As a leading publisher of research on emerging wireless technologies, Pioneer Consulting has been monitoring developments in the 4G space. 2G/2.5G is well-entrenched as the mainstream cellular technology around the world, 3G is stuttering and struggling to gain market share for a variety of reasons, and 4G is gaining some credence. This report is intended to deliver some timely value-adding research to the general body of knowledge on this area by analysing the interplay between these three generations of mobile technology. The ultimate goal is to provide a picture of what the global mobile telecom market will look like in 2010.

Moreover, this report asks the questions:

• “How are network operators getting ready for 4G?”

• “What will be the impact of 4G deployments on 3G networks and investment?” and

• “How large will be the burden of additional demand for capacity generated by 4G on the networks?”

Thus, the overall purpose of this report is to give the reader some fresh perspectives on the issue of 4G by looking at this technology, not as an isolated phenomenon, but as part of an ongoing technological evolution and to provide some ground-breaking analysis in terms of average user bandwidth demand, as well as the usual measurements of subscribers, penetration rates, installations, and equipment sales.

1. Technological Comparison

Instead of characterising the evolution of 3G and 4G mobile technologies as some battle to the death between species, Pioneer believes that there is potential for complementarity between the various technologies which reside under the 3G and 4G “umbrellas”.

While there is also some potential for overlap and confrontation, there are clearly market applications which suit only one technology e.g. WiMAX as a backhaul solution for mobile; EV-DO for an “always-on” mobile service.

Pioneer believes that the ideal outcome from the parallel evolutions of 3G and 4G should be that the end user is better served with a choice of technologies and networks which provides flexibility according to the end user’s circumstances and needs at any one time. Of course, realization of this vision will require an agnostic handset!

2. Comparative Technology Costs

At this stage, no certified 4G network equipment has been commercialised, so prices are unknown. However, it is reasonable to expect that an unproven new technology will, at first, attract low demand, so prices will be relatively high and will only fall gradually as demand increases. Due to the initial cost of CPE, 4G operators are expected to offer leasing agreements.

3. 3G Market Overview

3.1 Lack of Demand

The market penetration of 3G services has been slower than expected, primarily due to lack of demand for enhanced services, delayed deployments by the operators and issues related to coverage and Quality of Service (QoS).

3.2 Other Challenges

Impeded from the very start by the high entry costs making profitability elusive, 3G technologies have faced a number of other challenges including, operating costs which are significantly higher than in a 2G/2.5G operation and uncertainty surrounding forecast demand for non-voice features.

Exhibit 1: Worldwide Growth of 3G UMTS Subscribers

Source: 3G Today

4. 4G Market Overview

4.1 Demand for High-Speed Multimedia Services

The demand for sophisticated multimedia services has increased significantly in recent times. To be sustainable, this kind of demand growth will require the support of higher-capacity networks.

4.2 Fixed-Mobile Convergence

Users are looking for ‘always on, always connected’ solutions and expect bundled solutions for their fixed and mobile service requirements. FMC would enable an operator to provide both fixed as well as mobile services by using the same network infrastructure.

4.3 Spectrum Issues

None of the licensed frequency bands are available in all key markets, making global alignment of the frequency band for WiMAX currently impossible. Governments are moving to rationalise spectrum usage but the advent of 4G wireless technologies will likely occur incrementally rather than in the form of a paradigm shift.

4.4 Standards & Certification Issues

The first fixed WiMAX products meeting the requirements of 802.16d have been certified but the equipment certification process, which is essential for commercialisation, will likely continue at least until the end of 2006. Furthermore, the mobile version of the WiMAX standard (802.16e) has been approved but certified products will only be available in 2007 at the earliest.

4.5 Technological Challenges

As with any new technology, certain technical challenges need to be resolved before WiMAX and other 4G technologies can be adopted on a large scale.

4.6 Alternative Applications for 4G

Fixed WiMAX is being used to provide last mile access in remote or rural areas or to provide high-speed data services to enterprises. Operators are also looking at fixed WiMAX as a Wi-Fi backhaul solution. 

5. Prospects for Future Deployment of 3G and 4G

5.1 Market Share Forecasts

Pioneer believes that 4G mobile technology will stimulate subscriber interest in broadband wireless applications but the lack of 4G availability, and the cost of a 4G mobile phone, will lead many 2G users to settle for an upgrade to 3G.

Exhibit 2: Comparison of Forecast 2G, 3G, & 4G Penetration Rates in Asia Pacific across Scenarios

Furthermore, operators, particularly those who are heavily invested in 3G, will seek to use 4G technologies to augment their network and the services they can offer, rather than replace their existing networks.

5.2 Manufacturer Strategies

Manufacturers are initially targeting the fixed WiMAX market, with a focus on CPE as well as base stations. With increasing consumer demand for services offering enhanced mobility, several of the major network equipment providers are actively promoting the 802.16e standard as they see a bigger opportunity in mobile WiMAX.

5.3 Network Operator Strategies

Incumbents are using 4G technology to make their coverage more comprehensive, WISPs are using WiMAX to provide broadband wireless services, wireline operators plan to enter the mobile telephony segment and start-ups are looking to challenge the incumbents using WiMAX as the vehicle. Regional differences are discussed in detail in the report.

5.4 Global Spectrum Harmonisation

Since the 2.5 GHz band has been reserved for implementation of 3G technologies within the IMT-2000 family, the WiMAX Forum is lobbying for WiMAX to be classified as an IMT-2000 technology. The Forum is also trying to investigate if WiMAX could share frequency bands with UMTS but 3G operators are offering resistance. Neither of these initiatives seems likely to bear fruit in the near term.

6. Forecasts

6.1 Mobile Markets

Between 2005 and 2010, the total mobile subscriber base in North America, Europe and Asia Pacific, is expected to grow at a CAGR of 8.8% from 1.7 billion to 2.6 billion subscribers. Annual subscriber growth in North America and Europe will decline gradually as markets become saturated, but the Asia Pacific region will see accelerated growth (see Exhibit 3).

Exhibit 3: Forecast Combined Mobile Subscriber Population in
North America, Europe, & Asia Pacific 2004-10

With strong annual subscriber growth forecast in Asia Pacific, the demand for BTS is also expected to increase until 2008. However, the more saturated markets of Europe and North America are expected to show a decline in the number of annual BTS deployments throughout the forecast period.

6.2 Demand for 2G, 3G, & 4G (Fixed & Mobile)

Exhibit 4 summarises the forecast demand data which is provided in this report for fixed WiMAX in wireless backhaul for the mobile market, and for mobile WiMAX.

Exhibit 4: Forecast Data Available from this Report

Source: Pioneer Consulting