Witnessing operators dance with the wireless broadband devil is akin to watching moths flit about a brightly burning flame. The difference is that when the moths get burned, they don't generally take anyone else down with them.
While geeks worldwide celebrated Apple's (NASDAQ:AAPL) March 7 announcement of an LTE-equipped iPad, which will be sold by AT&T Mobility (NYSE:T) and Verizon Wireless (NYSE:VZ) in the United States, all I could think was that this is a dream come true and a horrific nightmare all rolled into one. No doubt the device will be a total delight when its supporting LTE network is clicking on all cylinders, but the adoption of more data and video-centric devices means wireless operators have no choice but to keep investing in and tinkering with their networks just to keep them from choking on customers' data demand. And the stakes are growing for customers, who increasingly rely upon wireless networks for not only their voice communications but their daily intake of Internet services as well.
Operators' wireless networks are already buckling under data overloads. According to a recent survey by J.D. Power and Associates, problems with wireless networks have been increasing, driven primarily by issues with data services including mobile Web and email. "Based on varying degrees of consistency with overall network performance, it's critical that wireless carriers continue to invest in improving both the voice quality and data connection-related issues that customers continue to experience," said Kirk Parsons, the firm's senior director of wireless services.
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Mobile operators are deploying a host of new technologies, including densification approaches such as Wi-Fi offloading and small cells that should help improve data coverage and capacity. But even pricey investments in all-new networks such as LTE will be inadequate for enabling operators to cope with exploding data demand because even companies with the deepest spectrum resources still find themselves spectrum constrained in many areas.
Credit Suisse analyst Jonathan Chaplin, quoted in the Wall Street Journal, said the LTE-equipped iPad is great news for Verizon because "they have a great LTE network that is empty, so they can afford to fill it up."
However, a recent FCC filing from Verizon tells a different tale. Bill Stone, the operator's executive director of network strategy, explained in the filing that Verizon's current spectrum holdings "will not provide sufficient capacity to meet the growing demand for mobile broadband--4G, in particular--by 2013 in some areas and by 2015 in many more." Verizon admitted that its spectrally efficient LTE network, which now covers 200 million POPs, will fall well short of meeting future demand when deployed on the spectrum Verizon has for it.
The same will no doubt be true for other operators migrating to LTE. And complicating LTE deployments is the issue of spectrum refarming, which will reduce capacity for older technologies. There have been complaints floating around the Internet for at least three years regarding poorly performing 2G service at AT&T Mobility as it refarmed spectrum to shift more customers to 3G. Now that the company is refarming spectrum to deploy LTE, it has started officially informing some customers using 2G-only phones to expect service disruptions if they don't upgrade to 3G models.
I would imagine similar scenarios will be played out at T-Mobile USA and Sprint Nextel (NYSE:S) as both also face tricky spectrum refarming procedures as they attempt to upgrade to LTE.
The wireless broadband revolution keeps adding up to more capex and opex for wireless operators, which are simultaneously embracing high-end data devices such as the latest iPad while struggling mightily to keep up with the unprecedented demand these devices generate. But it's worthwhile to remember that the risk isn't just on the operators, because if they fail to sufficiently invest and properly engineer their 2G, 3G and 4G networks--that is, if they don't hold up their end of the bargain--their customers will be the ones left in the lurch.--Tammy