You shouldn’t view Time Domain LTE as a niche technology exclusive to China—almost half the world’s population will be within reach in the near future.
The “TD” (Time Domain) flavor of LTE can no longer be viewed as a niche technology exclusive to China. Other countries worldwide, including India and Sweden, are embracing TD-LTE for their broadband wireless access rollouts. Before long, close to half the world’s population will be within reach of a TD-LTE network. India will have a full commercial service ahead of its northern neighbour, China.
In this article we will explore the market trends that are driving TD-LTE to become a truly global standard and assess the implications for companies that are looking to build an LTE market presence. Beginning with a brief review of the Time Domain Duplexing (TDD) sector of the mobile market and its trends, the impact of broadband wireless access (BWA) and TD-LTE will be analyzed, using India as a specific example.
TD Cellular Technology
TD-SCDMA has had a relatively long history, as shown on the timeline in Figure 1. Originally proposed to the International Telecommunications Union (ITU) in 1998, the first 3GPP specifications were released in 2001 as Release 4. Since then TD-SCDMA has evolved in parallel with the more widely-used WCDMA, with HSDPA, HSUPA and HSPA variants being introduced.
Trials in China began in three cities in 2005. These trials were expanded to 10 cities during the following year. As part of this rollout, China Mobile deployed 14,000 base stations in eight cities. In January 2009, three 3G licences were awarded in China, to three different standards – cdma2000 to China Telecom, WCDMA to China Unicom, and TD-SCDMA to China Mobile. Today there are more than 61 million TD-SCDMA subscribers.
The evolution of TD-LTE has not only been much faster than that of TD-SCDMA, but it has also been much more widely deployed and trialled (see Figure 2), with live commercial networks in Brazil, India, Japan, Poland, Saudi Arabia and Sweden.
Despite delays in the 3G auction process in India, the broadband wireless access (BWA) auction went ahead more or less as planned and concluded in June 2010. Prior to the auction, it was widely assumed that WiMAX would prove to be the technology of choice. However, the results were a surprise to many observers, with TD-LTE emerging as the favored technology. In a further surprise, the licence winners included Qualcomm, although they have since announced they will sell their licence to Bharti Airtel, who also won a licence. The other licence holders are Infotel Broadband, Aircel, Tikona, BSNL and MTNL.
Indian operators have actually begun to launch TD-LTE services ahead of those in China. Bharti Airtel has already launched its network in Kolkata in April 2012 and in Bangalore in May 2012, while both Reliance Infotel and Aircel are expected to launch in the coming months – it was recently reported that Aircel is expected to launch services in December 2012.
Because India has very low cellular and fixed broadband penetration rates (around 74% and 9% respectively), it represents a major target for growth in the TD-LTE market. However on the negative side, ARPUs (average revenue per unit) are among the lowest in the world at between US $1.30 and $1.70, which creates a significant challenge for the operators in terms of achieving profitability.
Comparison with China
It is interesting to compare the situation in India with that in China. Although China began work much earlier than India on TD technology, and has a well-established set of 3G networks, it also has higher ARPUs (US $9.60) and fixed broadband penetration rates (around 40%) than India, so therefore less incentive to move as quickly towards LTE. The government currently takes the view that 3G services are adequate to meet demand for the next couple of years before it is necessary to make the move to LTE.
It is forecast that spectrum and licences for LTE will be released in 2014, with commercial launches beginning in 2015. It is anticipated that all three of the incumbent 3G operators in China China Mobile, China Unicom, China Telecom ¬ will receive LTE licences. Despite these later timescales for launch, it is expected that large-scale pre-commercial trials will take place in China. In addition to this, China Mobile already has a combined TDD/FDD LTE licence in Hong Kong.
Looking at TD-LTE globally, it is likely that in the short term – up to two years – India will emerge as the largest TD-LTE market in the world, but that China will overtake it in the longer term. With higher ARPUs, China will also become the largest market by total revenue.
As described earlier, TD-LTE has had a very rapid evolution compared to earlier wireless technologies. It is well documented that scarcity of spectrum scarcity and rapid growth in data usage are key drivers for the entire wireless industry and this particularly the case for LTE as a whole: however for TD-LTE, we need to look at some additional factors.
Firstly, there is the technology behind the standards. The increasing maturity of software-defined radios has meant that radio access networks and UEs supporting multiple technologies are easier to design and manufacture cost effectively. 3GPP has also embraced TD-LTE as a complementary technology to the FDD version from the very beginning.
Secondly, China has played a huge role in developing TD-LTE – not just through its involvement in 3GPP but also through its support in building a large domestic market, with the economies of scale that makes it attractive for international companies to participate in. China has also sought to position TD-LTE, from its inception, as a truly global standard, through the creation of bodies such at the Global TD Initiative in collaboration with Vodafone, Softbank, Bharti Airtel and Clearwire. With such strong international support, TD-LTE has gained a lot of momentum.
