What is the Return on 4G Investment?
The discussions on 3G and 4G hinge on a fundamental question. Will the investment make sense for the industry in near term? We know that in long-term, 3G and 4G technologies offer great benefits. As this article mentions, LTE, a version of 4G, uses the radio spectrum more efficiently, improving network capacity. That will be crucial as smart-phone use explodes, straining cell networks. Consider the case of Verizon in the US which is pushing for 4G/LTE. Much of the investment for Verizon is around the purchase additional spectrum. It spent $9.4 billion for that in 2008. The same concerns apply to 3G in Pakistan.
Even so, the payoff looks uncertain. If 4G is anything like the 3G rollout overseas, which started before the U.S., the early years will be messy and it could take a long time for customers to actually use it. When Verizon introduces LTE, compatible devices are likely to be scarce—initially Verizon may offer 4G only for laptop cards. When phones do reach the market, spotty network coverage means they will require multiple radios to work everywhere, draining battery life. LTE network-equipment costs also are likely to be higher initially.
It is notable that Verizon Wireless’s 45% shareholder Vodafone Group, which was early in embracing 3G, is taking its time on 4G. Like some other overseas carriers, including Telstra of Australia, Vodafone is instead focusing on upgrades to 3G technology using High Speed Packet Access. Some believe HSPA could hit theoretical peak speeds near the 100 megabits-a-second expected of LTE, although real-life speeds are considerably lower for both. AT&T this year is using HSPA to improve its speeds.
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I guess the business model for LTE needs to different for different markets. For emerging markets like Pakistan it might be that they haven’t taken the next from 2/2.5G in which case as I understand the Capex will be higher in either case i.e. to go for 3G or LTE. Also LTE should be able to help the bigger operators free up some spectrum and the plug in play radio base stations should reduce Capex for mature operators.
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Pakistan now should leap-frog to 4G in order to keep with the world technology. Investing now heavily on 3G will not be good idea.
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