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The goal of this paper is to assess the impact of real-world propagation conditions on the maximum achievable diversity performance of communication over Ricean multiple-input multiple-output (MIMO) channels. To this end, we examine a MIMO channel employing orthogonal space-time block codes (OSTBCs) and study the diversity behavior of the resulting effective single-input single-output (SISO) channel. The performance criteria employed are symbol error rate, outage capacity, and wideband spectral efficiency. For general propagation conditions, we establish key quantities that determine performance irrespective of the performance criterion used. Furthermore, we discuss the relation between the notion of diversity order related to the slope of the average error probability versus signal-to-noise ratio (SNR) curve and diversity order related to the slope of the outage probability versus SNR curve. For Ricean fading MIMO channels, we demonstrate the existence of an SNR-dependent critical rate Rcrit, below which signaling with zero outage is possible and, hence, the fading channel behaves like an additive white Gaussian noise (AWGN) channel. For SISO channels, Rcrit is always zero. In the MIMO case, Rcrit is a simple function of the angle between the vectorized Ricean component of the channel and the subspace spanned by the vectorized Rayleigh fading component.