TOCKHOLM—Almost a year ago Swedish telecom operator TeliaSonera AB launched the world's first super-fast mobile Internet service, and now rivals are beginning to enter a Nordic market that is a pioneer in fourth generation, or 4G, Long Term Evolution technology.
Two weeks ago, TeliaSonera's Swedish rival Tele2 AB, together with Norway's Telenor ASA, kicked off the launch of their own Swedish 4G LTE network, with speeds of up to 80 megabits per second—10 times faster than existing networks—plastering downtown Stockholm with ads for the new service in their push to win a share of the market for high-speed mobile data.
The Nordic region, with its relatively low population density, may seem an unlikely frontier for the very latest in mobile technology, but customers there tend to be early adopters and, as Tele2 Sweden Chief Executive Niclas Palmstierna says, the region is home to two global leaders in the mobile field: Telefon AB L.M. Ericsson, the world's largest network equipment vendor, and Nokia Corp., the largest mobile-phone maker. This fertile ground has also attracted external players who want to test the emerging 4G market. In a blow to Ericsson in its own back yard, Huawei Technologies Co. of China last year won the contract to provide infrastructure for Tele2's and Telenor's new network.
The Nordic region has become a test site for 4G technology that is slowly spreading to bigger markets—Verizon Wireless, the largest U.S. cellular operator—a joint venture between Verizon Communications and Vodafone Group Ltd.—launched its first commercial 4G service in the U.S. Sunday.
As data-hungry smartphones become more widely available and demand for tablets like Apple Inc.'s iPad increases, customers have become accustomed to fast fixed-line broadband and increasingly want the same experience while on the move.
Offering a faster, more reliable service than rivals is what differentiates mobile operators fighting for market share and profit. Other regions are following: in the U.S., MetroPCS Communications Inc. launched 4G services in a handful of cities, including Las Vegas and San Francisco, in the autumn, while Sprint Nextel Corp. also offers 4G in a number of regions. Verizon aims for U.S.-wide coverage by 2013.
In Asia, Telstra Corp. subsidiary CSL Ltd. launched a combined 3G/LTE network in Hong Kong on Nov. 25, the first in the region. NTT DoCoMo Inc., Japan's biggest mobile operator, said this month that it is on track to offer a new data communication service using LTE on Dec. 24.
The market right now is limited to 4G dongles used with laptops and netbooks, as 4G-enabled smartphones and tablets aren't available yet, and Sweden offers an early insight into how the technology performs.
Tele2, which in 2008 paid 500 million Swedish kronor ($73.5 million) for a 4G license, hopes to provide 4G coverage for 99% of Sweden's population by 2012, competing with incumbent TeliaSonera on price.
A number of technical advancements help make 4G networks faster. Data is sent and received using IP, or Internet Protocol-based technology.
That data-centric focus is in contrast to 3G networks that have to handle various kinds of voice and data traffic simultaneously, making them slower and less efficient. 4G networks also have fewer network nodes, which means fewer transmission delays. And, when radio waves travel from a base station to mobile devices, the Long Term Evolution radio technology used in 4G networks makes more efficient use of available spectrum, further boosting speed.
Still, despite impressive performance , few consumers have so far paid the 599 Swedish kronor ($86) a month that TeliaSonera charges for a 4G subscription. The operator, which in the third quarter had close to 160 million customers world-wide , has so far only sold a couple of thousand 4G subscriptions , according to its head of Mobility Services, Hakan Dahlstrom.
In the U.S., Verizon plans to offer subscriptions starting at $50 a month, though with a slower service than TeliaSonera's due to spectrum considerations .
Consumer adoption has been slow in part due to a shortage of 4G-compatible laptop modems, but also because TeliaSonera so far has only rolled out the service in 11 Swedish cities, Mr. Dahlstrom says, with the aim of covering 228 cities by the end of next year.
There are other hurdles to overcome before the market can really take off; 4G networks will need additional spectrum as coverage grows, and as governments free up new frequencies in coming auctions, these could turn out to be costly in markets where several rival operators bid for licenses, leaving less money to buy equipment for the new networks.
As an indication of the value of spectrum, in the summer Germany auctioned off 4G spectrum for the first time, netting a total of €4.38 billion ($5.87 billion) for the government. Network costs in terms of equipment and software are also significant; network gear maker Nokia Siemens Networks in July won an eight-year, $7 billion contract to deploy and maintain a mobile broadband network in the U.S. for newly formed telecom venture LightSquared.
U.K. communications regulator Ofcom expects its 4G auction to take place some time in the first quarter of 2012 with frequencies released by the end of the following year. Spain is expected to authorize auctions by year-end that free up additional 4G spectrum in 2011.
Still, even if the operators get the 4G spectrum they need, the real money won't start flowing in until consumers get a good supply of 4G-connected tablets and smartphones, says Bengt Nordstrom, chief executive at telecom consultancy Northstream.
"Right now it's only about investments," Mr. Nordstrom says. "When the technology gets more mature around 2012 or 2013, you may start to see revenue as well."
The first 4G tablets and smartphones could reach the market next year, Dalhstrom says, adding that TeliaSonera is discussing this issue with a number of mobile handset vendors.
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