Disruptive Business Models for mobile networksin mature markets.ETSI’s Business Innovation Summit 2011, 4th October 2011.....
Changing business models …<br />Coolstuff<br />OTT Apps<br />Mobile Operator<br />Garden<br />“New”<br />Billing<br />CS V...
The mega disruptive challenges …<br />Mega bucks<br />Mega bits<br />Mega Hz<br />3<br />Dr. Kim Kyllesbech Larsen, ETSI’s...
ARPU … OTT Mobile Apps topline impact.Mobile revenues in an Apps-centric world could decline rapidly.<br />(Free) OTT VoIP...
Tellabs global study1 …The End of Profit.The end to the mobile-only business model as we know it?<br />Western Europe mobi...
 Accelerate LTE deployment
 Manage traffic via pricing, policy & control.
 Spectrum re-purpose & acquisition.</li></ul>Western Europe assessment<br />5<br />Dr. Kim Kyllesbech Larsen, ETSI’s Busin...
New business models and operation will be required.<br />Mobile Profit & Loss - Today<br />Mobile Profit & Loss - Tomorrow...
Network Factory /Network spin-off.
Increased purchasing power
DT-FT Procurement JV.
New partnership models – de-risk mobile.</li></ul>Spectrum  Amortization<br />−<br />↑<br />Capex (ca. 7% to 15% of Revenu...
Data demand exceeding spectral efficiency gains.”Houston we have problem”.<br />Illustration 1<br />	Spectral demand could...
Leapfrog network capacity:
Pico – Femto cells.
Smart antenna systems.
White-space systems.
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Disruptive business models for mobile networks in mature markets.

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Delivered at ETSI's Business Innovation Summit: "The Wireless Network of the Future", London, 4th October 2011.

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Disruptive business models for mobile networks in mature markets.

  1. 1. Disruptive Business Models for mobile networksin mature markets.ETSI’s Business Innovation Summit 2011, 4th October 2011..<br />Dr. Kim Kyllesbech Larsen, Technology EconomicsTechnology, Deutsche Telekom.<br />
  2. 2. Changing business models …<br />Coolstuff<br />OTT Apps<br />Mobile Operator<br />Garden<br />“New”<br />Billing<br />CS Voice<br />Mobile Data<br />SMS<br />SIM<br />SIM<br />Billing<br />Network<br />50 – 700<br />MHz<br />Cloud<br />Regulation<br />Whitespace<br />Smartdevices<br />2<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  3. 3. The mega disruptive challenges …<br />Mega bucks<br />Mega bits<br />Mega Hz<br />3<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  4. 4. ARPU … OTT Mobile Apps topline impact.Mobile revenues in an Apps-centric world could decline rapidly.<br />(Free) OTT VoIP and Messaging Apps can lead to a<br />dramatic loss of most profitable MNO revenues<br />Illustration<br />CS Voice<br />SMS & MMS<br />PS Data<br />23.01<br />ARPU<br />22.41<br />By 2015<br />more than 70%<br />of users have <br />a smartphone<br />6.2<br />?<br />3.3<br />3.4<br />3.8<br />12.7<br />15.7<br />13.0<br />6.2<br />6.5<br />2010A<br />2015E<br />Mobile centric<br />(“worry-free”)<br />2015E<br />Apps centric<br />(“doom”)<br />1 Source 2010 & 2015 Pyramid Research March 2011 Western Europe.<br />4<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  5. 5. Tellabs global study1 …The End of Profit.The end to the mobile-only business model as we know it?<br />Western Europe mobile carrier<br />“End to Profit” (Tellabs study).<br />Annual Growth Projection until 2020.<br />Mounting cash<br />pressure<br />Business<br />model<br />breakdown<br />What can be learned?<br /><ul><li>End of Profit in WEU next 5 years?
  6. 6. Accelerate LTE deployment
  7. 7. Manage traffic via pricing, policy & control.
