Stephen Bartholomeusz25 May 2011, 3:28 PM3

It would be easy to regard the switching on of the first phase of Telstra’s Long Term Evolution, or 4G technology, yesterday as purely a technology upgrade. In fact, the upgrading of Telstra’s Next G network is highly strategic.

Telstra has switched on its first 4G base stations in Sydney, Melbourne, Perth and Brisbane and will now continue to roll out the network to other cities and regional centres. Initially the network is focused on the CBDs, allowing more data to be delivered more quickly.

The key initial strategic benefit of the roll-out, however, is not just that it will facilitate faster data speeds, but that it will release capacity on Next G’s original 850MHz spectrum by shifting big licks of data usage to the 1800MHz band.

Telstra stole a very significant technology edge over Optus and Vodafone when it originally launched the Next G network, with far better speeds and coverage just in time for the explosion in data usage ignited by the advent of the smart phone era.

Optus has since been spending about $500 million a year on its wireless network to close that gap while Vodafone was caught unprepared for the rate of growth in data usage and has suffered enormous brand damage, and losses of customers, because of its network quality degradation.

The $1 billion Telstra has thrown at the market to improve customer service and to make its offers more price-competitive has turned out to be well-timed. The rate at which smart phones have penetrated the market, its own more competitive offerings and Vodafone’s well-publicised problems, have resulted in explosive growth in its customer numbers.

Telstra obviously hopes and is planning for a continuation of that trend. While the take-up of 4G services themselves is likely to be slow – initially Telstra will only be able to offer wireless broadband dongles while it awaits the dual mode handsets that will be needed to...

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