, and other parts of its business seem to be holding up well, including wireless. It seems perfectly reasonable to expect continued growth here. Cell phones have fast become a necessity in developed and emerging markets. The economic setback will probably just accelerate the trend of fixed-mobile substitution, whereby customers ditch their fixed-line phones to save money and rely even more on their mobiles.

 

It’s all bad news for companies dependent on broadband growth for their long-term prosperity. Operators without a wireless business look very exposed in the current climate.

The iPhone divide

Apple was in typical self-congratulatory spirits this week, boasting sales of 4m iPhones since they hit the stores last summer. Having surpassed all expectations, CEO Steve Jobs will no doubt feel satisfied to have proved his detractors wrong.

Before he gets too carried away, though, he might reflect on just how lopsided those sales look. Around 3.4m went to AT&T customers in the US, leaving just 600,000 to split between O2 UK, France Telecom and Germany’s T-Mobile, the European distributors.

Sure, the iPhone was introduced to the US four months before it went on sale in Europe. And yes, the US is more populous than the UK, France and Germany combined. No one could realistically expect parity. But the gulf between the two regions seems to have widened over the Christmas period.

It’s no surprise, really. Americans are used to splurging their savings on the latest gizmos. Europeans, on the other hand, are used to getting the newest and most stylish handsets at heavy discounts. Chances are most can’t quite believe how much their service providers want for the iPhone.

That’s not all. The iPhone has had a lot of bad press because it doesn’t work on Europe’s fastest mobile networks. Customers have to use WiFi – a short-range wireless technology – to get maximum value from it, and WiFi coverage is not pervasive. The alternative is frustratingly slow and costly.

This is no different in the US, but AT&T’s highest-speed mobile network is unavailable across much of the country. Most customers don’t miss it because they’ve never used it, and so they’re happier to make do with the occasional bout of WiFi.

Of course, the quicker development of mobile technology in Europe also means the region has more iPhone rivals. Vodafone UK launched some new handsets over the Christmas period that allow fast web surfing and data downloads across most of the country. SFR did the same in France. Both providers are offering competitive monthly deals, charging for mobile data usage at flat rates.

Amusingly, the Financial Times, a UK newspaper, recently published a letter from a disgruntled iPhone customer that lampooned some of O2’s optimism about the device:

“I would dearly love to use my phone more for surfing the internet away from WiFi,” wrote the customer, “but frankly the current costs are prohibitive. From O2’s point of view, I am afraid the iPhone is nothing more than a temporary blip in the usage charts.”

Clearly, an iPhone that works on the fastest, most cost-efficient mobile networks is needed essentially on one side of the Atlantic. Apple should provide more guidance on when this will become available. But other measures need to be taken. Apple should drop its pompous claim to a share of airtime revenues – which turns the whole net neutrality argument on its head – and give its European partners the financial freedom to subsidise handsets. Only then will it realise the true international potential of the iPhone.