4G: Faster, Cheaper, Better

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4G is the “great wireless hope” – the only possible challenger to cable industry dominance of residential broadband internet access.  Detractors, including cable industry executives, have been quick to pooh-pooh the notion, suggesting that spectrum scarcity and the technical limitations of wireless are insurmountable barriers to wireless competition.  While initial US deployments of 4G have been focused on mobile users, the future availability of additional spectrum, the throughput promised by the technology roadmap, and the economics of cell site deployment, make us believe that wireless will be formidable competitor for residential broadband before the end of the decade

The LTE 4G standard supports about 100Mbps of downstream capacity for each antenna over each 20MHz channel.  MIMO allows multiple antennae to be used simultaneously over the same channel, multiplying cell capacity.  Current LTE specifications utilize up to 4 antennae (4×4), and support a theoretical aggregate throughput of 326Mbps, although 2×2 configurations with aggregate capacity of 172Mbps are common.  Of course, real life conditions do not support full theoretical speeds, particularly at motion.  Actual 4G performance is believed to average roughly half the laboratory maximum, a significantly better ratio than for 3G owing to improved coding techniques

In comparison, Cable’s DOCSIS 3.0 data standard supports 38Mbps of usable downstream bandwidth for each 6MHz channel dedicated to it.  Most operators reserve 4 channels for data, yielding 152Mbps of aggregate throughput.  Typically, MSOs support 500 or more households per DOCSIS system, with slightly less useable aggregate bandwidth than on a single LTE cell site

Both LTE and DOCSIS “over-subscribe” the total bandwidth shared by subscribers.  All users will not demand bandwidth at the same time, and that many of the applications used will only require bandwidth in bursts.  As such, higher speeds can be promised than the proportional share of the user.  For example, 500 cable subscribers sharing 152Mbps would have a proportional share of just 300Kbps, but are promised peak speeds of 10Mbps, a 33-1 oversubscription level.  If usage by subscribers increases, operators would need to invest in more capacity or to reduce the number of users per system to deliver the same perceived performance.  These dynamics apply to 4G as well

LTE has a specified upgrade path to LTE Advanced, which uses an 8×8 antenna configuration to increase spectral efficiency and supports up to 5 20MHz channels within a single cell.  This will raise the theoretical aggregate downstream capacity to 3.3Gbps, with likely improvement in the signal loss experienced in live deployment.  This specification will be finalized this month, with commercial equipment expected to be available for test by mid 2013, followed by wider commercial deployment 1-3 years after.  Work on the next iteration of LTE, which should include further capacity improvements and reduced loss, should result in upgraded published standards by 2013

Including 150MHz of 2.5GHz band frequencies currently underutilized by Clearwire, the US wireless industry now uses roughly 430MHz of total bandwidth on a national basis, divided between 2G, 3G and 4G technologies.  The FCC has published a goal of adding 500MHz of new spectrum for commercial terrestrial wireless, has identified 415MHz that it believes can be made available by 2015, and has begun the process to free 120MHz of highly valuable TV spectrum in the 700MHz band via incentive auctions.  This spectrum would enable future deployments of multi-channel LTE Advanced networks by the four existing national wireless operators and potential market entrants

LTE can be added to most 3G cell sites for less than $30K, plus on-going costs for tower rental, power, back-haul, etc.  The cost of a new cell site on an existing tower is under $100K.  The cost of a new tower can top $250K, particularly with site acquisition and permitting costs/delays in restrictive jurisdictions.  While this is a substantial investment on a national basis, where 50,000 cell sites might be required to provide blanket coverage, it is less daunting if the technology is deployed to individual communities for residential broadband.  A single base station could serve 500 residential subscribers over a 75 square mile area, and support revenues of more than $300K/year

Alcatel-Lucent’s recently announced LightRadio concept could dramatically improve 4G network coverage and reduce both capital and operating costs.  LightRadio separates the radio and processing components of a cell site and packs them into a series of 2.5 inch cubes.  The radio cubes are then mounted with antennae, requiring a fraction of the space and power normally required.  Importantly, these cubes can be inexpensively and unobtrusively installed in places unavailable to traditional equipment, closing holes in coverage and multiplying system capacity.   Furthermore, removing data processing from the radio allows benefits from centralization, such as diverting processing power based on the traffic loads across radios, thus expanding system throughput.  Upgrades are cheaper and easier, and the system is more resilient to component failures.  This approach, which will likely be copied by all suppliers, promises to cut network costs in half and reduce impediments to splitting cells to increase system capacity

We believe wireless broadband is on a collision course with wireline, and that current skepticism about the capacity and cost of LTE relative to cable will be short lived.  With new spectrum, evolving standards, breakthroughs on network cost, and the myriad advantages of wireless, LTE will challenge for residential subscribers well before the end of the decade.  The rise of greater competition amongst wireless carriers is central to our thesis, a threat to the existing duopoly as well as the cable industry.  The prime beneficiaries stand to be the providers of wireless technology, the owners of towers, and the platforms and applications that will ride the new network

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