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Summary:

[qi:gigaom_icon_4G] Later this year in Boston and Seattle, Verizon will test a wireless technology capable of delivering speeds that are comparable to those of basic cable modems and exceeding basic DSL. And the local Boston papers want to know if this means consumers should dump their […]

[qi:gigaom_icon_4G] Later this year in Boston and Seattle, Verizon will test a wireless technology capable of delivering speeds that are comparable to those of basic cable modems and exceeding basic DSL. And the local Boston papers want to know if this means consumers should dump their wirelines and welcome the fourth-generation wireless technology as a viable home broadband connection. Will 4G wireless services, be they from cellular carriers deploying LTE or from Clearwire deploying WiMAX, replace basic cable and DSL broadband, much like wireless service is replacing landlines?

That’s what I wondered last year, when I was shown speeds of 150 Mbps down and 30 Mbps upstream during tests of Long Term Evolution networks at Ericsson’s Dallas lab. In the real world, speeds will more likely resemble 10-20 Mbps down and 5 Mbps up, but that’s still much faster than my current cable service from Time Warner Cable, which is about 7 Mbps down and 512 kbps upstream. But for most people, this substitution theory won’t work when it comes to wired broadband. Here’s why:

Wireless networks are constrained: Data use takes up more capacity on a network than voice. Ericsson has estimated that data cards comprise 73 percent of traffic on a wireless network, even though they account for just 3 percent of the subscriptions. And if someone substitutes wireless for wired broadband, they’ll behave more like a data card user. Also most cellular networks (although not all) are designed for people on the move, not just those staying stationary and thus using just one tower. Perhaps carriers will change that with their 4G network designs. Clearwire’s WiMAX network does make concessions to fact that some of its customer base will stay put, but it still only has so much spectrum to use. This issue of constraint brings us to the next few reasons wireless isn’t a great substitute for wireline.

Data caps: As part of their efforts to manage their networks, cellular carriers currently have limits on their data consumption, typically around 5 GB per month. That’s fine for occasional use, but may cause problems for folks trying to download movies and music. That cap may increase on LTE networks, but I wouldn’t hold my breath expecting that it will compare with the data one can download on a wired network. Clearwire’s WiMAX service offers an unlimited plan as well as capped plans.

Limiting terms of service: There’s a reason AT&T is so afraid of Slingbox on the iPhone, and it’s not about competition. It’s because high-bandwidth services use up limited resources on the network, threatening to prevent calls or other services from going through. Next-generation service will be better, but they can’t eliminate this problem completely, so all those watching HD video on the web should keep their wires. Even Clearwire has to come up with a way to manage bandwidth when networks get clogged.

Cost: I pay $60 a month for my current 3G mobile broadband service, which is about $20 more than I pay for my cable service (although this could change under various tiered pricing plans). Clearwire charges $45 for unlimited home usage without mobile access. If you don’t need the convenience offered by mobile broadband (and not everyone does), then it doesn’t make sense to pay more when you’re really getting less.

Speeds: I may be too optimistic, but by the time most people get access to wireless broadband, their wired broadband speeds should be faster. Both the telcos and cable companies are rapidly deploying technology to boost speeds on both the downstream and the upstream side, with the exception of a few laggards. Since WiMAX is still getting rolled out and LTE won’t be prevalent until 2012, much of the U.S. will have faster speeds for less money.

Except for those that don’t, and they make up the exception to the wired broadband rule. Those that live in tiny pockets of cities without wired connectivity, but who have access to 4G wireless service, should cut their cord and hope for the best.

This article also appeared on BusinessWeek.com.

  1. WIll be very interesting when, WIMAX is fully depoloyed with NO Bandwith Caps.

    Neal Saferstein
    http://nealsaferstein.com

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  2. @Stacey,

    I think we’ll see wireless broadband adoption in rural areas first given (as you’ve stated many times) that many rural areas lack wired broadband. This will be followed up by more aggressive wireless pricing and bundles to drive adoption in urban areas as the wireless carriers reach a critical mass of market deployments. I expect that we’ll see continued innovations in backhaul and data capacity management that should provide a better runway for managing peak data demands on the wireless networks. I’d estimate that we’re looking at mid to late 2011 before it is feasible for consumers (and small businesses) to replace their wired broadband lines.

    My $.02,

    Best….