  8. 8. Spectrum re-purpose & acquisition.</li></ul>Western Europe assessment<br />5<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  9. 9. New business models and operation will be required.<br />Mobile Profit & Loss - Today<br />Mobile Profit & Loss - Tomorrow<br />70% of Total Revenue Today<br />↓<br />Total Revenue<br />Reduce Cost with 30%!<br />↓<br />New business, operation and cooperation models<br />−<br />Usage Cost (Voice dominated 10% - 20%)<br />-><br />−<br />Market Invest SAC & SRC (ca. 20%)<br />-><br />−<br />Personnel Cost (<20%)<br />Personnel Cost (<20%)<br />↑<br />Technology Cost (ca. 15% – 20%)<br />−<br />Technology Cost (15% - 20%)<br />-><br />−<br />Other Cost (5% - 10%)<br />=<br />Maintain Today’s EBITDA of ca. 37%<br />↓<br />=<br />EBITDA (WEU ca. 37% 1)<br />New Business Models<br />Network depreciation (ca. <20% of Revenue)<br />−<br /><ul><li>Network sharing (i.e., EE UK).
  10. 10. Network Factory /Network spin-off.
  11. 11. Increased purchasing power
  12. 12. DT-FT Procurement JV.
  13. 13. New partnership models – de-risk mobile.</li></ul>Spectrum Amortization<br />−<br />↑<br />Capex (ca. 7% to 15% of Revenue)<br />−<br />1BoA ML Global Wireless Matrix 1Q11, margin data for 4Q 2010.<br />6<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  14. 14. Data demand exceeding spectral efficiency gains.”Houston we have problem”.<br />Illustration 1<br /> Spectral demand could exceed spectral efficiency by<br />as early as 2014.<br />Leapfrog network Innovation! <br /><ul><li>More spectrum.
  15. 15. Leapfrog network capacity:
  16. 16. Pico – Femto cells.
  17. 17. Smart antenna systems.
  18. 18. White-space systems.
  19. 19. Price, Control & Policy.</li></ul>Data demand:<br />CAGR 71% < 2015<br />CAGR 61% 2016<br />(*) Report for Ofcom,: 4G Capacity Gains, Final Report, January 2011.<br />1 Illustration for a mobile operator with 20MHZ @ 800 MHz, 20MHZ @ 900MHZ, 50MHZ @ 1800MHz and 30MHZ @ 2100MHZ.<br />7<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  20. 20. Mobile data growth in for a crash ... unless managed.” <br />8<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  21. 21. Off-loading benefits are tremendousBut it demands new partnership models for mobile-only.<br />Off-loading Economics.<br />Mobile data is “80% fixed”<br />Free Cash Flow<br />“20% data mobility”<br />Innovation<br />Business<br />model<br />breakdown<br />Data traffic per user<br />What can be learned?<br />2010<br />2011<br />2012<br />2013<br />2014<br />2015<br />2016<br />2017<br />2018<br />2019<br />2020<br /><ul><li>80% of data traffic carried by 3 sites.
  22. 22. 20% of users generate 80% of traffic.
  23. 23. Off-loading is an effective financial remedy … but not easy to achieve!</li></ul> HSPA only, No LTE<br />HSPA + LTE 50% off-load from 2012<br />9<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  24. 24. LTE deployment requires available spectrum.<br />900 MHz (2G -> 3G)<br />800 MHz (LTE)<br />700 MHz<br />50 MHz<br />UL<br />(35MHz)<br />DL<br />White-space<br />UL<br />(30MHz)<br />DL<br />1,800 MHz (2G  LTE)<br />1,500 MHz (MSS L-band)<br />UL<br />(75 MHz)<br />DL<br />TDD<br />UL<br />(58 MHz)<br />DL<br />TDD<br />(20 MHz)<br />2,100 MHz (MSS S-band)<br />2,100 MHz (3G)<br />2,300 – 2,400+ MHz<br />DL<br />UL<br />(60 MHz)<br />TDD<br />(100 MHz)<br />DL<br />3G<br />TDD<br />part TDD<br />(mainly APAC)<br />3G<br />TDD<br />UL<br />(20 MHz)<br />2,6001 MHz (LTE)<br />3,400 – 3,500+ MHz (WiMax -> LTE)<br />UL<br />(70 MHz)<br />TDD<br />(50 MHz)<br />DL<br />FDD part TDD<br />This band provides interesting backhaul P2P options in some Greenfield scenarios<br />1 The shown structure consistent with European band plan. In USA this band is held by Clearwire and primarily used for<br />TDD WiMax.<br />10<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  25. 25. Data traffic trend to be considered.Optimized service delivery – macro-level.<br />Primary indoor usage -> off-load possibilities<br />Traffic Profile<br />What can be learned?<br /><ul><li>30+% in-fill possibility.
  26. 26. Cognisant network.
  27. 27. Optimized service delivery
  28. 28. Network friendly apps.
