SA LTE mar 09
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STRATEGY ANALYTICS INSIGHT
RF & Wireless Components
26 March 2009
Snapshot
Many operators have not made their plans for LTE spectrum public, and many countries have not yet auctioned off spectrum to be used for LTE. Nevertheless, LTE deployment is off to a good start, with Verizon moving very quickly at 700 MHz and other operators lining up to establish LTE services at 900 MHz, 1800 MHz and 2600 MHz.
Overall, 2600 MHz will emerge as the key band for LTE over the next three years, initially supporting high-speed broadband services in urban centers. Facing economic uncertainty, some operators will take the cautious approach and deploy LTE on a limited basis in the 900 MHz, 1800 MHz and 2100 MHz bands alongside current users of the GSM grid, and in the longer term, these bands will ultimately migrate completely to LTE. Nevertheless, the bulk of subscribers will use LTE in the 2600 MHz band.
In addition to creating opportunities for 2600 MHz radio components in terminals, the preference of the operators to add LTE to existing cell sites will create opportunities for remote radio heads (RRHs), which offer a potential opportunity for efficient gallium nitride-based power amplifier modules for base stations.
Analysis
Not Just Another Mobile Standard
LTE will enable lucrative wireless broadband services underpinned by internet protocol, for example virtualized location based services, VoIP, on-line gaming and streaming HD video. The demand for these services by consumers using laptops, mobile internet devices (MIDs), ultra-mobile PCs (UMPCs), netbooks, cellphones and other wireless-enabled consumer devices will ultimately drive the success of LTE, underpinned by the availability of chips and components that support the requisite bands and modes.
Complex Economics & Regulations Favor LTE At 2600 MHz
US Headquarters:
199 Wells Avenue, Suite 108, Newton Centre, MA 02459 USA Tel: 617.614.0700 Fax: 617.614.0799 European Headquarters:
171 Midsummer Boulevard,
Milton Keynes, MK9 1EB. UK
Tel: +44 1908 423 600 Fax: +44 1908 423 650
?LTE offers peak downlink data rates of 173 Mbps with uplink rates up to 58 Mbps, ten times faster than HSPA;
?Latency typically ranges from 10 ms to 20 ms, conducive to real-time multimedia applications such as on-line gaming, browsing and VoIP;
?From an operator perspective, LTE will make more efficient use of spectrum and cost less than 3G per megabyte.
Operator plans for LTE rollout are dictated by the need to maintain service quality, manage capital expenditures and control backhaul costs during the transition while dealing with regional regulations and the constraints of spectrum auctions. As a result, different operators will use different bands for LTE, and the mix of bands used will shift over time as operators’ mix of LTE and legacy services change.
Rollout and Spectrum Alternatives
Many network operators are focused on competing for broadband subscribers in high traffic areas, so after establishing LTE coverage in urban areas, they will push the technology outward to suburban and then into adjacent rural regions. Use of LTE will start primarily for notebook computers (PC data cards, USB dongles, embedded), netbooks, UMPCs and mobile internet devices. Eventually, operators will phase in full mobile broadband services, replacing GSM voice traffic with LTE-based VoIP and high-speed data services across most of the world, at the same time offering LTE in smartphones, conventional cellphones, and a host of mobile computing devices.
?Most operators in the developed world will focus on spectrum allocations where they can gather 20 MHz or more contiguous spectrum together all at once to offer the full benefits of LTE as quickly as possible. This favors new spectrum at 2600 MHz where operators do not have to worry about sharing spectrum with legacy cellular users;
?In Western Europe and much of Asia, the availability of clear bandwidth at 2600 MHz will make this the preferred spectrum for LTE in urban areas,where LTE rollouts will start.
Most global operators want to avoid deploying new antenna sites for LTE, instead adding LTE to existing base stations despite the different link budget for LTE. While the longer range propagation characteristics of lower frequency bands from 700 MHz to 900 MHz offer a better match to the existing cell sizes compared to higher frequencies, other considerations complicate band selection:
US Headquarters:
199 Wells Avenue, Suite 108, Newton Centre, MA 02459 USA Tel: 617.614.0700 Fax: 617.614.0799 European Headquarters:
171 Midsummer Boulevard,
Milton Keynes, MK9 1EB. UK
Tel: +44 1908 423 600 Fax: +44 1908 423 650
?Notebook computers users, the initial users, expect good indoor reception. Lower frequency bands provide better indoor penetration;
?In spite of the advantages of new, uncrowded spectrum at 2600 MHz, some operators prefer rolling out LTE more cautiously using existing bands, especially the GSM 900 MHz band. These operators often argue that it is easier to refarm 900 MHz GSM to LTE rather than to W-CDMA. LTE requires as little as 1.4 MHz channel width for admittedly limited operation, while W-CDMA requires a minimum 20 MHz channel. Using 900 MHz for LTE allows operators to grow LTE slowly as demand for GSM diminishes;
?It almost goes without saying that regulators in each country and the outcome of spectrum auctions will ultimately determine the bands that operators are permitted to use for LTE.