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    1. I agree 4G will play a major role in the developing countries especially China and India. Infact I would say that these countries would skip 3G for most part and move to 4G.

      On the other hand there are many applications which in future will rely on 4G (more about it here – http://bit.ly/10CttP ). All these will drive 4G adoption. Lastly if deployed properly, 4G can eliminate wired broadband. Key things here would be security and quality of service (QoS). The only thing that’ll come in the way is companies like Comcast and Verizon who have vested interests in both wired and wireless trying to promote both options despite the fact that the wireless would solve your problem. Anyway, read more about it here – http://bit.ly/10CttP

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  3. I think this analysis is slightly simplistic. Yes, there are constraints to mobile networks. Yes, there are bandwidth caps. Yes, there is the value equation – but only in an apples to apples comparison.

    The problem is that this is not an apples to apples comparison. Mobile broadband and fixed broadband are like two different tools – they result in different usage behaviors. Mobile broadband (think iPhone) has thousands of relatively light applications that have high utility when paired with the mobile nature of the service(GPS based, situationally based etc.). Fixed broadband has hundreds of applications that present similar utility to high bandwidth users (VOD, P2P file sharing etc). But the overlap is not particularly high and – over time the scale tips toward mobile broadband. In fact, there is already evidence that iPhone users use less home broadband. If you are writing a blog out of your loft in SOHO or SOMA, you are not going to drop fixed broadband – but if you have a regular gig at Levi’s or ABC Carpet, replacement is going to start to creep into your mind – particularly as the bandwidth caps rise with more clever wifi offloading mechanisms.

    It’s a more serious threat that you articulate here – and as you rightly point out, an actual strategy for getting at the corners of the market (think stimulus $$$ for broadband) for AT&T, Verizon and others.

    Two final proof points – Telstra and Telenor now ship more 3G gateways each month than wired gateways. Been that way since January of this year. Why? Exceptional networks.

    Finally, think about emerging markets. Big.

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    1. Stacey Higginbotham Thursday, August 13, 2009

      Bane, I agree that they are different tools, and this deserves more analysis (especially after faster wireless is more generally available). Today some people do use their 3G service as their primary broadband. However, a lot of innovation and wealth has come from our access to ever faster speeds, so I don’t know if folks are ready to jump off the growth curve in wired speeds and accept the limitations of wireless too readily. Especially as more compelling content keeps moving online. But price, convenience and decent networks may change that.

      That being said, I think there a separate path of innovation happening in wireless around location and faster data that’s just as exciting. So, I’m keeping my eye on various data points and will certainly write about this again.

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  4. Interesting points – but 4G is more disruptive than you give it credit for.

    Stacey makes some interesting observations about the current wireless data market and how those practices might (and might not) extend into 4G (WiMAX and LTE) deployments. I believe we have our first glimpse into answers with Clear’s market launches. As of today (and who knows what the network management policies will be in the future) Clear does not cap data transfers and does not have restrictive TOS. The speed & cost is competitive against DSL & cable, especially for those people who only qualify for basic speeds.

    An item that the post does not address is the customer experience for ordering and installation. If you order cable service, it can be several days to get installed – WiMAX changes the provisioning game. During a recent project a co-worker ordered Clear in Atlanta and was blown away with the whole experience. He ordered Monday, had the WiMAX modem/router on Tuesday (shipped UPS overnight) and was up and running with 9Mbps service. His previous experience ordering broadband was a painful wait, painful install, and problematic reliability. I could even see a scenario where customers are provisioned via WiMAX on the same day – walk up to a kiosk at the mall and walk away with a modem.

    A second item not addressed in the post is the way that mobility options change the value proposition for customers. If the analog landline vs. cellular primary line taught us nothing else, it was that some customers will value mobility over call quality to the point of substitution. I believe the same thing will happen with a portion of broadband customers. If you move apartments every year do you want the hassle of cable disconnect/reconnect? If you can purchase a bundle that has wireless 4G at home and a USB 4G connection for the road – for same/less than the cost of a 3G data plan from Verizon why wouldn’t you?

    I will concur with Stacy on one point, physical landline connections will scale much better over the long run. However, I think that she is discounting the competitive threat and disruption of 4G data in the market.

