Problem solve Get help with specific problems with your technologies, process and projects.

Three 4G business models emerge for LTE and WiMAX

4G evolution talk is all the rage, but the best business models for wireless broadband technologies aren't in sharp focus yet. Wireless operators have to decide whether to deploy WiMAX or LTE for their 4G networks, and knowing their customers' habits is the key.

This Content Component encountered an error

Anyone who attends a wireless/mobile trade show anywhere in the world knows that 4G is one of the truly hot topics. The question is whether interest in a concept will translate into investment in that concept -- and when. For 4G, the issue is complicated because not only is the technology an evolution from current wireless services in a technical sense, but the business models for 4G are far from harmonious.

Hundreds of comparisons have been made between the technologies with no clear winner, so the deciding factor may be the business model that drives deployment.
Tom Nolle
PresidentCIMI Corp.

For most service providers and consumer, 4G wireless has the potential to deliver 40 Mbps or more of broadband connectivity per user. There are two technologies capable of supporting this requirement: WiMAX from the IEEE and the 3rd Generation Partnership Project (3GPP)'s Long-Term Evolution (LTE). Hundreds of comparisons have been made between the technologies with no clear winner, so the deciding factor may be the business model that drives deployment. The business model is also likely to set the pace of deployment, since most wireless operators are uninterested in the "build it and they will come" theory of service marketing in today's economy.

Looking back to move ahead

Historically, wireless has been divided into two segments, fixed and mobile. Fixed wireless has been used as an alternative to wireline service delivery, but except in emerging markets, this particular segment hasn't been generally attractive because broadband-over-copper (DSL, CATV) is available in most developed economies, even in rural areas. The cost pressure on fixed wireless in more rural areas is greater because of low customer density and low willingness to pay. And so, valuable spectrum space is probably better used in another model -- the mobile one.

The challenge presented by 4G is that broadband delivery of tens of megabits to a mobile device represents a consumption model different from today's mobile voice services. There is no value to a 40 Mbps voice service. Only something highly visual has the potential to consume that much bandwidth.

Delivering video to a mobile device compromises the safety of the viewer, however, and risks a significant public policy backlash. Even in the youth market, where risk-taking is more likely, viewing mobile video while actually moving hasn't been very popular. This means that the current "mobile" business model doesn't naturally extend to 4G.

Three 4G business model options to date

The large-cell model. One business model that extends to 4G is the "large-cell" or "rural" model of service. If 4G towers and spectrum permit, the range of the service could be quite large and the number of users per cell similarly large. But the higher capacity could still provide a reasonable grade of service.

This exact business model has been the primary example of early WiMAX success in emerging economies. As long as the available bandwidth per device is constrained to prevent a cell from being hogged by a few users, WiMAX can provide good service with widely separated cells. For this reason, it presents a low-threshold entrée into mobile and even wireline-replacement markets.

The migratory user model. Another 4G possibility is the "migratory user" business model. In this model, the users consume wireless service not because they're mobile but because they're migrating between fixed locations, each of which represents a place where they are at rest and available to view video content, play games, and so on. This fits well with the behavior of the youth market, and it has the advantage of reducing the constraints on device size and thus display size, because the appliances need not be used while moving. The migratory model appears to be what the Clearwire/Sprint WiMAX alliance is aimed at, and what Intel hopes to support with its own investment in WiMAX.

The Internet over-the-top (OTT) model. In the "Internet" or OTT model, the primary use of devices on the wireless network is to make voice calls and support extemporaneous access to the Internet for Web browsing for news and directions, access to social networks and email, and so forth. In many ways, this model is based on the assumption that mobile users will evolve into smartphone users, that smartphone applications will (like wireline broadband) focus on the Internet, and that the operator probably won't obtain significant incremental revenue from premium delivery of content such as video. This model clearly favors 4G/LTE, since it is an evolution from the current 3G model.

The assignment of the "new" models to WiMAX and the evolutionary models to LTE may seem pejorative, but it's critical to understand the dynamics of 4G deployment. New consumption models are generally easier to launch if they aren't constrained by existing practices and technology. So while "migratory" use of LTE handsets to view mobile content is certainly practical, it may be easier to view that content with a different device and thus through a different service relationship.

4G handset requirements

For 4G/LTE to be optimally successful, it is essential that the handset be as easy to use for content display as possible. The value of the device also must be so high overall that users will tolerate some lack of visual quality to keep a single device for their mobile and migratory missions.

For WiMAX to be optimally successful, there must be a considerable improvement in visual quality of experience versus smartphones, and there must be a strong level of integration between smartphone and migratory tablet services so users can be comfortable having only their tablet/netbook device with them while "migrating."

The latter point appears to validate the notion that 4G deployment in any market other than an emerging economy would probably need to be offered through a current mobile provider and integrated with mobile services in some way. So for WiMAX to offer a "better" strategy than LTE for 4G in developed markets, the notion of a migratory user must be well established.

The bottom line for WiMAX and LTE deployment

Operator studies suggest that the migratory WiMAX model is most valuable in cities with large student populations, areas where mass transit is used for commuting in preference to private automobiles, and areas where online video usage has been well-socialized among wireline broadband users.

Where there is a strong wireline content appetite, sustaining that appetite in other places where the user may relax is far easier. On the other hand, in locations where much of the population commutes by car, where the user is older and less likely to view content online at home, and where a large segment of the population of a service area may be moving in from a different area, the mobile-evolution or LTE model is easiest to validate.

 

About the author: Tom Nolle is president of CIMI Corporation, a strategic consulting firm specializing in telecommunications and data communications since 1982. He is the publisher of Netwatcher, a journal addressing advanced telecommunications strategy issues. Check out his SearchTelecom networking blog Uncommon Wisdom.


This was last published in March 2009

Dig Deeper on Telecom Resources

PRO+

Content

Find more PRO+ content and other member only offers, here.

Start the conversation

Send me notifications when other members comment.

By submitting you agree to receive email from TechTarget and its partners. If you reside outside of the United States, you consent to having your personal data transferred to and processed in the United States. Privacy

Please create a username to comment.

-ADS BY GOOGLE

SearchNetworking

SearchDataCenter

SearchCloudComputing

SearchCloudProvider

Close