Market Timing
Verizon, NTT DoCoMo, SKT, Telecom Italia, and a few others will launch first commercial services in 2010, but the mainstream market will take a bit longer to develop. Many European operators will bid on 2600 MHz spectrum for LTE in 2009. In normal times, a 2009 license would result in deployment during 2010 and 2011. In today’s financial climate, however, the outcome of the auctions and the timing of big CAPEX investments are uncertain. Taking the macroeconomic situation into account, we project LTE commercial launch in Europe and most of Asia starting in 2011 and 2012. In 2011, LTE-enabled mobile device shipments will probably reach a modest but rapidly growing 25 million units, with at least 45 percent of these supporting LTE at 2600 MHz.
Regions
Initial LTE rollouts will occur in the US by Verizon and Japan in Japan by NTT DoCoMo. Verizon will use the 700 MHz band, while NTT DoCoMo will use 2100 MHz.
In the US, Verizon and AT&T Mobility have spent almost $20 billion for 700 MHz spectrum for LTE. Verizon is pursuing an aggressive rollout, and will begin deployment of LTE using Ericsson equipment in 2010, while AT&T Mobility’s rollout probably will not get underway until 2011. The 700 MHz spectrum is part of the 470 MHz to 862 MHz of UHF spectrum freed up in the transition from analog to digital TV.
Japan will start with 2100 MHz but will use a mix of bands. Japan’s NTT DoCoMo will start deploying LTE in late 2009 using UMTS Band I (W-CDMA 2100 MHz). . KDDI has stated that it does not have enough spectrum
US Headquarters:
199 Wells Avenue, Suite 108, Newton Centre, MA 02459 USA Tel: 617.614.0700 Fax: 617.614.0799 European Headquarters:
171 Midsummer Boulevard,
Milton Keynes, MK9 1EB. UK
Tel: +44 1908 423 600 Fax: +44 1908 423 650
available at 2100 MHz for LTE, and it may use 1.5 GHz initially, now in use for PDC. KDDI will begin deploying LTE in 2010. Softbank (SBM) will begin an LTE trial in Mito City in 2009 using Huawei equipment operating at 1.5 GHz.
Japan's Ministry of Internal Affairs and Communications awarded two licenses at 2600 MHz last year to KDDI and Willcom for WiMAX, each for 30 MHz of spectrum. The firms could potentially use this for LTE-TDD. The authorities plan to make additional awards in June 2009, which will include more 2600 MHz spectrum.
During the next few years, LTE activity in Europe will occur primarily at 2600 MHz. Auctions for 2600 MHz spectrum designated for LTE are coming up in 2009 and 2010 across much of Europe, including:
?UK: O2 and T-Mobile have put up legal challenges to regulator OFCOM’s plan to auction 2600 MHz spectrum. Both vendors want OFCOM to set favorable rules for refarming 900 MHz GSM spectrum before committing to 2600 MHz. We think that OFCOM will resolve the issues and conduct the first 2600 MHz auction by the end of 2009;
?Germany: plans to auction 2600 MHz spectrum before the end of 2009;
?Netherlands: is planning a mid-2009 auction;
?Finland: will make an award this year;
?France, Italy, and Spain are all looking to award spectrum in 2010.
A Closer Look at LTE Bands
Judging from auction prices so far, support for 2600 MHz has been mixed to date.Telenor, TeliaSonera and CSL/Telstra have won the auctions in Norway, Sweden, and Hong Kong at prices at respectable levels, but well below the value of spectrum in 3G auctions. Auction prices were low because some operators have chosen not to bid aggressively for 2600 MHz spectrum, citing an interest in deploying LTE in the 1800 MHz and 900 MHz bands where they already hold licenses:
?In Hong Kong, the 2600 MHz auction bids came in at a relatively low US$0.31 /MHz/PoP, compared to over US$7.17 /MHz/PoP for Verizon’s C-block bid at 700 MHz;
?Sweden’s 2600 MHz auction was similar, with TeliaSonera paying US$0.25 /MHz/PoP;
US Headquarters:
199 Wells Avenue, Suite 108, Newton Centre, MA 02459 USA Tel: 617.614.0700 Fax: 617.614.0799 European Headquarters:
171 Midsummer Boulevard,
Milton Keynes, MK9 1EB. UK
Tel: +44 1908 423 600 Fax: +44 1908 423 650
?Note that in 2001, 3G spectrum in Europe (excluding the UK and Germany) sold for roughly $0.60 /MHz/PoP.
