The arrival of a new competitor can transform an entire market. Since the arrival of the fourth operator, the discourse has changed, methods too. In recent months, we are no longer on the Battle of hours of communication or SMS included in the package, but the rates of mobile connection. Now, compare the amount of SMS is much easier and more transparent than comparing a technology or a given coverage. So what is 4G in the end?
January 1, 2012, the market was shocked. The three operators were attacked on a recurrent fault oligopolistic markets: price. So, the market structure has changed and in a sense, the market has become more elastic (more dependent on price). Unfortunately, the decline in prices has not only advantages in a market with high fixed costs. Large can be an advantage (economies of scale, barriers to entry), but they must always innovate to differentiate. And this is where 4G finds its place. Behind the name hides a 4G evolution of mobile technology currently used. This improvement – LTE, for Long Term Evolution- increases throughput by antenna, which ultimately increases the throughput for the user. The adoption of this standard then responds to a simple problem: increasing the consumption data.
Answer a problem: the explosion of data traffic
For smartphone user, 3G is becoming increasingly limited – independently of any quality factor. To understand why, just remember that the theoretical throughput (14, 21 or 42 Mbps depending on the operator) is shared within a cell. So while the size of a cell does not change, the number of smartphone users increasing over time and individual consumption as well. So, the network becomes more easily saturated and we are increasingly frustrated by the speed, sometimes you revert to EDGE (2G). Some are upset facing the questionable quality of their network operator. Unfortunately, in many situations, it is put on the account of the technology used. 3G has many limitations, that the finding.
To overcome the problem, two solutions: increase the number of cells (their size decreases, so the number of users per cell as well) or adopt newer and better technology. For the three ‘historical’ operators, the answer is obvious: adopt LTE. This change in standard allows to save money (they put their equipment on existing sites) and differentiate (improve 3G is not a “visible” improvement for the future buyer). Thus, they can be deployed relatively quickly a new more efficient network than the previous (and more scalable, 3 Gbps futures) and justify different price positioning of the proposed low-cost subsidiaries and Free Mobile.
This heading is crucial to their strategy: differentiation by the network. The impact is significant on the speed and quality of deployment (eg fiber drawing of the relay antennas). To illustrate, we can compare the speed of deployment between an actor to the aggressive pricing policy (Free Mobile) and an operator whose strategy is differentiation by the network (Orange). Free Mobile is authorized to deploy its 3G / 4G antennas for several months (it began well before his arrival in January 2012). Since then, it has 2314 Service 3G antennas (also probably 4G), approximately 24-36 months. While Orange in 7-8 months, has set 2469 Service 4G antennas. It should be noted that the finding would have been greater with the deployment of 4G Bouygues Telecom antennas on 1800Mhz frequencies, but we would have been there a bias observation too important to compare, it is necessary frequencies including administrative and technical constraints equivalent (we shall return later). still we nuancera stating that the incumbents have the advantage of a network of existing antennas, so it is not a question of a purely quantitative comparison but deployment policy justifying a tariff.
Moreover, a tariff system focusing on the quality of the network allows péréquer (distribute) more easily and quickly the network: very dense areas are very profitable and then used to finance the deployment in sparsely populated areas. For example, Free Mobile will be forced to rely on another network to cover the 4G in sparsely populated areas, roaming as may, by law, benefit as soon as it reaches 25% 4G coverage on these specific frequencies. It is this equalization system which helped bring the landline phone in the countryside, for example.
4G allows to support a much larger data traffic
But, what does 4G in practice? It’s simple: a better connection! The context has already been laid: data traffic increases tremendously and the 3G network, although covering almost the entire territory, finds saturated and can no longer provide sufficient flows. With the new LTE standard, each cell has a theoretical throughput multiplied by about three (compared to H +) and the prospects for improvement are phenomenal. To measure the potential of our future networks, a reminder is needed.