    @mattpavlik

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    1. Stacey Higginbotham Thursday, August 13, 2009

      Thanks, Matt. there is a lot to think about as fast 4G starts hitting the market and your two points are spot on. The second is a post all to itself, although I would argue that many would pay more for the convenience of mobile and at-home broadband. When Clear hits Austin you can be sure I’m trying it against my TWC service as a wired broadband replacement, and once I do, I’ll of course let all of you guys know :)

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      1. Stacey, I would seriously appreciate this particular comparison. I am considering moving to Clear as a replacement for TWC in Charlotte. Every real world speed test I have seen for Clear deployments in Atlanta & Portland indicates better performance (including up/down speeds and pings) than my standard 7Mbps/384k TWC service

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  5. [...] Posted on August 14, 2009 by mattpavlik Over at GigaOM, Stacey Higginbotham has an interesting post on the threat from 4G to cable/telco broadband where she extends the current 3G business models to [...]

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  6. Ok, I’m going to be contrary and take a less optimistic viewpoint. I think there are physical limitations that will limit the attractiveness of 3G or 4G to replace wired access for many or most people for quite some time.

    One of the biggest factors is that, being a shared medium, all subscribers in the receiving area share the same bandwidth. That 100Mbps is shared & the sharing factor when the service is running is potentially far higher than on Stacy’s cable connection. For the sake of argument, assume cell site radius of 1/2 mile in urban settings and 5 miles in rural. How many subscribers are in a 1/2 radius in an urban setting? Yes, there are sectors, but even so, if you have say 100Mbps (downstream) available at the basestation and you are sharing among all the active users on-line at that time, you might get << 1Mbps allocated to you at busy times of the day and 100Mbps at 2am.

    For users who are web browsing, this might be just fine but not if they are all trying to watch unicast video streams. Wireless carriers can't arbitrarily increase number of available frequency bands to add more capacity because of the scarcity of available frequencies (which is why spectrum at FCC auctions is so expensive).

    Additionally, as one nears the edges of the cell boundary, the bandwidth drops because of signal/noise considerations. Current radio design is truly amazing but they are now close to theoretical capacity limits. The result is users at the periphery (which is the majority, if you assume the simple case of uniform subscriber density) see much less than 100Mbps peak bandwidth even when the network is lightly loaded.

    Noisy reception due to error bursts on your cell phone is annoying but humans do the error recovery ('what did you say?). However, bit errors on a TCP connection will result in packet drops & the equivalent error recovery now done by application software will cause TCP to backoff. The net is the the user's data session will appear to be very unresponsive.

    I agree, as Bane pointed out, that the mobile vs fixed usage model is different today and it might shift over time. But I would also suggest that application bandwidths will continue to rise so the net is that users will want increased b/w. As the service becomes more popular & more users are added to the 4G network, you bump against the above limits.

    In contrast, wireline access generally guarantees more sustainable bandwidth (through fairness guarantees & 'effectively' lower sharing), higher reliability and orders of magnitude lower number of bit errors/dropped packets. for these reasons, the user experience of "30Mbps" delivered across a PON access link will be vastly different than "100Mbps" over 4G wireless. So, I do not plan to drop my wired data access for the foreseeable future. And I may stick with 3G for a very long time.

    I expect I will have a 3G femtocell in my home, backhauled via my wired high speed connection. In theory, this fits with the usage model (light when mobile, heavy when stationary) & should be best of both worlds but will have to see how that works in practice.

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  7. i would agree completely if it were not for what i have seen first hand at my used computer shop. cricket broadband has become super popular in denver; it is nearly always subscribed in place of a wired connection and almost never as a supplement.

    but even assuming many people stay connected by wire will those with wireless continue to keep wired as a supplement? i do not think so. it will be one or the other not both for most people.

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  8. It will be interesting to see how high speed mobile services affect the wireline carriers attempts to stifle and cap traffic. Where I live TWC tried to put insane caps on wired broadband, and got slapped around for it. Those plans are not dead, but merely in sleep mode for now. If wireline broadband carriers get too greedy with their caps and speed throttling, LTE’s gonna take a large bite out of home wireline subscriptions. I’d drop TWC at the drop of a hat if they start up with their 15 gb cap BS again.
    Also, the net neutrality arguments that unfold are going to be interesting as well.

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  9. I was wondering if you also had a feel for the effective latency of 4G connections?

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  10. [...] Verizon, the nation’s largest mobile phone company, has tested a Long Term Evolution (LTE) network in Seattle and Boston. The tests included streaming video, file transfers and web browsing. Verizon also tested VoIP [...]

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