How 4G LTE Is Transforming The Mobile Ecosystem

The dream of digital media at our fingertips has historically been hampered by slow wireless networks and disparate standards.

But the entire mobile ecosystem took a big step forward when Verizon, the largest U.S. carrier, launched LTE in early 2010.

LTE stands for "Long Term Evolution" — the most advanced in a succession of cellular network technologies. 

Other technologies, including WiMax and HSPA+, have been offered as options for fast, 4G mobile communications standards. But LTE has become the standard bearer: Its widespread acceptance and high performance have created global momentum among carriers and handset makers.

Modern smartphones, with their pocket-bursting display sizes and fast processors, are increasingly engineered to take advantage of LTE network speeds. 

LTE is about ten times faster than 3G wireless connections. In fact, many consumers have found LTE faster than their home broadband connections.

The technology is still early in the adoption cycle (it's worth noting that Apple's first LTE-ready phone was the iPhone 5). Yet LTE's potential to transform mobile usage and app capabilities is vast. 

In this report, we look at the opportunities created by LTE and the hurdles it must overcome: 

· LTE has the potential to add new layers of functionality to entire app categories such as games and maps, and to make video sharing and video chat ubiquitous.

· However, developers contemplating LTE-dependent apps and features will wait on widespread availability before moving forward. LTE has been aggressively rolled out in the United States, but many markets lag behind.

· LTE encourages the use of wireless networks by all device types that are heavier data users, such as tablets. This migration to wireless raises the stakes around data pricing.

*The Case Beyond Netflix: Seven LTE-Friendly App Categories*

Video will be, by far, the data type that sees the most explosive growth in mobile over the next five years. However, there are many other kinds of apps that consumers use, with video consumption still taking up less than seven minutes per day of overall smartphone usage, according to NPD Connected Intelligence.

Beyond bringing video streaming to our iPads (outside of Wi-Fi range that is), many other app categories will see enhanced functionality with LTE, translating to increased engagement and more monetization opportunities.

Advertisers will serve more ads as consumers plunge into immersive mobile applications more often and in new locations.

· *Video Sharing.* Apps such as Qik and SocialCam enable consumers to broadcast video live from their smartphones. Looxcie offers a wearable camera so users can stream real-time video or post clips on-the-go (Looxcie's website features video taken from a mountain bike).

· *Video chat.* Microsoft's $8.5 billion-dollar acquisition of Skype was a bid to shore up its also-ran Windows Messenger video chat; the software giant has moved to integrate Skype tightly with Windows Phone 8. Skype and other video chat apps will serve a central role in mobile platforms as they become more convenient.

· *Augmented reality.* Today, augmented reality apps typically involve video taken by a smartphone, which is then overlaid in real-time with lightweight graphics that add additional information. For example, the Spyglass app adds GPS coordinates and compass bearings.

· *Games.* Multiplayer games in particular will benefit from LTE. Games that demand remote players to interact with one another nearly simultaneously become more practical. LTE also makes cloud gaming initiatives — like OnLive and Gaikai — more viable.

· *Maps.* Maps have long been a smartphone staple. But new map apps like Apple's have introduced high-resolution images of buildings and other landmarks. For obvious reasons, map-aided navigation is a task that's used far from a Wi-Fi network, so LTE is crucial for next generation maps.

LTE also has the potential to revise our expectations around connectivity.

As we've stated, LTE speeds are comparable to those of wireline broadband connections. With LTE, the vision of broadband Internet being available to consumers everywhere, on any device type, suddenly seems within reach.

· *Personal hotspots.* With 4G LTE speeds, it has become feasible for mobile devices to share data connections via Wi-Fi. That means laptops, tablets, and game players that aren't wireless-ready can tap into a mobile network via a device doubling as a mobile router. Novatel’s MiFi devices create Wi-Fi hotspots for up to ten devices. Many smartphones also can be transformed into Wi-Fi hotspots for other devices, a practice referred to as "tethering."

· *Mobile offices.* The same technology detailed above can create mobile offices, in which sales forces and service personnel from a range of industries power their work on-the-go via mobile hotspots.

· *Home Broadband.* In developing economies that have no landline broadband pipes, LTE will form a critical backbone for Internet access. Even in the U.S., Verizon has begun offering LTE as a home broadband option in rural communities where it doesn't offer FiOS and DSL.

*LTE's Uneven Growth*

Right now, the main drawback to LTE is its limited availability. It has ramped up quickly in some countries, and hardly at all in others.

Globally, there were an estimated 27 million LTE customers as of the middle of this year, according to Wireless Intelligence. That was up from only 10 million at the end of 2011. In other words, the LTE customer base almost tripled in three months.

Visiongain, a market research firm, forecasts 125 million global LTE customers by year-end 2012, and over 250 million by 2015. Juniper sees 430 million LTE subscribers by 2016. 

And LTE is expanding its footprint geographically.

