LTE Coming on Fast

LTE Coming on Fast

Several recent developments in the worldwide mobile services marketplace confirm what we at Tarifica have been reporting over the past several weeks – that LTE is coming on fast. Operators are acquiring bandwidth and launching service, moving aggressively to capture data-hungry customers.

At the moment, the main issue seems to be whether the infrastructure can cope with the demand. As we reported in our previous issue, Three recently purchased 4G spectrum in the U.K. from Everything Everywhere as part of a regulatory deal. But the prevailing wisdom is that the LTE infrastructure Samsung is building for Three will not be sufficient to keep up with growing demand.

Demand is indeed growing vigorously in every market where 4G has been introduced. Just last week, SK Telecom reported that it had hit the 5 million mark with respect to LTE subscribers, the third service provider in the world to do so, and the second in Asia (a region that is particularly strong on LTE adoption). The South Korean operator added 1 million of those in the last 60 days alone.

Tarifica’s Take

But we at Tarifica question whether an impending data bottleneck is really what operators should fear most when it comes to LTE. Some in the industry have urged that in order to avoid the bottleneck effect, proliferation of public Wi-Fi hotspots should be encouraged, with the expectation that such hotspots will take some of the data burden off the young and still-growing 4G networks. And these hotspots are indeed spreading: Last May, five U.S. cable giants including Time Warner and Comcast announced a deal to make 50,000 hotspots available, free of charge, to each company’s customers.

The risk here, for mobile operators, is that with so much free access available, mobile customers will actually end up using less paid-subscription LTE service than anticipated. While the rollout of 4G will certainly help to “turbo charge” growth in the near term, we can envision the industry reaching an inflection point at which customers’ reliance on Wi-Fi will begin eating into that growth in a meaningful way.

The solution, we believe, lies in flexibility and creativity. Mobile operators should not think of LTE in itself as the be-all and end-all. Data delivery in itself will not be enough; what is delivered via LTE will end up being just as important as the delivery pipeline, if not more so. With this principle in mind, we have been encouraging mobile operators to offer, as part of their LTE packages, value-added apps – preferably exclusive apps – that provide customers with desirable tools and features that they cannot get elsewhere. Any providers that don’t already have internal app development teams would be well advised to start them. By taking this approach, mobile operators will avoid falling into the trap of becoming mere pipes (and quite possibly underutilized pipes, at that) and ensure that they remain smart providers of relevant, attractive content and services for Smartphone users.