T-Mobile HSPA+ Winning Race For Speed

T-Mobile, USA, owned by Deutsche Telekom, Europe's largest phone carrier, is facing stiff competition in the race for faster mobile internet service, after surpassing rivals Verizon Wireless and AT&T in some locations this year. But with the latter companies preparing for network upgrades, T-Mobile may once again find itself having to play catch-up, industry observers said.

Verizon Wireless, the largest mobile operator in the United States, and AT&T have both been able to attract customers by offering faster networks and appealing handsets such as the Motorola Droid and Apple iPhone. Last week, Germany-based Deutsche Telekom reported that T-Mobile USA's total number of customers declined by 93,000 compared with the first quarter of 2010 "as a result of the decreases in the prepay segment." As of June 30, T-Mobile's customer base was 33.6 million, compared with 33.5 million one year ago. Its high-speed packet access (HSPA+) 3G network has 85 million subscribers, and by year's end, is expected to increase to 185 million people, the carrier said.

During a press conference last week, Deutsche Telekom CEO Rene Obermann said they will either buy or lease spectrum or re-farm existing spectrum to get a 4G network, and that within two years T-Mobile will not be trailing its competitors. Last year, when T-Mobile first deployed HSPA+, it outpaced Verizon and AT&T networks in some locations. But the other carriers are following suit, with Verizon expected to roll out its next-generation, long-term evolution (LTE) technology network this year and AT&T offering LTE in 2011.

Mobile operators are rushing to upgrade their networks to handle the surge in data traffic as more consumers and companies use smartphones to conduct business transactions and upload and download content from video-intensive sites. Eventually, LTE networks will have the capacity to reach speeds greater than five times faster than T-Mobile USA's current 21 megabits-per-second. Yet Obermann said HSPA+ has plenty of capacity, giving it the ability to stay competitive.

Neil Shah, an analyst at Strategy Analytics, concurs that T-Mobile doesn't have to worry about LTE 4G yet. "AT&T will wait until after mid 2011 to deploy LTE because it's still in a nascent state and it wants to see how the network will perform -- that's the whole strategy,'' he said. AT&T will roll out HSPA+ first in order to avoid "huge gaps in terms of a seamless experience for the user" by going to LTE.

Apart from Sprint, which currently has the fastest 4G network, based on WiMax, comparing T-Mobile with AT&T and Verizon Wireless, T-Mobile "is ahead of the curve in terms of a faster network at this point in time,'' he said.

In terms of T-Mobile's spectrum plans, Shah said the carrier will be limited in its ability to offer an LTE network unless it acquires more spectrum in a lower frequency like the 700-MHz band. "So it makes sense to deploy HSPA+ and give customers a better mobile web experience, compared to slightly less than LTE periodically," he said, "but it is a proven solution that has been deployed all around the world while LTE is still in the infant stages."

Todd Frost, an analyst with Frost & Sullivan, said that while AT&T and Verizon Wireless have begun testing LTE, it will likely be at least 2012 before LTE is available nationwide on their networks, although both will roll it out in some larger markets next year.

"When push comes to shove, customers will be looking for faster speeds. Whether those speeds come from LTE or HSPA, it doesn't matter to the consumer,'' said Frost, in an e-mail. Echoing Shah, he said, "What it ultimately boils down to is that T-Mobile doesn't have to implement LTE at this time, because they have the ability to grow capacity with HSPA." That will help T-Mobile keep costs down over the next few years "while still being able to provide fast speeds for their consumers."