Thursday, January 12, 2012

UK 4G - Too little, too late?

Ofcom has announced new plans to auction the 4G mobile phone spectrum, but will it deliver the windfall the government is hoping for, will operators invest in the coverage expected, will customers actually use it and will the operators therefore make their money back?

Well, I don't know.

You can read about the Ofcom announcement here but let's look at it from the users' point of view.

I own a phone, iPad and computer - all able to use the Internet.  They are generating and downloading lots of data, all day whether I ask them to or not, sometimes you just try stopping them!  There's no doubt that the amount of data I and my family are transmitting and consuming is growing, not least as emails are being sent to all three devices simultaneously as they all try to keep synchronised.  I've written before about the automatic downloads of new TV episodes from iPlayer, there's surely no doubt about the growth in traffic.

We also as consumers want it to be ever faster, higher performance, no waiting, HD-quality and whatever is the best way next to consume content; IMAX or 360 degrees with multiple projectors coming out of your Mac in a few years?  Who knows?

But, do we need 4G?

Today's devices can connect to a multitude of data sources, of course this being communications we have a huge bunch of acronyms to confuse the enemy - GSM, 2G, 3G, Edge, CDMA, UTMS, WiMAX and 4G, and the devices are smart enough to pick and choose the best available system and switch between them without bothering the user.  Maybe they don't always make the best decisions, but as the algorithms get smarter and they can take into account maximum throughput, reliability, signal strength, achieved throughput and continue to keep connected while making incredible leaps between systems, we users can be oblivious to the technology underpinning the data.

So, what is in it for the operators?  Why should they invest in 4G?  Well, to give the fastest connection to their users and steal customers from the other operators, as almost everyone has a connection today, they have to compete on either performance or price (or a bit of both).  Sadly, the up-front investment costs could be huge, as some 4G signals don't travel as far, they may need more aerials or have greater "not-spots" for 4G than 3G.

OK, but how much will we pay?  I am currently on a PAYG deal that costs me £10.00 (USD$15) a month, I get unlimited texts, unlimited data and 250 minutes of UK calls.  (If you'd like the same deal, just let me know).  Prices are coming down, so can the operators make any money?

But it gets worse for the operators, what do I connect to the most?  Actually none of the above acronyms - I use Wi-Fi.  I find Wi-Fi spots in so many places today and a huge number are free or available in a package with a single provider (BT's deal where you can share other consumer's Wi-Fi for example) or offered by cafes, pubs etc. - even local councils are starting to cover the area at limited or no charge.  You can download free applications for your phone or iPad that lists over half a million wifi spots globally and simply walk to the nearest one.

I can see 4G becoming a little like satellite phones from years ago.  I remember a few folks with them telling me how great they are "as I can make calls from the top of Everest ... anywhere, no patchy connections".  In those days, there were a huge number of areas where cellphones didn't work at all, but I always wondered when I would actually be at the top of Everest and, as each new cellphone antenna was installed, the need for the satellite phone reduced.

So, I welcome 4G, anything that improves connectivity is great, but the operators are smart (hence the legal challenges over the last couple of years) and they can see the consumer pricing going down, so where's the ROI for them?  But the big one for me is that as each new wi-fi system is installed, the need for 4G technology will reduce and unless the same operators are getting revenue for the wi-fi connections, where will the money come from to make the investment that the government wants them to sign up to?  (Actually, as an aside, perhaps they will get MORE revenue from rural areas and not less, as cities covered in Wi-Fi might mean less 4G revenue).

There's a lot of other aspects to take into consideration, not least coverage distance, but essentially it was coverage that was the great selling point for satellite phones - now used in very remote places around the world but you wouldn't expect to see one in most business meetings, personally I doubt I have seen one for 5 years or so.

So, there better not be any more delays, the height of the price that the operators will pay has possibly already passed.  The UK treasury may be hoping for a £3B ($5B) windfall, and perhaps they will get it as the operators don't want to have no 4G service, but on the other hand.... maybe not.  We just have to wait and see.

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