In the end, European operators with urban demographics will pursue 2600 MHz LTE because of difficulties clearing the 20 MHz blocks required for full operation in legacy bands.License terms such as buildout requirements imposed by the regulators are undefined so far, and may not drive widespread networks as quickly as the 3G case. Watch auctions of 2600 MHz spectrum closely as an ongoing indicator of upcoming deployment intent by each operator in Europe.
A limited market for LTE will exist at 2100 MHz. The primary global 3G band is a natural candidate for LTE upgrades as a result of the way that suppliers build base stations nowadays. Flexible reconfigurable radios have become the preferred way to implement W-CDMA node
B and LTE e-nodeB infrastructure, and some equipment shipped in the last year at 2100 MHz can be easily upgraded to LTE. Ericsson’s Flexi Multimode base station, which started shipping in 2008, is one example.
Some operators will choose to implement inexpensive software upgrades to their existing infrastructure in order to advertise higher data rates. However, in the end there are no long-term compelling reasons to focus LTE services in the 2100 MHz band. Terminals operating at 2600 MHz will have lower prices through economies of scale, and 900 MHz will offer superior coverage. In the end, a truly ubiquitous service above 2 GHz would require additional base stations and / or replacing legacy W-CDMA infrastructure. We can expect a burst of LTE announcements at 2100 MHz as an inexpensive way for operators to launch initial LTE services, but the cost savings of the software upgrade will be a one-time event, and over the long term economic forces will drive operators to different solutions.
UMTS Band III (1800 MHz) has received a surprising level of interest for LTE. Major GSM / W-CDMA operators that have conducted LTE trials are now focusing a great deal of attention on the 1800 MHz band. This is surprising, because the 1800 MHz frequency band does not offer the coverage benefits of the lower frequency bands.
The reasons for the interest in 1800 MHz are not technical in nature. Spectrum at 1800 MHz is simply less crowded with GSM traffic than the 900 MHz band, and operators prefer not to touch their GSM-900 network and risk problems with their cash-cow voice traffic.
The 900 MHz band will become a major part of the LTE network eventually. Performance of high-speed mobile standards in the 900 MHz band is clearly superior to 2600 MHz in terms of coverage. For example, Ericsson has demonstrated that data throughput is at least 1 Mbps faster for WCDMA900 compared to
US Headquarters:
199 Wells Avenue, Suite 108,
Newton Centre, MA 02459 USA
Tel: 617.614.0700 Fax: 617.614.0799 European Headquarters: 171 Midsummer Boulevard, Milton Keynes, MK9 1EB. UK Tel: +44 1908 423 600 Fax: +44 1908 423 650
WCDMA2100 throughout more than 80 percent of a typical suburban cell. According to Nokia Siemens Networks, cell area increases 2.8 x going from WCDMA2100 to WCDMA900 (see Exhibit 1).
Exhibit 1 Comparison of Services in Low and High Bands
GSM900 Voice WCDMA900 Voice
WCDMA900 1Mbps
GSM1800 Voice
WCDMA2100 Voice
WCDMA2100 1Mbps
Cell area [km2]
A choice between good LTE performance in the 900 MHz band and the risk of problems with 900 GSM voice customers faces operators. After a test period of 2 to 4 years, we expect that the benefits of LTE technology will overcome the risks and much of the 900 MHz GSM network will have converted to LTE.
Some operators will deploy LTE at 900 MHz right away, using channel widths between 1.4 MHz and 5 MHz to achieve good coverage but with limited data rates and capacity. One example is in the UK, where regulator OFCOM recently announced their intention to force 900 MHz incumbent operators to give up 5 MHz of spectrum each to accommodate a new high-speed network operator. In the same breath, OFCOM hinted that they would lift 900 MHz band-use restrictions to allow non-GSM / EDGE standards.
