We obtain the Shannon capacity of a fading channel with channel side information at the transmitter and receiver, and at the receiver alone. The optimal power adaptation in the former case is "water-pouring" in time, analogous to water-pouring in frequency for time-invariant frequency-selective fading channels. Inverting the channel results in a large capacity penalty in severe fading.

Adaptive modulation exploits the time-variant channel capacity fluctuation of fading channels using a range of different modem modes. Specifically, no information is transmitted when the instantaneous channel signal-to-noise ratio (SNR) is low, and, hence, during this period the data must be buffered, which results in delay or latency. When the instantaneous channel quality improves, 2-, 4-, 16-, and 64-level modem modes are invoked, which allows the transmission buffer to be emptied. It is shown that channel capacity gains are achieved at the cost of some latency penalty. The latency is quantified in this treatise and mitigated by frequency hopping or statistical multiplexing. The latency is increased when either the mobile speed or the channel SNR are reduced, since both of these result in prolonged low instantaneous SNR intervals. It is demonstrated that as a result of the proposed measures, typically more than 4-dB SNR reduction is achieved by the proposed adaptive modems in comparison to the conventional benchmark modems employed. I.