Lastly, LTE and TD-LTE were not the only contenders for next generation wireless. Mobile WiMAX was also heavily promoted, with the backing of the IEEE standards movement. In the mid-2000s, WiMAX established a technical lead on LTE but unfortunately it suffered a number of delays in bringing devices to market for true mobile usage. This allowed the LTE industry time to catch up, and to reassert the traditional dominance of the cellular sector. When these factors were combined with the greater economies of scale of LTE, the ability to re-use significant parts of existing WiMAX R&D, and the ability to use the same spectrum, it has been very easy for operators to switch from WiMAX to TD-LTE.
The high level of commonality between TD-LTE and LTE FDD protocol stacks, shown in Figure 3 with the differences highlighted in red, has been one of the key factors. There is a much greater degree of commonality between these two technologies than there was between TD-SCDMA and WCDMA. This compatibility is what enables reduced R&D expense, economies of scale, and the ease of developing and deploying LTE FDD and TD-LTE technologies in parallel.
Three years ago, TD-LTE was really only a Chinese standard, with some interest being shown by Softbank in the form of network trials. However, as shown in Figure 2, even though there are still only a few live networks, the scale and geographical spread of trials has made it very much a global standard. As of today the TD-LTE networks launched include Sky Brazil; Bharti Airtel (India); Softbank (Japan); Mobily (Saudi Arabia); and STC (Saudi Arabia). Two operators Aero2 (Poland) and 3 Sweden have also launched dual-standard FDD and TDD LTE networks.
Impact of TD-LTE on the Indian Market
In India, demand for mobile data is still low. Even by the end of 2012, 3G subscribers are only forecast to reach 41 million, compared with 128 million in China after the first two years of availability there. A major hurdle to 3G adoption in India is the high cost of handsets, but with cheaper devices appearing on the market – especially from China and the fact that only around 9% of households have fixed broadband, it is expected that India’s preferred means of accessing the internet will be via mobile devices. This means that establishing a position in the mobile broadband space is very important for operators.
Other factors that favored TD-LTE are the increasing maturity of the ecosystem and the economies of scale that is brought about by widespread adoption. With low ARPUs, technologies that offer the opportunity to reduce OPEX and CAPEX are critical to the business case for mobile broadband. On the other hand, the lack of device maturity is a risk, as currently most TD-LTE networks are limited to the use of data dongles. The delivery of high performance TD-LTE smartphones is still behind those for LTE FDD. India will soon begin to licence 700MHz spectrum for LTE FDD at some point, and for operators planning to run both TDD and FDD this will bring further cost and operational advantages for choosing TD-LTE over WiMAX.
While we can agree that a large potential domestic market is an advantage, this must be balanced with the effects of a low ARPU. From a traditional operator or vendor perspective, the low ARPU looks like a disadvantage. However, coupled with an entrepreneurial culture and a strong IT industry, it can provide a spur to innovation.
It is not just the IT players who are looking to benefit from TD-LTE in India. There are already a number of domestic mobile phone brands that are seeking to provide differentiated offerings in a market where smartphones are still a rarity. The consolidation of the network infrastructure manufacturers has also prompted other companies to look for ways to enter the infrastructure market. Finally, the outsourcing giants already one of India’s great success stories are beginning to build up their LTE capabilities.
It is easy to talk of TDD and FDD as competing technologies. However, with the commonality of standards common radio base station architectures that support TDD, FDD, WCDMA, CDMA and even WiMAX the distinction is becoming increasingly academic. In many ways the multiple spectrum bands and the allocated bandwidths from 1.4 to 20MHz make LTE much more diverse in its deployments than WCDMA has been. TD-LTE simply provides further options, and with its already extensive reach it makes sense to consider TD-LTE as just part of the larger LTE family.
With limited 3G and fixed broadband, India represents a new market for many vendors, and one with a considerable potential for growth. We are already seeing lot of different companies entering the market – some are established players in the wireless space such as IT consultancies that are looking to extend into LTE, while others are existing companies that see the decision of the Indian market to invest in a leading edge technology as an opportunity for them to expand. Still more are start-ups that are hoping to carve out their own market niche.
India’s large population size, the predominance of mobile versus fixed line connectivity, and low ARPUs combine to create a fertile environment for new market entrants. The continuing pressure on spectrum and the increase in data usage will continue. There will be both a growing need for more LTE capacity and a further need for innovative solutions.
Crucially, however, the success of TD-LTE will rest on the devices and the applications that are available for them. Low-cost and high-performance smartphones and feature phones are still lacking, although naturally the Chinese vendors in particular are pushing hard to address this, and others are expected to follow suit. China Mobile is already working towards the sub- $150 smartphone, but the realistic goal for widespread uptake in India is probably going to be US$50. Maravedis-Rethink forecasts that if this can be achieved, then India could have 67 million TD-LTE users by 2017.
China has built its TD-LTE industry with a high level of state-directed investment that few, if any, other countries are in a position to emulate. In India it is more likely that a host of entrepreneurial start-ups will appear, looking to take advantage of the mass availability of data.
It is most important to note that nearly half the world’s population will soon be within reach of a TD-LTE network, but the way that the markets will develop will differ greatly depending upon the characteristics of the individual countries involved.