4G - It's a Whole New Ballgame
by Susan Simmons, Vice President
Telephony Magazine, March 26, 2007

4G mobile technologies not only have the potential to bring about a new era of communications and personal networking, but also will allow new players to compete against traditional fixed and mobile operators with differentiated offerings. Success relies upon expansion of the mobile ecosystem to computer and consumer electronics manufacturers that will extend mobile broadband connectivity to new places.

While many operators are still in the process of deploying and optimizing their 3G networks (including CDMA EVDO and UMTS/HSPA), major communications equipment vendors are already banging the "4G" drum. While new OFDM technologies will undoubtedly continue to lower the costs per MB relative to current technologies, success for 4G has to be about more than a continually declining cost curve.

The first question about 4G is why we need it when there is still debate on the return on investment in 3G. Unfortunately, it may be difficult to see the "returns" from 3G, but one has to consider that without these investments, business as usual would have faced a steady decline due to market saturation, intense competition and the resulting lower pricing. New data services enabled by 3G have allowed operators to halt and reverse ARPU declines. 3G has provided a new arsenal of products and services which increase the operators' ability to differentiate offerings and improve customer loyalty. Given the apparent benefits of 3G at this early stage and the potential for further growth, do operators need to spend billions more on 4G?

There is no simple answer to this question, and the answer may be different for different providers. If the only goal is a faster-speed and lower-cost network, it is unclear that enhanced speeds alone will generate the returns necessary to justify such a significant upgrade, especially considering the extensive investment made for 3G. By avoiding technology licensing fees and royalties, and utilizing improved spectral efficiencies from OFDM and MIMO, 4G can deliver wireless services at lower costs relative to 3G. However, for 4G to make sense, operators must create new business models that extend services beyond handset-centric voice and data services.

The logical extension for wide area connectivity provided by 4G technologies is in the computer and consumer electronics space. Mobile providers have already begun to embed 3G technologies into laptops with select OEM partners. While there appears to be a strong interest, the mix of devices and challenges with these business models may hinder their success; the variety of laptop models with embedded devices is limited. Where they do exist, service is limited to a single provider, and the monthly cost for this service usually exceeds the cost of wired broadband. As a result, mobile broadband service is limited to the price-inelastic business and prosumer segments.

Wide-scale 4G embedded in computing devices could reduce the cost to purchase and costs to use, thus expanding the current mobile broadband market. Furthermore, the potential to create new 4G services lies in a large base of embedded devices, extending beyond laptops and ultra mobile PCs to music players, digital cameras, and other CE devices. Consumers already connect these devices to computers to exchange digital files. With embedded 4G technologies, the functionality of these devices increases, enhancing the value for both the device manufacturer and the consumer. Imagine real-time video sharing with friends and relatives with a 4G digital camcorder or sending photos directly from a 4G camera for printing, posting and sharing.

The 4G vision and reality are two different things. Development of these technologies needs to involve players outside the traditional mobile ecosystem-computing and CE are global markets whereas most operators serve a single geography. New business models between network operators, device manufacturers, retailers, content providers and other intermediaries need to be developed. The traditional model of buying a plan and a device at retail doesn't apply in the majority of 4G use cases. In developing these new models, all parties need to be realistic about what the consumer is willing to pay for the additional benefit. Yes, there are more questions than answers at this time, but the industry and consumer have much to gain from getting it right.