Verizon (S vz) sold 1.4 million 4G LTE devices in the third quarter, and about 95 percent of the company’s Internet devices are now 4G LTE-enabled according to an analyst report from Stifel Nicolaus. The operator also said on Friday that it’s ahead of its LTE roll-out plans, now covering 186 million people, up from none a year ago. What’s stunning about the rapid roll-out and adoption here is how different it is from the operator’s 3G roll-out back in the early 2000s and how much pent-up demand there already is for LTE.
While such demand is great for Verizon, which can attract subscribers with its faster network as other providers are still planning their major LTE roll-outs, it also shows how slow the carriers are compared to the rapidly moving consumer electronics industry. But as connectivity becomes integral to everything we own, does the lumbering pace of the carriers threaten innovation? And what can they and governments do about it?
Mobile broadband then and now
Back in 2002 or 2003, Verizon came to Austin, Texas with much fanfare and showed off a group of tech reporters its brand new 3G service. It used CDMA technology called EVDO, and the result was about 1 Mbps connectivity everywhere the Verizon network covered. I had a test modem, and I spent at least a day wondering what the heck I could do with it other than plug it into my laptop and check my email.
That didn’t seem like a good test. Eventually, I ended up driving around Austin with my laptop open on the car passenger seat, streaming Pandora (s p) or some other Internet radio station. I said that the service was cool but seemed gratuitous for the average person. And at the time it was, but fast forward to late last year when Verizon first launched its LTE network, and we already had mobile phones that were capable of streaming music and even video.
We had richer web sites on our laptops that frankly, struggled with a 3G connection, and we had smartphones that we’d love to use to show people YouTube (s goog) videos or upload videos to Facebook right after we took them. I would guess that by 2009, two years after the launch of the iPhone(s appl), consumers were ready to use LTE. The launch of the iPad in 2010 only made the need for faster mobile broadband more apparent.
So what’s holding operators back?
It’s easy to blame operators for being slow to react to a rapidly changing market, but building out a network is expensive and takes time. While someone can code an app in a weekend, the pieces that make up a mobile network are etched in silicon, legislated in governments and then built on towers from the ground up. All of these take time. Equipment providers and radio manufactures had to wait for the LTE standard to be finalized in 2008 before they could build the radios and gear that could transmit the signals.
Governments have to allocate spectrum to accommodate the carriers, and part of that process involved knowing how much spectrum the standard needed to work most efficiently. In the U.S. the auction took place in 2008, but had begun several years prior. However, the spectrum that was auctioned off wasn’t even available until mid-2009, delayed by political waffling. And the U.S. is actually ahead of the game on LTE spectrum. In some countries, those auctions are happening now, while in others they are still delayed.
And still, even with the airwaves, equipment and radios available, operators have to build or lease towers which can be delayed by local governments. Then the network must be tested and perfected in an evolving process that often see some early outages and issues. I’ve said before that making mobile call or surfing the web in your car is a minor miracle. It requires the cooperation of different industries, companies, regulators and engineers. So how can we speed the process up?
Innovation in the telecom industry will also be slow
The next-generation standards for LTE-Advanced have been finalized, which means the machinery for a network upgrade is moving again. The standard promises 100 Mbps speeds while moving and gigabit speeds while fixed, and the U.S. has begun the process of finding more spectrum. Some have proposed relaxing the process around acquiring spectrum to speed it up, which might help, but would involve a political process to enact. Right now, the FCC and Congress are deeply mired in the political process just to get more spectrum.
One thought is that more unlicensed airwaves that could possibly be used for wireless access, but that too will require FCC approval, and will be fought by the industry. On the chip and equipment manufacturing side, it’s hard to know what advances might lead to a faster chip design and build process, which can take from 18 months to about two years. However, the promise of software-defined networks and the introduction of commodity gear might help hasten the equipment build inside the core network.
I’d love to know what other options are out there, because it’s clear that people expect connectivity, and once they get a little broadband they want a lot. Verizon is in luck, because it’s giving the people what they need, but it can’t afford to rest on its laurels knowing that somewhere in a college dorm room or a garage someone is building the next bandwidth-guzzling application or device.