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Don’t cut that fiber just yet

Mon, 12/19/2011 - 2:00pm
Andrew Berg, Wireless Week

Verizon Wireless' LTE network is currently available in 190 markets, covering more than 200 million people across the United States. Verizon boasts LTE download speeds of 5 to 12 Mbps and upload speeds of 2 to 5 Mbps. That's better than, or in line with, some fixed-line connections. So will end users opt to cut the data cord in the same way they've cut their voice landlines?

While it might sound improbable, and to some degree making an LTE hotspot your sole connection to the Internet simply doesn't make sense, the technology is certainly capable of providing such a service. Still, users might want to hold off on getting rid of their fixed-line data just yet, as moving to LTE for all of your online needs has its drawbacks.

The going price of a bit
Peter Rysavy, industry veteran and founder of Rysavy Research, says that while there are parallels between what happened with voice and what could happen with data, there are also major differences.

"You can largely do everything you ever could with a cell phone that you used to do with your landline," Rysavy says. "You can certainly talk as much. But the problem with cutting the cord with LTE right now is you really have to look at how much data you're consuming … because if you stream Netflix on a laptop screen, you can easily go through 500 megabytes to a gigabyte of data per hour."

Given that plans are in the five to 10 gigabyte range per month, with per-gigabyte pricing playing out at around $10, a user could suffer some real bill shock should they exceed their cap.

Back when Rysavy started consulting in 1994, the emerging wireless technology was cellular digital packet data (CDPD), which brought with it usage-based pricing of around 10 cents per kilobyte.

"That might not sound like a lot, but when you do the math, it's actually $100,000 per gigabyte," Rysavy says, noting that while the price of data continues to drop, it's going to take some time for LTE to hit a point where data caps can sustain a household for a month without breaking the bank.

Rysavy recently asked a panel of experts at a 4G Americas conference whether LTE could fill the role of a primary Internet connection anytime soon. The general consensus, he says, was that such a leap would not happen for at least five years, if only because there won't be sufficient capacity for it to be cost-effective for consumers.

"Long-term, once you've got a gazillion picocells, a really dense network, and maybe more spectrum, we can get there. But it's not going to happen anytime soon," he says.

And yet, he says, some will still decide to cut the cord. Lower-income communities and college students are prime candidates, and he adds that those who do choose the wireless route will have to be very careful to monitor their usage.

Capacity, capacity, capacity
Even if you’re a light user or a millionaire, you might still think twice about going entirely wireless. Allen Nogee, principal analyst for In-Stat, says he actually tried an LTE modem as his sole Internet connection for about four months. He was pleased with the service; however, he did eventually go back to a fixed line for a number of reasons.

Nogee says that while price is certainly an issue, depending on usage, spectrum is the truly prohibitive element that will prevent LTE from becoming an in-home solution. Nogee says that eventually the cell towers currently pumping out LTE will get crowded, and that’s when things get complicated.

“It’s a shared resource, with a set amount of spectrum, and operators only have so much spectrum,” Nogee says. “If we had no wired Internet in the United States and everyone attempted to use LTE, it just wouldn’t work. There’s just not enough capacity there.”

Nogee points to large conferences like the upcoming Consumer Electronics Show (CES) in Las Vegas as microcosms of what the industry is up against as more devices and data traffic hit their networks.

“If you go to a convention center, it just never works for anyone, because there’s just so many people on the network, and there’s so many base stations they can put in a certain area, and it just gets overloaded,” Nogee says.

The key here is that spectrum is limited. Nogee estimates that in the future, the industry could see double the current spectrum availability, but not much more, meaning there also has to be a point at which data prices simply can’t go any lower due to supply and demand.

Data is already so low that carriers are subsidizing the cost of building and managing their networks with voice revenues. At the end of the day, Nogee says, VoLTE will shift everything to data. Bottom line: Don’t plan on that $10-per-GB number coming down too much lower anytime soon, even if capacity on the network increases.

“There’s going to be competition, and that’s going to drive prices down a little bit, but there’s some limits on how much the carriers are going to be able to do,” Nogee says.

LTE has arrived
Joe Baeumel, vice president of professional services and technology for Nexius, a network optimization company, says LTE delivers a connection that is on par, if not better in some cases, with what consumers are seeing with their existing fixed-line connections.

Baeumel says that’s good news, seeing as how mobile is quickly becoming the primary method by which people are connecting to the Internet. “If you look ahead just a few years, we’re going to be seeing 50 percent of all connections to the Web will originate on a mobile device,” he says.

What’s interesting is there’s already a precedent being put forth by Verizon Wireless for the emergence of LTE as a primary connection. While LTE might not be cost-effective as a primary Internet connection for the urban dweller, Verizon has decided it is most definitely a cheaper alternative for getting a connection to rural customers than expanding its FiOS footprint.

During a third-quarter conference call, Fran Shammo, Verizon's CFO, said the carrier is looking in to what it is calling a "cantenna," which would essentially bring a wireless LTE connection to those outside of FiOS coverage areas.

Cantenna isn't a commercial name for the antenna, but Shammo pointed out that Verizon conducted a trial of it with DirecTV, calling it "extremely successful." The cantenna is essentially a fixed LTE antenna that communicates wirelessly with devices in the home.

"The benefit of this antenna is it operates the spectrum extremely efficiently," Shammo said, according to a transcript of the earnings call provided by Seeking Alpha. "So if you look at a MiFi card or a dongle, this is very, very efficient, way above those two devices, which is why it's critical to have that bundle with that cantenna. So when we launch that, you're going to see us go nationally with that type of an offer."

Shammo said that such an offer would be available sometime in the fourth quarter.

Baeumel of Nexius admits challenges remain for LTE, but he says there will definitely be more reliance on the technology going forward. “There’s always an increase of the number of homes in the U.S. that are abandoning almost any other connection besides mobile. We saw it with home phones, people cutting the cord there, and I think on a smaller scale we’ll see some of that here. I think there’s a lot of promise in this technology.”

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