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Russia shows how LTE build-out patterns will differ from those of 3G

27 августа 2010

Over the past few years, the wireless vendors’ hopes have been firmly focused on the remaining major unbuilt 3G markets, notably China and India. But with Chinese roll-out slowing now, and India’s marred by delays, there is a new source of potential revenue in LTE. Thought this will be slow to gather steam, there are already signs that purchasing will follow a very different pattern to those of 3G.

One reason is that many governments and carriers will regard 4G as a fixed as well as mobile broadband platform. This means it will be deployed more quickly than 3G was, in many cases, in rural areas and emerging economies, because of the urgent need for high speed access. In this scenario, 4G - whether LTE or WiMAX - does not have to be a ‘network in search of an application’ as 3G often was.

The other reason is that some countries will aim to deploy 4G quickly in order to minimize investment in 3G, where this has been limited to date, and to kickstart mobile, broadband and web services expansion via the more cost efficient IP standards. In some countries, mainly in sub-Saharan Africa, 3G may be bypassed altogether, and in others, like Brazil, operators are discussing confining 3G to a few areas and using non-deployed spectrum elsewhere for 4G instead. This would be particularly practical where 3G investments have been fairly recent and used software upgradeable base stations, and where regulators are technology neutral.

One of the most interesting countries in terms of the 4G pattern will be Russia. In the top five growth markets for wireless, Russia’s 3G expansion has been slow and bureaucratic, but in 4G it is moving far more quickly as the momentum behind broadband and web services rises. It already has several WiMAX operators, one of which, Scartel/Yota, is also trialling LTE. The early WiMAX spectrum auction opened the door to some smaller players and now the three main cellcos - MTS, VimpelCom and Megafon - may face another wave of new competition as Russia gears up for its main tranche of 4G auctions.

Russia is facing a dilemma that has affected the spectrum policies of many economies - whether to let experienced operators expand wireless availability, or encourage new competition. The main cellcos are dismayed at president Dmitry Medvedev’s belief that new spectrum should be opened up to new entrants so that 4G services are spread more widely than 3G between different operators and business models. In particular, they are keeping a wary eye on the rising mobile ambitions of landline incumbent Rostelecom which gained licenses in the first tranche of 4G auctions. A second wave of auctions around 2.5GHz will be held later this year.

According to Russian business newspaper Vedomosti, Medvedev has told the minister of communications, Igor Shchegolev, to draw up plans to distribute ‘4G’ licenses on a broad basis. This could speed up development of new services in Russia, which is one of the world’s largest potential markets for wireless and broadband, but whose development has often been delayed by bureaucracy. In particular, localized carriers could be encouraged to bring access to rural areas, which are vast but sparsely populated in the highly urbanized country. Medvedev also hopes smaller players would introduce innovative web offerings and support government and industrial applications.

However, as the US and other countries have discovered in the past, new operators can be financially unstable and inexperienced, raising the risk that spectrum goes unused or new services fail.

Of course, Medvedev’s proposals are encountering fierce opposition from the big three. The newspaper reports that they have all written letters to Shchegolev and prime minister Vladimir Putin arguing that only they have the cash and expertise to handle the roll-out of LTE in Russia. This will not stop them lobbying for state support in the financing of LTE, though. Medvedev argues that national LTE will cost far more than 3G because he wants it deployed as much as 10 times faster than the sluggish pace of 3G, in order to support fixed as well as mobile broadband. This may require state financial support, which in turn will increase his negotiating power over the cellcos. Last week Vedomosti reported that Osnova Telekom, 25% owned by Russia’s Defense Ministry, is willing to help build the LTE system.

The Russian press says that potential new spectrum bidders are already making themselves known. They include Rusenergotelekom, a new firm formed last October and controlled by energy investor Grigory Berezkin, who also owns a blocking stake in national landline operator Rostelecom. This company is getting increasingly active in wireless services and has said it will increase its influence and revenue streams by supporting new mobile entrants in order to boost competition.

Rostelecom has also invested directly in spectrum. It was recently awarded 30MHz of spectrum in the 2.3GHz to 2.4GHz band, covering one-third of the country’s population, and plans to launch LTE test networks in Penza by the end of August.  The carrier, an arm of state-owned conglomerate Svyazinvest, won licenses in 38 of the 40 Russian regions covered by the tender, while fellow Svyazinvest subsidiary Sibirtelecom got the license for the Tomsk area and local operator Vainakh Telecom won in Chechnya. The operators have 18 months to build and launch networks and must adopt Russian-made equipment. However, the largest cities, Moscow and St Petersburg, were excluded from the tender to give the big three cellcos - MTS, Vimpelcom and MegaFon - more time to get return on their recent investments in 3G.

Svyazinvest is currently undergoing a reorganization, combining Rostelecom with its local divisions nationwide to provide integrated fixed, broadband and mobile services, but the group has less power in the cellular than the fixed market. It has regional cellcos like Sibirtelecom, Uralsvyazinform and SkyLink, but has been rumored to be considering a bid for one of the big three, or even a start-up like Scartel/Yota, which has 2.3GHz spectrum in the main cities. Svyazinvest’s wins of new 4G spectrum make it the fourth largest cellco in terms of licensed area, overtaking Tele2. It plans an IPO in April 2011.

Another hallmark of Russian 4G is the way that its operators are using their subsidiaries in neighboring, former Soviet states to test LTE at a very early stage, with less cost and risk than building out in key Russian cities. So an unlikely nation, Uzbekistan in central Asia, has become the world’s first to gain LTE networks from two different operators - TeliaSonera’s UCell and Russian-based MTS. Both are primarily serving as testbeds for the cellcos’ larger owners, which can trial LTE in tough terrain but without the significant expense and risk of rolling out at such an early stage in their key territories. MTS recently switched on its LTE network in capital Tashkent and has plans for the main Russian cities once it validates the technology and acquires spectrum, probably later this year.

Meanwhile, UCell is a subsidiary of TeliaSonera, which was the world’s first operator to launch commercial LTE networks in Sweden and Norway, and is looking to expand the technology around its many bases in the Nordic, east European and central Asian regions. The two providers have a combined 78% market share in Uzbekistan.

UCell has turned to ZTE for its equipment, favouring the Chinese firm’s software defined base station architecture, while MTS is using kit from rival Huawei. ZTE now claims seven commercial or pre-commercial LTE networks and 50 trials while Huawei has been part of several high profile early awards, including Telia’s in Norway.

Uzbekistan may be a testing ground rather than a strategic market for its carriers, but it does illustrate a key trend - the squeezing of the upgrade cycle between 3G and 4G in emerging nations. In some areas, 3G may be largely bypassed altogether as operators chase the better economics and spectral efficiency of the new IP-based systems, and their superior ability to support fixed broadband and packet data services as well as mobile offerings.


Источник: 4G Trends

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