Will spectrum fragmentation mean costlier LTE phones?

The plethora of spectrum bands used for LTE (Long-Term Evolution) will result in more expensive devices, and also make the ability to roam globally using the technology less likely, according to the Wireless Intelligence, the research arm of the industry group GSM Association.

Wireless Intelligence predicts there will be 38 different spectrum frequency combinations used in LTE deployments by 2015, thanks to ongoing spectrum auctions, license renewals and reallocation initiatives across a wide range of frequency bands, it said on Friday in a new report entitled “Global LTE Network Forecasts and Assumptions — One Year On.”

That fragmentation will have several repercussions, according to Joss Gillet, senior analyst at Wireless Intelligence and author of the report.

The number of combinations means economies of scale won’t be as good and prices won’t come down as much as they could if fewer spectrum bands were used as volumes increase, Gillet said.

Today, an LTE-equipped smartphone costs about twice as much as a 3G-based device, which means operators have to heavily subsidize them to drive the market. But that isn’t possible for operators to do in all parts of the world, because the average revenue per user is much lower than in, for example, the U.S.

Spectrum fragmentation also makes it more complicated and expensive to manufacture smartphones that can connect to the Internet using LTE all over the world.

Asia-Pacific, Eastern Europe, the Middle East and Africa are the regions that will use the widest variety of spectrum combinations, while the situation in the U.S. and western Europe will be less complicated.
In Canada, BCE Inc.’s Bell Mobility and Rogers Communications are deploying LTE on AWS spectrum in the 1700 and 2100 Mhz bands. Telus Communications Corp. will join them in the new year. The trio also plan to use LTE on the 700 Mhz spectrum that is expected to be auctioned off late next year, and possibly also on the 2500 MHz spectrum that will be auctioned either at the same time or separately.

Not everyone agrees that spectrum fragmentation is the biggest problem facing the rollout of LTE. The ongoing development of more advanced chipsets will bridge the problems created by fragmentation, according to Bengt Nordstrm, co-founder and CEO of market research company Northstream.

He instead objects to the auctioning of spectrum. Governments are in effect taking money from operators that instead could be used for a more rapid rollout of LTE networks, Nordstrm said.
Iain Grant, managing director of the Montreal-based SeaBoard Group, is also a doubter.  “A key benefit of LTE is the ability for a carrier to mix  and match bands, which brings new flexibilities and efficiencies,” he said in an email. “Added radio capacity may add a few dollars to unit costs, but is more than made-up for by the flexibilities that will allow carriers to do much more with radio resource.”

There will be more than 200 live LTE networks in over 70 countries by 2015, up from 40 networks in 24 countries today, according to the Wireless Intelligence report.

Meanwhile, the number of LTE connections is forecast to grow from approximately 7 million in 2011 to close to 300 million by 2015. Between 2011 and 2015, the total number of 3G connections — in which Wireless Intelligence includes LTE — will almost double to reach 3.4 billion.
(With files from Howard Solomon, Network World Canada)