4G won't solve 3G's problems

NEW YORK (CNNMoney) -- LTE stands for Long Term Evolution, but it isn't a long-term solution to the nation's wireless problems.

As a fourth generation, or 4G, wireless technology, LTE promises speeds of between five and 12 megabits per second. That's 10 times the speed of most 3G connections, and probably faster than your home broadband service. It can even be made, theoretically, to go 10 times faster than that.

Some early customers on Verizon's recently launched LTE network say they've clocked speeds of double the 12 Mbps maximum target that the carrier advertised. Verizon (VZ, Fortune 500) and HTC named the first LTE smartphone "Thunderbolt" for a reason.

LTE's blazing-fast speeds are made possible by the technology's much more efficient use of wireless spectrum than 3G. With LTE, wireless companies try to cram the maximum possible amount of data into radio waves. That lets them save on spectrum and, ultimately, costs.

Among the many different flavors of 4G, LTE has received the strongest support from wireless carriers. After an early "Betamax vs. VHS"-like debate between LTE and another 4G technology known as WiMAX, LTE won out. It could become the world's first universal wireless standard by the end of this decade. That means mobile devices like smartphones and tablets could eventually be used interchangeably on any network and around the world.

So what's the problem?

Mobile data traffic has more than doubled in each of the past three years, according to Cisco (CSCO, Fortune 500). With the mass adoption of smartphones, tablets and wireless modems for laptops, the company expects traffic to continue growing by an average of 92% in each of the next five years. The majority of that new traffic will be online video, which requires massive bandwidth.

That hockey-stick like growth has already overwhelmed 3G networks -- as anyone with an AT&T (T, Fortune 500) iPhone in New York or San Francisco can attest. AT&T's data traffic has grown 8,000% since it started selling the iPhone four years ago.

4G-LTE offers up to 20 times the capacity of some 3G networks. But by 2015, when LTE networks are fully built out, Cisco estimates that mobile data traffic will have grown by the same factor of 20.

Without any improvements to the network, 4G's capacity would be maxed out too -- in less than four years.

"By the time 4G-LTE is mass market, all it will have done is allow wireless companies to keep up with the problem," said Patrick Lopez, chief marketing officer for Vantrix, a bandwidth optimization company.

The reasons are two-fold: The amount of spectrum made available to U.S. wireless companies is limited, but the carriers have also been sluggish in buying up enough backhaul to support their capacity requirements.

There is only so much data that can be crammed into wireless spectrum -- and only so much spectrum available to wireless networks. Thanks to rising mobile data demands, a current wireless spectrum surplus of 225 MHz will become a deficit of 275 MHz by 2014, according to the FCC.

That's one of the main reasons why AT&T wants to buy T-Mobile: if the two companies are combined into one, the mega-carrier could make better use of redundant spectrum for LTE deployment.

The lack of wireless backhaul -- transmission routes between the network's core and its edges -- is mainly a cost issue. Wireless carriers are already spending $200 billion at year to maintain their networks, according to Alcatel-Lucent (ALU), and margins are getting thinner by the quarter.

"Networks tend to be built to carry the traffic that is anticipated in the near-term, so as not to waste precious investments in underutilized capacity," said Dan Hays, telecom consultant at management consulting firm PRTM. "The continued growth in data traffic is keeping pace with network capacity, and 4G is not likely to be any exception."

But even if the backhaul was there, that alone wouldn't solve the problem.

"There is definitely going to come a time when backhaul is capped and wireless companies are gong to have to explore more efficient ways of getting data back to the towers," said Ari Zoldan, CEO of Quantum Networks, a developer of WiMax products and services. "As LTE grows out and subscriber numbers increase, what's going to happen when spectrum limits are reached?"

There are some potential solutions and actions already in progress to help address these problems.

The government has pledged that it would free up 500 MHz of spectrum for mobile broadband use, which would nearly double the amount of available spectrum for wireless companies. Though some experts say even that may be insufficient to keep up with customers' demands, it would at least delay the problem.

Mobile companies have also learned many lessons from 3G. For instance, both Verizon and AT&T bought large chunks of spectrum in the same band. That's a very different approach from the patchwork they had with 3G, which delivered good reception in some locations and poor reception in others.

Network providers are also scrambling for ways to make data more efficient. Companies like Vantrix and Cisco believe that optimized video can help cut mobile traffic by as much as 50%. For instance, by predicting what a user wants to watch, networks could physically place videos closer to the user so that there is no buffering and less usage of the overall network.

Wi-Fi solutions are also being sought out, including the deployment of hotspots and devices that automatically switch to Wi-Fi when a network is detected. Cisco estimates that 16% of mobile data traffic will be offloaded to Wi-Fi by 2015.

Smaller cells like lightRadio are also a potential part of the solution. The Rubik's cube-sized antennas can be deployed almost anywhere to make more efficient use of spectrum and reduce networks' costs.

The problem is that most of the solutions will take years to be fully realized. With LTE deployments already under way, they may not come soon enough to keep up with our growing data deluge.