If a new operator enters the UK market with widespread LTE services at 900 MHz, we expect Vodafone, O2, T-Mobile, and other UK operators to follow with W-CDMA or LTE services at 900 MHz as well
Digital Dividend Spectrum at 700 MHz
Timing for European and Asian countries to clear spectrum in the transition to digital television remains unclear. As an example, OFCOM in the UK has recently delayed its licensing of prime 700 MHz spectrum until
US Headquarters:
199 Wells Avenue, Suite 108, Newton Centre, MA 02459 USA Tel: 617.614.0700 Fax: 617.614.0799 European Headquarters:
171 Midsummer Boulevard,
Milton Keynes, MK9 1EB. UK
Tel: +44 1908 423 600 Fax: +44 1908 423 650
2010 at the earliest, and competing interest groups continue to cause political delays. Chief among these interest groups is the analog TV broadcasters, who do not plan to vacate the 790 MHz to 862 MHz bands for several more years. If these auctions proceed and UHF spectrum becomes available for LTE services, then it’s possible that we will see the major European operators investing heavily in spectrum and related equipment. Depending on the timing, the 700 MHz bands may take some attention away from LTE at 900 MHz.
Implications
The primary band for LTE in Europe and Asia will be 2600 MHz. Most terminals will need to include this band for broadband LTE applications in city centers.
Handsets and data terminals for LTE will eventually find a strong market at frequencies below 1000 MHz. There are risks to cash-cow GSM services at 900 MHz and technical difficulties with LTE-MIMO below 1 GHz, but operator will realize compelling benefits in the lower bands from the combination of better coverage and the improved spectral efficiency of LTE. Over the long term, we expect the sub-1 GHz market to grow to at least 30 percent of the LTE market.
Handoff is not critical for now. Most operators view LTE as supporting data services to be used with laptop computers and emerging mobile computing devices, not just for use by handsets, and so handoff from LTE to other modes (or from band to band within LTE) will not be as critical as for previous generations of mobile devices.
ST-Ericsson will ship engineering samples of LTE chipsets by late 2009. These and other early LTE chipsets will probably consist of W-CDMA / HSPA basebands with external LTE coprocessor chips bolted on. In any case, early chipsets will have multimode capability but not necessarily the ability to handle real-time handoff among bands and modes. Handoff requirements will creep into OEM’s specifications over time.
Terminals wanted! Verizon’s quick timetable for LTE deployment at 700 MHz with possible commercial services in early 2010 challenges data-card, USB modem and embedded terminal manufacturers. Operators with LTE-ready W-CDMA infrastructure will put pressure on terminal vendors to have something ready quickly in multiple frequency bands. Look for terminal OEMs to push LTE technology into the field very quickly, with chipset and antenna products still in a very early-production phase.
Wider use of remote radio heads (RRH). To maximize the LTE link budget, which in turn maximizes throughput performance for LTE and provides a better match to existing 2G and 3G cell sizes, we expect power amplifiers
US Headquarters:
199 Wells Avenue, Suite 108, Newton Centre, MA 02459 USA Tel: 617.614.0700 Fax: 617.614.0799 European Headquarters:
171 Midsummer Boulevard,
Milton Keynes, MK9 1EB. UK
Tel: +44 1908 423 600 Fax: +44 1908 423 650
and transceivers built into remote radio heads, mounted on antenna masts and linked by fiber optic cables to the basebands and network processors in many cases.
?Adding multiple antennas for LTE MIMO to existing cell towers presents challenges given space constraints.
Equipment makers will adopt cross polarization and other techniques to keep antenna layouts compact;
?RRH deployment may be more straightforward in a 2600 MHz overlay than in a spectrum re-farming case, because the diplexers for a 2600 MHz system are simpler with lower losses compared to the high-rejection filters required to insert a 900 MHz or 1800 MHz RRH.
Gallium nitride will find use in LTE power amplifier modules. The demand for multi-band RRHs may create opportunities for GaN devices in that they can provide broadband performance and high efficiency (i.e. no fans) in compact, lightweight modules and subsystems, particularly above 2 GHz.
The economic downturn could delay spectrum auctions and LTE. While the United States, Norway, Sweden, and New Zealand have licensed spectrum for LTE, other countries have not finished the process. The global economic slowdown and credit crisis will without doubt affect the 2600 MHz auctions scheduled for later in 2009, potentially delaying licensing in some key countries. The technology is ready but the economics of borrowing billions of Euros may result in delays for new bands, making low-budget re-farming strategies more attractive for operators, but in the end, 2600 MHz will still carry the bulk of LTE subscribers.
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