Which will characterize the quality of 4G, these are the available frequencies. Each operator has frequency blocks of its own and the intrinsic qualities of 4G (and 4G + or LTE-Advanced) will depend on its frequency. What is important to know is that the rate depends on the width of the frequency owned block, and the coverage distance and the quality of penetration into the walls depend on the height frequencies (higher is , the more the waves go away and enter buildings). Another important point is the theoretical maximum speed for LTE will be the maximum flow obtained for the widest frequency block owned by the operator (not the total bandwidth). This is, in particular, differentiate the LTE-A standard. Finally, the theoretical quality of the 4G network of an operator depends on the number of blocks that has and width of these. In France, the widest possible spectrum block is 20MHz (Orange and Free), which gives the following theoretical speeds (depending on category of the network / terminal)
To briefly summarize the allocation of frequencies in France, two strips of original frequencies are available for 4G: 800MHz and 2600MHz. Each band is divided into blocks that is shared between operators. The 800 MHz band is limited to a total of 30 MHz spectrum -the only is less available at low frequencies, because they have excellent propagation properties, so they are used for television, for example. Orange, SFR and Bouygues Telecom have obtained each 10 MHz in the frequency band “gold”, Free Mobile will have to settle for roaming on these frequencies-that is to say he will use the network another operator. The 2600 MHz band, in turn, the advantage of being off (because the spectrum is more available at this level of frequency). So 70MHz could be sold to operators, allowing for better off, to offer high flow rates (actually twice as large).
In addition to these two original bands, Bouygues Telecom has obtained permission to use its 2G frequencies to deploy 4G. This is called refarming. This gives it a great advantage: it receives additional frequencies that its competitors can more easily use (2G frequencies are much used by Orange customers, for example) and allow extremely rapid deployment (there is almost more red tape associated with the installation of a new antenna, use of existing infrastructure). However, importantly, the band is not entirely devoted to 4G, only 10 MHz are (which limits the flow to 75Mbps), currently.
Finally, with the current LTE standard, the theoretical maximum throughput of 115Mbps marketed varies (for 15 MHz blocks SFR and Bouygues Telecom) to 150Mbps (for blocks of 20MHz in Orange, without MIMO 4 × 4). Compared to the 42 Mbps maximum of the standard “H +”. Thus, the speed of which you can theoretically benefit depend on the frequency band on which you are connected. These are different situations depending on the operators
Moreover, the frequency band “golden” also promises 800MHz (as noted earlier) much more stable connections within buildings, which is not always the case in 3G. Low frequencies 900 MHz used for 3G being originally intended for 2G, some dense areas not covered by this 3G one. Therefore, when we lose our 3G connection inside a building, it is common to come across a good connection EDGE (2G standard uses low frequencies throughout France).
The deployed 4G standard is only the starting point
In the coming years, operators will deploy LTE-A as soon as enough of the terminal will take charge. This standard has the particular advantage to aggregate carriers – that is, the frequency bands – even if these bands are not contiguous. Recently, Bouygues Telecom and SFR have announced to have started experiments of aggregating the two blocks of frequencies 800 MHz and 2600 MHz in order to get 160 Mbps for Bouygues Telecom, SFR 175 Mbps. Similarly, for Orange, the carrier aggregation technique alone (all else equal) to carry the speed to 225 Mbps with current frequencies, against 150 now. Then, further improvements will be added to technology and new frequencies will be added to this (and refarming 2G spectrum allocation issue 700MHz TV). Objective 3 Gbps.
The deployment is progressing at great speed V
Regarding the current state of the deployment, the network is rather sparse (coverage of an area with little antennas, or no coverage at all …). However, deployment is very fast. Including Orange and Bouygues Telecom who install each month hundreds of antennas. The table below summarizes the network status on 1 October 2013. The figures will evolve very quickly, the easiest way is to check every month the retail network on the site ANFR. In addition, the site provides the complete mapping cartoradio.fr then to consult antennas that you couvrent.￼
As we noted above, the first block of 800MHz is favored by SFR. He put over stating that “there will be 4G and 4G”, this will allow more coverage and better interior, but with a lower rate. The second block of 2.6 GHz easily covers less territory, but offers a much higher rate, so it is favored by Orange. The third block of 1800 MHz is used by Bouygues Telecom, it gives it an undeniable advantage on speed of deployment (more than 3,800 service branches, more than 50% of current 4G antennas), but permits only a rate equivalent to the band of 800MHz (75Mbps).
For coverage predictions for Christmas, Orange should cover more than 40% of the population, SFR provides 35%. Bouygues Telecom, the band 1800 MHz allows it to cover now 63% of the population, a figure expected to rise by Christmas. As for Free Mobile, we do not know if it will propose a commercial offer in 2013, but we can now estimate that enabling 4G on all its 3G antennas, covering his potential will be around 30-35 % of the population by the end of 2013 (against 50% more 3G coverage, through the use of low frequency 900MHz). As such, it may be able, by law, to roaming on 800 MHz frequencies SFR.