LTE carrier EE, backed by Orange and T-Mobile, recently launched service in the U.K. In all, at least 40 countries have rolled out LTE, although many of these deployments are essentially trial runs to test the waters. By the end of the third quarter of this year, there were 110 commercial LTE networks worldwide, according to Ovum.

Apple, among the last of the major handset manufacturers to support the standard, introduced three versions of the iPhone5 (the differences are virtually invisible to the consumer, since they're strictly technical) to support LTE among 16 different carriers in nine countries.

For now, the LTE user base remains concentrated. Korea, Japan, and the United States account for 87 percent of the world's LTE subscribers, according to Wireless Intelligence.

LTE rollouts have been slower in emerging markets. India and Russia introduced LTE in limited markets earlier this year. However, China, fast-emerging as the world's largest smartphone market, is not expected to issue LTE permits to its carriers until next year.

The United States remains the world's LTE pioneer, largely on the back of Verizon's efforts. But competitors followed Verizon’s lead, with AT&T about a year behind in terms of offering coverage in major markets nationwide.

Sprint's tie-up with Softbank will accelerate its LTE build-out. Sprint has so far launched 4G LTE in 32 U.S. cities, most recently Oct. 22 in Chicago.

T-Mobile USA had not bet on LTE, deciding instead to build a 4G network based on older technology. But its pending merger with MetroPCS promises to recast its strategy. MetroPCS was an early promoter of LTE, and built its business championing LTE among pre-paid subscribers. It's likely T-Mobile will exploit MetroPCS's advantage and tilt future investments toward LTE.

*Freedom From Wi-Fi, But At What Price?*

Tablets seem tailor-made for LTE. Tablets' larger screens and faster processors allow them to tackle a wider array of applications than smartphones, and tablets offer a far better user experience as video viewers and game devices. It's no coincidence that on average tablets consume about 122 times more data than smartphones, according to the U.S. Federal Communications Commission.

Before LTE, many networks with 3G speeds didn't allow tablet users to fully take advantage of their devices without Wi-Fi. LTE should be able to handle tablets without hiccups.

Portable mini-tablets with LTE-ready versions (including the iPad Mini and Samsung Galaxy Tab), combine LTE with hardware small enough to fit in a pocket or purse. That degree of portability will encourage tablet usage outside the home, for all sorts of applications.

During the recent launch of the iPad Mini, for example, Apple's executives touted it as being ideally suited for Apple's FaceTime video chat app.

But even as CEOs tout video chatting, they're overlooking an important point. Video chats consume an incredible amount of data, and data is getting expensive (FaceTime reportedly consumes 3 megabytes per minute).

Consumers and carriers may come to clash over data fees as tablets (and LTE-powered smartphones, which consume twice the data as 3G units) begin to drive up usage.

LTE has definitely transformed how carriers think of cellular service and the options they offer to consumers for taking advantage of it.

Flat-rate, unlimited data plans are increasingly a thing of the past — a pricing scheme that tends to recede along with 3G networks.

Verizon and AT&T capitalized on LTE with long-anticipated data sharing plans that let consumers subscribe to a pool of data that may then be shared across multiple devices. Verizon recently reported that 13 percent of its customers already have switched to its “Share Everything” plan.

The data-bucket plans may be popular, but there's a downside. These plans are pricey. Validas, which tracks data costs, estimated that a family data plan on AT&T or Verizon ranges from a monthly $120 to $160 for 11 gigabytes (11GB) of data.

LTE networks from carriers such as the U.K.’s EE often have constraining data caps.

Given capped allowances, and high prices (up to $7.50 per gigabyte of data in the U.S.), consumers may begin to ration data usage, and that would constrain opportunities across the ecosystem, from app development to advertising. 

Rich media ad campaigns with layers of video and display (and tappable interfaces) demand faster wireless connections in order to work seamlessly. 

That's why mobile video ads are still being watched overwhelmingly over Wi-Fi. According to Rhythm, 70 percent of its mobile video ads still are being streamed via Wi-Fi. 

It's no coincidence that rich media mobile ads have been popular in South Korea, where roughly 20 percent of smartphone users already have LTE.

Ujjal Kohli, CEO of Rhythm, recently celebrated the iPhone 5, since its LTE "will make it easier to stream on the go, bringing mobile videos (and the ads to monetize them) to target audiences at all times of the day regardless of location."

But the rich media ads increasingly being deployed by the mobile ad industry may anger data-conscious wireless consumers. Mobile marketers may have to weigh data load when designing campaigns.

As much as LTE offers promise in terms of powering rich media ads served on-the-go, consumers may simply not want to pay for them. They may begin to shun ads when severed from Wi-Fi.

*THE BOTTOM LINE*

· LTE allows marketers and app developers to create rich media experiences that rival those of the desktop Web, but coverage will take years to complete.

· As of September 2012, there were 110 commercial LTE networks in operation globally. Visiongain forecasts 125 million LTE customers globally by year end.

· LTE will accelerate the move to a mobile lifestyle and support the shift to on-the-go tablet usage. Since tablets use 122 times more data than smartphones, LTE will tend to go hand-in-hand with mobile tablet use.





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