China recently allocated TD LTE licenses to its carriers on the 2300MHz band. This is a significant event in the technology life cycle of LTE as TD LTE develops as mainstream standard and is set to massify on the global scale. The debate between TD and FD LTE has hovered around the lines of GSM versus CDMA and the emergence of one technology as the dominant standard. However, with technology and eco-system maturities, TD LTE emergence alongside FD LTE is now seen as a complementing effort and effect. This would create technology inter-operability between TD and FD LTE.
Why is the China LTE launch key to LTE eco-system world over?
China LTE implementation is all about scale – China Mobile for instance has deployed 200K BTSs for the LTE pilot covering 500 million people initially. That’s the size of the whole of Europe put together. The number of 4G base stations is expected to increase to 500K by the end of 2014. In addition, China Mobile is set to offer more than 200 different 4G-compatible handsets this year, including a handset priced at CNY 1,000 ($165) and a number of self-branded 4G devices. Apple’s iPhone portfolio has also recently been made available to China Mobile customers. Similarly, China Telecom plans to launch entry-level 4G smartphones at similar prices to its rival in the first half of the year before introducing mid-range and high-end models before year-end. By this time it expects to have 60,000 4G base stations. In contrast, China Unicom confirmed in December 2013 that although it has been issued a licence for TD-LTE (like its rivals), but it remains focused on running the majority of its 4G network via FDD-LTE – for which it is yet to receive a license. It is likely we will see a rather slower start to the 4G era for China Unicom.
With such large-scale rollouts underway, China Mobile and China Telecom will have the fastest initial 4G migration rates seen outside of South Korea, with close to 10% of their combined total connections migrating to 4G by the end of this year. According to new GSMA Intelligence, take-up of 4G-LTE in China will happen twice as fast as the earlier move to 3G HSPA networks. By contrast, it took twice as long for China Mobile and China Telecom to migrate their 2G customers (on GSM and CDMA2000 1x networks, respectively) on their 3G networks (TD-SCDMA and CDMA2000 EV-DO) following launch. For example, it took China Mobile 14 quarters to migrate 10% of its 2G connections base to 3G, but it will take approximately half that time to reach the same milestone in the move from 3G to 4G. Subscribers are estimated at 900 million 4G connections in the China by the end of 2020, up from around 100 million this year.
It is important to note that FDD and TDD LTE are two flavours of what is essentially the same standard, marking a different situation to when two technology standards (GSM/HSPA and CDMA) were competing for 2G and 3G hegemony. The availability of dual-mode FDD-TDD chipsets help mobile operators running either LTE variant to offer a wider choice of attractive 4G devices. Device manufacturers can therefore generate greater economies of scale given that dual-mode FDD-TDD chipsets remove the need to create multiple variants, serving to lower costs. Currently TD LTE accounts just over one in 40 LTE connections globally. However, China Mobile, China Telecom, Reliance Jio and Airtel could alter these TD LTE subscriber numbers by a wide margin. Even though there could be more instances of FD LTE launches by operators, number of subs on TD LTE networks could outweigh those on FD networks.
As the industry waits with baited breath for reliance Jio to create the landmark disruption, there has been an uproar over VoLTE i.e Voice service over LTE spectrum. Reliance Jio paid Rs 1,658-crore fee to the government for supporting 4G VoLTE on its universal services licence. VoLTE was the final piece that would complete Reliance Jio’s portfolio of services. However is that really a disruptor as it is purported to be?
Voice Telephony on LTE is made possible through apps such as Skype. However, with prohibitive CAPEX on full carpet area coverage – Data connectivity in a wide carpet area will be patchy at best. It means no voice calls when driving or outside city limits.
The 2,300 MHz spectrum, is one of the worst when it comes to creating a large area network. Compared to a GSM/HSPA 900 MHz; LTE on 2300MHz requires exponentially higher number of towers in one shot. Voice is not profitable enough, to support such high infrastructure costs.
Thirdly, Voice requires a better quality of experience. A data subscriber rarely notices fluctuations in speed, but a user in a moving vehicle will expect the same call quality throughout. Thus, for data services can afford lower initial investments and expand incrementally afterward, but for voice telephony, all investments are needed up front.
The one way VoLTE might make commercial sense is if Reliance acquires or partners with an existing mobile operator, such that its current 2G or 3G network becomes the fallback network that will carry voice calls or data when 4G airwaves aren’t around. That appears to be the only way Voice can happen for Reliance Jio. (Or alternatively, a tie up with Reliance (Anil Ambani) could provide Mukesh Ambani the where with all to su[pport voicee services).
Thus VoLTE under the current understanding is not the disruption as many earlier thought it to be.