At Huawei’s MBB Forum in Shanghai last autumn, 4G deployments in Asia were on the agenda, as their scale has led to falling network costs for the entire industry, while driving the overall level of maturity of 4G across the world. The industry is no longer looking to Europe or Silicon Valley for innovation & leadership.

The Asia-Pacific region, with around 125 commercial LTE networks, has roughly 200 million 4G connections. Six of the largest ten LTE operators in the world are Asian and that number is expected to increase next year. Japan has three in the top seven.

And with 4G users representing only 5% of total regional connections – slightly below the world average – there is plenty of room for growth. GSMA Intelligence forecasts 4G penetration in Asia will rise to almost 30% by 2020.

South Korea remains the world’s most-advanced 4G market with LTE connections accounting for almost two-thirds (64%) of the country’s mobile connections in Q3, followed by Japan (39%) and the U.S. (37%).

Economies of scale

LG Uplus is ahead of the domestic average – 73% of its 11 million mobile connections are LTE. It has more than 120,000 4G sites. According to Korea’s Ministry of Science, ICT and Future Planning, 4G traffic accounted for 92% of all data traffic in July – up 34% in May. Average monthly 4G usage jumped from 2.3GB in April to almost 3GB in July. Data usage has surged since the country’s three major mobile operators launched unlimited 4G plans in April.

Japan’s three major mobile players had a total of 53 million 4G connections in Q3. China, with about 45 million 4G connections last quarter, is forecast to have nearly 80 million by year-end (2014), according to GSMA Intelligence.

China Mobile, which has rolled out 570,000 4G base stations, has signed up 50 million 4G subscribers in less than one year. China Mobile Executive VP Li Zhengmao said at Huawei’s Global Mobile Broadband Forum last autumn that it expects to have 70 million 4G subscribers by the end of 2014 and 150 million a year later (Verizon Wireless in the U.S. is currently on top with 59 million).

China Unicom had 2.7 million 4G connections in Q3 and is forecasting 6.3 million at the end of the year. It will have 330,000 LTE-FDD base stations by year-end and plans to deploy another 180,000 next year. These huge investments in 4G networks have helped the entire industry by lowering costs on the infrastructure side.

The increased scale has also driven down the cost of 4G smartphones, which has broadened the audience and helped speed up uptake. Li said the handset supply has been growing much faster than expected. China had 617 4G devices, with 60% of them priced close to CNY1,000 (USD130). The cheapest are selling for CNY400.

Beyond cost reduction

David Wang, president of Huawei Wireless Networks, told Huawei’s event that Asia has a huge population and customer base, but also a culture of trying new things, which forces operators to innovate. For example, LG Uplus has demoed three-band carrier aggregation and plans to go commercial soon, and China’s operators are working on FDD-TDD convergence, which he said are both challenging.

“This innovation has driven the maturity of 4G technology, and not just lowered costs.”

He noted that the leadership has also shifted away from Europe as the industry has moved to 4G. “In all of Europe, there are fewer than 150,000 4G base stations.”

GSMA CTO Alex Sinclair agreed, pointing out that several regions are leading in LTE in different ways. “North America has made a lot of progress and many people think all the innovation has to come from California. That’s simply not true. If you come to this part of the world, you see continuous innovation, beyond what the standards bodies outline. I live in the U.K. and I still can’t get a 4G signal. When I go to Seoul, it’s like travelling two years into the future.”

Sinclair said the model in Asia that seems to work well is you first deploy a technology, you drive usage heavily and then you gain scale, which creates a virtuous circle. He also said you also need the right regulatory environment.

“In Japan, South Korea and China you have an industry-friendly, or forward-looking environment, which really helps, because in some parts of the world there’s an inclination just to tax and see it as a source of revenue.”

Higher speeds and margins

The move to 4G, of course, is also about speed and efficiency as well as improved margins. China Mobile’s Li said its network performance has jumped from 14Mbps to 110Mbps and frequency efficiency has improved by two to three times. 4G ARPU is 1.5 times its average level.

LG Uplus’ ARPU has increased 38% to more than USD36 since it launched LTE three years ago, said CTO Lee Chang Woo.

During a conference session at Huawei’s event, attendees participated in a real-time poll on a range of network-related issues, with a panel of experts commenting on the results. Almost half of the audience said higher ARPU was the most significant value that LTE has delivered. Over a third said lower cost per bit was most important, while 10% said increased customer loyalty was the top reason.

Fifty percent of the respondents said LTE would lead to a 20% increase in ARPU. Another 35% expected a 40% jump in ARPU and an optimistic 13% looked for a 60% rise. Again, almost half the audience indicated that the key to achieving LTE business success was diversified services and apps. National coverage was ranked second (36%), followed by flexible tariff packages (10%).

China Mobile Institute VP Huang Yuhon said the results reflect the fact that allowing new services can create additional value for operators. “If it’s only simple data usage, then we can’t add value.”

Asked about the likely timing to deploy carrier aggregation, a third of those surveyed said 2015, 27% said they have or will deploy this year and 28% plan to by 2016. Twelve percent have no plans.

China Telecom Deputy Managing Director Shen Shaoai said carrier aggregation will allow it to use all its spectrum bands. “We’ve done a lot of work preparing for carrier aggregation to improve the user experience.”

Operators are definitely keen on technologies that allow them to leverage every single hertz available – across both paired and unpaired spectrum. Regarding deploying LTE over unlicensed spectrum, 39% of those polled were neutral on the issue, while 27% were highly confident and 20% were confident. A surprising 14% weren’t aware of unlicensed spectrum.

The next wave

Looking to future LTE upgrades, 62% of the audience said the key driver of the evolution beyond LTE-A in the next two to three years would be a better user experience and increased speed. Almost 30% indicated the mobile Internet of Things (IoT) would be the main force behind upgrades.

China Mobile’s Li said network traffic in China is forecast to increase 1,000 fold between 2010 and 2020, compared to a global average of 240 times, so “it will be a huge challenge for us to support this growth. I’m calling on all our partners to bring down the cost.”

He said the cost per bit on its 4G network is just one-third of that on 2G and a fourth of the 3G cost. But he insisted that rate of decline is not enough. “I’m calling on all our partners to bring down the cost.”

That challenge is only getting more difficult as the technology is changing every year and a half and the number of bands that network gear and devices have to work on continues to climb. But Asia’s operators and equipment suppliers are leveraging their experience and scale to bring down costs and boost efficiency to prepare for the IoT wave, which will bring an estimated 30 billion connected devices by 2020.