From Theory to Practice: Evolution in the Middle East

Thursday, 10 November 2011 11:32  |  James Barton

With a spate of recent LTE launches in the Middle East, the region is plunging headlong into the next generation – but what are the factors that have led to near-simultaneous launches across several territories? And what does the advent of LTE mean for consumers and operators in the region? DT editor James Barton spoke to Mohamed Abdulrahim, LTE specialist (Middle East) at Nokia Siemens Networks, to find out.

DT: What are the factors that have led to a sudden, widespread launch of LTE services by various operators across the Middle East?

MA: It’s inaccurate to say that the development is sudden – deployment has already been taking place, it’s just that operators have up until now been unwilling to publicise their LTE plans until they are confident that their network can deliver. There were a lot of trials taking place in several countries, but it’s just in the last few weeks that companies have taken the decision to announce their deployments.

The first trials started last year and this began to build up momentum, with many operators beginning to test out LTE networks. There is a clear demand for internet usage, with social networking sites in particular having an increasingly bigger impact on customers’ lives and affecting how they use the internet. In the last 24 months, the demand has grown dramatically; we have seen operators launching 42Mbps networks, doubling their broadband capacity.

DT: Has there been a noticeable adoption of LTE services since they were introduced? What kind of services have they replaced?

MA: So far, they have mainly focused on pure data services (LTE is primarily a Data Centric technology). In the near future, more services will be provided such as voice, subject to device availabilities. Currently the main offerings are based on Modems and CPE devices, where the dongles are multimode supporting both WCDMA & LTE technologies.

The average LTE latency range is 23 milliseconds (MS) while the average DSL speeds in leading markets is 50MS, opening the door for many additional applications such as gaming.

DT: How affordable are the new services?

MA: LTE services will be priced similar to how 3G was priced during its launch in 2002 / 2003. The difference is that prices will decline much quicker, as device prices are developing rapidly as well as demand for LTE is growing much faster than 3G had previously.

Looking at the North American market, we clearly see the model of 10GB LTE usage at US$80/month and US$10/GB for excess data versus Europe keeping LTE prices linked to data volumes and speed for example (ie. 80 Mbps with 30 GB limit for only 90$). On the other hand, Singapore is taking the risk in offering flat rates during the launch but then capping at 50GB for enterprise customers after only three months of offering unlimited LTE.

In a study performed by Cisco for the introduction of tiered pricing, it was found that overall data traffic growth was unchanged, but after three months, the top 1% of users consumed 25% less data. We believe that both end-user behaviour and device capability development will completely reshape the mobile broadband pricing model.

DT: Are devices prohibitively expensive? Can currently available devices be used for LTE?

MA: Operators will charge a premium on the early adopters as new technologies are highly appealing – there are a lot of customers who want the advantages offered by the new tech, and there has been a big shift from HSPA+ to LTE. It’s likely that customers will be charged this premium for around six months to a year – early adopters are generally used to gauge market reaction. However, it’s unlikely to stay as expensive for as long as 3G services did when they first launched – the reason for this is that the cost of chipsets and modems for LTE networks is coming down far faster than the 3G equivalents. The price of an LTE modem has dropped from a few thousand dollars to a few hundred in a relatively short space of time.

Factoring in the number of users attracted by new tech, the operator will be able to commit to higher quantities with the device manufacturer so they can get a good price.  However, that’s only one part of the equation; the second is the initial investment, and this comes back to the spectrum.

Different types of spectrum have different values, so if the operator uses an existing spectrum - 1800 GSM, for example – they can essentially reuse RAM. Completely new spectrum - such as TDD 2.3-2.6 or 2.6 FDD – represents a completely new business because some of them have been adopted by WiMAX while others have not been utilised at all. How an operator launches and prices its LTE service will depend on how much it invested initially in the network.

DT: How is the growth of smartphones affecting networks?

MA: I don’t believe that we’ve reached a point where the signal and load is really impacting the network in the same way as happened in the US and Europe. Penetration is still not that high. In some networks we might find that there is a bit of a hike in the load but the network capacity can still adapt to that. Penetration and usage is not as high as it was in the US & Europe.

DT: At what point will demand begin to outstrip capacity?

MA: In our experience, the more you give the end user, the more they ask for. It’s not about how much capacity you have on the network; the demand is still growing and it will still grow - smartphones have more of a signalling impact and less of a payload on the data. People are becoming more dependent on their smartphones, so new devices and applications coming to the market will affect the demand and subsequently the amount of capacity an operator must add to sustain this. Google and Microsoft are currently engaging with potential partners in order to move into this market.

DT: Has your offering already been augmented by cloud services? What kind of impact will they have on your networks in the future?

MA: We are engaging with cloud service providers in the Middle East and Africa. In terms of how this impacts the networks, we’re not building that correlation between them. We are still in the first phases of seeing what services and applications we want in the context of cloud; later on we’ll see how we are able to use that – instead of having the service within your network, it’s going to be on that cloud.

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