LTE-WiMax contest winner could be HSPA+ -- for now

Recession hampers companies from upgrading to faster wireless technology

Equipment vendors are trying to persuade mobile operators to spend money upgrading their networks to deliver faster Internet access, with two technologies battling for the bucks: LTE (Long Term Evolution) and WiMax. However, in the short term, the winner could be an intermediate technology, HSPA+, as operators look for ways to wring more out of their networks with less capital outlay than LTE requires.

Verizon Wireless made headlines at the Mobile World Congress in Barcelona, Spain, this week with its announcement that it will build an LTE network this year and offer commercial service next year.

Other operators are proving slow to adopt LTE, but vendors of the rival WiMax technology will have a hard time taking advantage of this reluctance because of the poor economic situation.

Verizon Wireless' announcement gave LTE a boost: A more palpable deadline means standards and equipment will have to be finalized, said Mark Newman, chief research officer at market research company Informa Telecoms & Media.

"It gives confidence to other operators looking at LTE. Because of the financial markets, operators are averse to risk. Being a pioneer is quite risky, but Verizon Wireless going early helps to reduce that risk a little for other operators," said Newman.

Verizon Wireless will buy its LTE radio base stations from Alcatel-Lucent and Ericsson.

Some other operators will be ready to roll out LTE networks in a similar time frame, according to Mike Iandolo, president of the wireless networks product division at Alcatel-Lucent.

Rolling out LTE service, though, involves building a whole new network of base stations, while other, cheaper ways exist to improve the performance of many existing cellular networks, such as upgrading an existing HSPA (High Speed Packet Access) network to HSPA+.

HSPA, already deployed by some operators, can deliver data at up to 14Mbit/sec. And this year, a few operators will start offering HSPA+ services that offer up to 21Mbit/sec., with 42Mbit/sec. on the way.

During its LTE trials, Verizon Wireless saw peak speeds of 80Mbit/sec.

"There weren't a lot of big LTE announcements at the show, other than [from] Verizon Wireless. The emphasis seems to be much more on extending HSPA, and it seemed like there was a push-back on LTE," said Richard Webb, directing analyst at market research company Infonetics. He doesn't see operators installing LTE in any significant volume until 2011.

Because of the economy, many operators will first adopt HSPA+, rather than going directly from standard HSPA to LTE. "With the economic climate, it makes sense to continue to sweat your assets," Newman said.

It's probably going to be five years before we see LTE as having a major impact in the marketplace in terms of services and handsets being offered to consumers, according to Newman.

The switch to LTE is being driven by operators, such as Verizon Wireless, that are moving to the technology from CDMA (Code Division Multiple Access). Their current high-speed option, EV-DO (Evolution-Data Optimized), has been stretched to its limit, and these operators don't have the HSPA+ option, according to Webb. Those companies could well be two years ahead of HSPA operators in their plans to roll out LTE, Newman said.

With Sprint-Clearwire's rollout of WiMax, Verizon Wireless had to respond, and going with LTE makes sense for them, he said.

Although Sprint-Clearwire announced its mobile WiMax service last year, it has done little to sway other operators.

"The growing realization during the show was that it's going to be extremely difficult for mobile WiMax to emerge as a competitor to HSPA or LTE, because there isn't the volume to drive innovation and creativity in handsets," said Newman.

In the mobile services market, "everyone is eventually going to go to LTE. The only questions are when and by what path," said Alcatel-Lucent's Iandolo.

Alcatel-Lucent decided to withdraw from the mobile WiMax market last year, instead pushing WiMax as a replacement for fixed-line broadband access or as a data technology for nomadic workers: those who need Internet access while sitting down or parked, but not always in the same place. Typical examples include traveling sales staff or repair workers accessing schematics.

Another role for WiMax is to provide basic broadband connectivity in emerging markets, according to Newman. WiMax is moving away from being a mobile-centric technology; the slowness of mobile devices to emerge points to that, he said.

When painting a picture of how big WiMax will be in the future, Webb compares LTE and WiMax to current fixed broadband networks. WiMax will be cable to LTE's DSL. "WiMax is going to be far smaller, but it doesn't have to be a huge market," he said.

Although Alcatel has reduced its commitment to WiMax, Intel isn't wavering in its support for the technology.

"The key thing to take away from the show is that commercial products are here. It's not a trial; it's real, and it works," said Sriram Viswanathan, managing director of Intel Capital and general manager of the WiMax program office.

Because of the economic turmoil, he added, it will difficult for operators to put up money for a huge infrastructure or technology development that has a payout three or four years ahead.

"We see the predominant way that laptops and netbooks and [mobile Internet devices] will be connected to a network is WiMax -- at least over the next three or four years, because there is nothing else to connect to," he said.

WiMax has more headroom to increase the bandwidth than HSPA, according to Viswanathan. In Japan, UQ Communications can get up to 40Mbit/sec. out of its current network, he said.

Viswanathan agrees that it is in emerging markets where WiMax will have the biggest impact. "Russia is already deploying it. You're going to see it in India, Brazil and many of the Southeast Asian countries," he said.

The U.S is still a very big goal for Intel's WiMax team, and Western Europe less so, according to Viswanathan.

Western European operators went on a 3G spending binge and have to figure out how to dig themselves out of the hole they are in, he said. Until that happens, it will be difficult for any technology to take off.

With additional reporting by Peter Sayer in Barcelona.

Copyright © 2009 IDG Communications, Inc.

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