  29. 29. Cloud-Device optimization.
  30. 30. E2E SON.</li></ul>data<br />voice<br />Off-busy-hour In-fill delivery<br />11<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  31. 31. The cognisant network experience.Cognisant experience – aggressive innovation.<br />Capacity limit<br />Network optimized OS & Apps<br />Self-Optimized & Cognisant Network<br />Average<br />load<br />BH time frame (sec by sec)<br />Smart & Interconnected (ad-hoc) Devices <br />12<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  32. 32. Cost-optimized LTE deployment models.Availability of a wide range of frequencies will be essential for economical network deployment.<br />Throughput / Capacity<br />2.3 - 3.6 GHz<br /> Typical BWs/Operator > 40 MHz<br /> Femto/Pico cells & smart-antenna systems.<br />Hot-<br />Spots<br />2.3<br />To<br />3.6 <br />GHz<br />Rural Fixed-like<br />Typical BWs/Operators < 20 MHz<br />LTE connectivity<br />Urban – Suburban:<br />Up-to 2100 MHz<br />Rural / Nation-wide: Digital dividend up-to 900 MHz<br />Illustration<br />13<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  33. 33. Backhaul will force re-thinking the network design.LTE’s extremely power-full air-interface, i.e., 100+ Mbps, will require extensive backhaul fiber deployment.<br />LTE air-interface<br />30mean to 100+peak Mbps<br />(per sector)<br />DWDM<br />DWDM<br />Evolved<br />Packet<br />Core<br />100 Gbps<br />DWDM<br />eNode<br />100<br />GbE<br />DWDM<br />DWDM<br />FTTS1 100+ Mbps<br />32:1<br />320:1<br />eNodes per element<br />3200:1<br />BH Throughput<br />3+<br />32+<br />320+<br />In Gbps<br />Illustration<br />14<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  34. 34. Our Connected Life ... @Home, @Work and on-the-Go The drive and strive for convergence<br />Technology trends<br />Sharing 100 Mbps <br />with up-to 7000+ devices<br />per macro-cellular radio node.<br /><ul><li>Transparent off-loading strategies.
  35. 35. Boost out-side in coverage-capacity</li></ul>Fiber-to-the-Site.<br /><ul><li>Inside-out coverage</li></ul>In-home “backhaul” connectivity.<br /><ul><li>Always-best-connected offers.</li></ul>Node<br />FTTS 100 Mbps<br />Out-side in coverage<br />versus<br />In-side out coverage<br />AP (e.g., WiFi or Femto,..)<br />New partnership models<br /><ul><li>Network Factory concept
  36. 36. Beyond network sharing.
  37. 37. Multi-party sharing (>2 parties).
  38. 38. Mobile-Fixed JVs.
  39. 39. Network spin-offs.</li></ul>Home Environment with ca. 2.3 people <br />per Home<br />FTTH 100+ Mbps<br />Cable 100+ Mbps<br />VDSL 40+ Mbps<br />15<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  40. 40. 2020 Western Europe <br />Prediction 1<br />Prediction 2<br />Max 2 mobile network infrastructures (per country) connected to <br />1 Fiber or DOCSISx networks<br />(1 pan-European mobile LTE network incl. <br />S-band & white-space).<br />Most MNOs have spun-off<br />their mobile networks or<br />leasing their infrastructure to Global Service Providers.<br />(mobile-fixed-media JVs and mergers).<br />Prediction 3<br />Prediction 4<br />Cognisant network and massive interconnected smart-devices.<br />(more than 50% mobile data traffic being<br />off-loaded to fixed, cloud storage/computing)<br />Smart-device and application oriented business models rules across all platforms & channels.<br />(provided by GSPs)<br />16<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  41. 41. Re-think the Mobile-only business model.What we need to be passionate about.<br />Mitigate spectrum crunch-> acquisition, off-loading & policy.<br />New partnership models optimizing across Mobile, Fixed & Device.<br />Innovation across network, device & OS -> The Cognisant Network.<br />New financing structures -> public funding, supplier financing, …<br />17<br />Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.<br />
  42. 42. Thank you for your interest!<br />Contact: kim.larsen@t-mobile.nl<br />Mobile: +31 6 2409 5202<br />http://nl.linkedin.com/in/kimklarsen<br />Acknowledgement: I am indebted to my fantastic team for always being patient with my data requests, for their great suggestions and support in creating this presentation.<br />
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