Spectrum refarming at 1800 MHz key to LTE device adoption - Refarmed spectrum accounting for 40% of global LTE market

A new study by GSMA Intelligence highlights the need for device manufacturers to prioritise the development of 4G LTE devices compatible with the 1800 MHz spectrum band. Refarmed spectrum, mainly in the 1800 MHz band, currently accounts for almost 40 percent of the global LTE market and will continue to do so over the next four years, the study says.

GSMA Intelligence estimates that global LTE connections stand at 39 million as of Q3 2012, comprising 93 live networks, including both the FDD and TDD variants. By 2016, the global LTE market is forecast to increase to over 500 million connections via more than 200 networks. However, LTE adoption is dependent on how much new spectrum mobile operators can acquire in the digital dividend and IMT-extension bands as well as how much existing 2G/3G spectrum they can refarm to use for 4G services.

Regulators and governments play a critical role in the adoption of LTE networks as they make these network capacity solutions available. However, the uncertainty surrounding regulatory decisions and the complex fragmentation of LTE frequencies at national and regional levels continue to negatively impact the development of LTE-compatible consumer devices.

The digital dividend band (700-800 MHz) currently accounts for 57 percent of global LTE connections, mainly due to the aggressive rollouts underway in North America. In contrast, the IMT-extension band (2500-2600 MHz) only supports 5 percent of global LTE connections with most deployments in this band located in Western and Northern Europe. Meanwhile, the spectrum refarming scenario accounts for 38 percent of the current global LTE market, of which over half (53 percent) relates to the 1800 MHz band. This refarming trend is allowing operators to introduce LTE prior to the allocation of additional spectrum by regulators.

There are 27 live LTE networks worldwide supporting the 1800 MHz band to date. Last month, UK regulator Ofcom gave permission for the country's market leader Everything Everywhere to deploy LTE using its existing 1800 MHz band currently used for 2G services. This decision effectively gives the operator a 12-month head start over its rivals, which will have to wait for fresh 800/2600 MHz auctions later this year. Ofcom said its decision was partly motivated by the availability of 1800 MHz-compatible LTE consumer devices, a band not usually supported in HSPA equipment in the UK.

GSMA Intelligence expects that the share of global LTE connections using refarmed spectrum today (38 percent) will remain relatively stable over the next four years - despite regulatory moves to enable more operator LTE deployments in the IMT-extension and digital dividend bands. By 2016, GSMA Intelligence forecasts that all three spectrum scenarios will account for roughly similar shares of the global LTE market (one third each - see graph).

Joss Gillet, Senior Analyst, GSMA Intelligence:

LTE spectrum fragmentation is a major hurdle for hardware vendors that are eager to rationalise frequency capabilities to take advantage of economies of scale. The availability of handsets has been limited so far by the lack of spectrum harmonisation which makes it difficult for handset and chipset manufacturers to deliver LTE-capable devices at a mass market price point. A typical example concerns Apple’s latest iPad, which only supports LTE connectivity in the 700/2100 MHz bands therefore mainly addressing demand in North America and ignoring frequency requirements in other regions. However, considering the long-term prevalence of the 1800 MHz band in global LTE deployments and its combination with deployments in the digital dividend and IMT-extension bands, device vendors such as Apple have an interest in covering all three bands in upcoming LTE device launches – in Apple's case via the ‘iPhone 5’ due to launch next week. Huawei has already unveiled LTE smartphones capable of covering the 800/1800/2300/2600 MHz frequency combination, supporting 60 percent of the forecast global LTE market in 2016.

4G LTE spectrum solutions as a % of global LTE connections
Source: GSMA Intelligence