Commercial offers, fair use and services included
Tariff heading 4G deals is above the offers of low-cost subsidiaries and Free Mobile. But these deals also seek to be distinguished by a gain related to additional services provided.
First, let’s look at the pricing of these offers. In the following table, we simply compare the heading of “core” of each operator offers 4G in a joint offers low-cost subsidiaries (Sosh, RED, B & You and Free Mobile).
One can observe that to get a 4G connection, it costs no less than 10 euros extra each month. This may be unnecessary for many people not covered or not interested. Obviously.
However, 4G deals also offer additional services meant to increase the value of these packages. It is these services that both SFR and Orange operators can be distinguished from low-cost deals say. This is also the amount of included services which explains the minimum 12-month commitment required by the two operators. In that game, it’s Orange seems to stand out, as noted in the article in Le Figaro. Indeed, the Orange offering represents the equivalent of 23 euros to service included, against 16 euros in SFR for example. What sums up in the following table
In the coming months, it is certain that other 4G deals will be added to those of the three incumbents. Here one thinks of the offer of Free Mobile, but it will also count on some MVNOs.
For Free Mobile, it would seem that the leaders prefer to wait for enough coverage to propose anything. Its potential to cover “own” being in the order of 30-35% by the end of the year, it does not seem possible in the short term. However, it could rely on its roaming 800MHz to inflate this value, which unfortunately will not be enough to achieve national coverage by the end of year celebrations.
As for MVNOs, there will clearly 4G offers. ARCEP has made many statements in this sense: the MVNO will benefit from 4G. Even if only to avoid the reformation of an oligopoly. This is Virgin Mobile chopping first announcing in September that he would propose a 4G package in the first half of 2014 (on the Bouygues Telecom network). More recently, the actor AR Telecom (NRJ Mobile, Crédit Mutuel Mobile and CIC Mobile Auchan Telecom in particular) said that 4G would arrive on November 14, which will make him the fourth player in the market to offer 4G. First, this announcement only concern NRJ Mobile and offers from CM-CIC group. It is unclear on what network operator will use.
Finally, concerning the current fair use some “limited”, it is certain that it will increase in the coming months. But as long as the network is overwhelmingly 3G, the increase will not be significant. The “cost” of fair use is higher than 3G 4G, explaining that operators do not yet offer a “revolution” on this point. The arrival of competing offers just will accelerate the adoption of 4G, fair use is sure to increase. therefore expect the increase in coverage and the number of subscribers, and things evolve.
Should I upgrade to the 4G?
Once we took into account the principle of saturation that degrades our good old 3G network, it is easier to understand the benefits of 4G. The theoretical output of the antenna increases, so the new network can cope with increased data traffic in recent years. But as a user, the question to switch to 4G remains.
For small consumers, a type of offering “low cost” you should clear. You can always read your emails, view your favorite sites, etc. In addition, the 3G network could relieve so many users migrating to 4G. So better availability could solve the current problems of saturation. If you are a heavy consumer of data and you find yourself in a widely covered area (we must take into account all the frequencies that cover you), while 4G is a ‘comfortable’ improvement is undeniable. The rates will be high and the lowest latency, the response will be really better. Frequencies “gold” guarantee you furthermore a good rate even indoors. The presence of additional services on the 4G packages is a benefit that will convince some. Note also that the rates are higher, with an average amount given to consumption data, the rate of use is logically low, so 4G will support the increased smartphone use for future years up the arrival of the next enhancements to wait 3 Gbps.
The differentiation of offers and tariff heading is fundamental in a market like this one. If many want to pay less left to settle for a smaller / performance network, others prefer to pay extra to have an efficient network across France – the performance test results conducted on the ARCEP networks often eloquent. As with the purchase of a terminal or a car, the diversification of supply is always beneficial to the consumer, and that it will not be forgotten.
Luc GAUTHIER-Aurelian is currently research professor PhD student at the Pierre and Marie Curie University. He is preparing a thesis in the field of artificial intelligence, he especially studied the semantic links in recommendation systems and social networks. He also has a specialization in Digital Economy and network industries, he is preparing a thesis specialized European Innovation & Entrepreneurship.