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Presented at the 4G World China Conference in Beijing, May 20, 2011.

Presented at the 4G World China Conference in Beijing, May 20, 2011.

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Economics of 4G Introduction in Growth Markets Presentation Transcript

  • 1. Economics of 4G Introduction in Growth Markets.4G World China 2011, Beijing, 20th May 2011.
    Dr. Kim Kyllesbech Larsen, Technology EconomicsTechnology, Deutsche Telekom.
  • 2. Deutsche Telekom.
    • 17 countries covering 300m pop and 130m HH in Europe.
    • 3. 2010 Net Revenue EUR 62bn. & EBITDA of EUR 20bn.
    • 4. Ca. 250 thsdemployees.
    • 5. Ca. 100m mobile subscribers.
    • 6. 100+ thsdradio nodes.
    • 7. 2G: GSM, GPRS, EDGE.
    • 8. 3G: UMTS, HSPA & HSPA+.
    • 9. LTE:@ 800 and 1800 MHz.
    • 10. 2 major network sharing deals (UK & PL), more to follow.
    • 11. Spectrum bands covers from 800 MHz up-to 2.6 GHz.
    • 12. Ca. 2m IPTV subscriptions.
    • 13. Ca. 36m fixed network lines.
    • 14. Ca. 17mbroadband lines.
    Netherlands
    Netherlands
    Poland
    Poland
    Germany
    Germany
    (mother-ship)
    Czech
    Czech
    Republic
    Republic
    Slovakia
    Slovakia
    Hungary
    Hungary
    Austria
    Austria
    Romania
    Romania
    Croatia
    Croatia
    Bosnia
    -
    Bosnia
    -
    Serbia
    Serbia
    Herzegovina
    Herzegovina
    Bulgaria
    Bulgaria
    Montenegro
    Montenegro
    Macedoni
    Macedoni
    a
    a
    Albania
    Albania
    Greece
    Greece
    2
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 15. A bygone time … not so long ago ...When 1 + 1 was close to 2.
    Blablabla
    ... Bla …
    Mobile Network
    We talked (a lot)
    Rarely did we use the (mobile) web.
    We SMS’ed (even more)
    3
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 16. A new paradigm … 1 + 1 is no longer “just” 2 ... Applications have “taken over” the communications.
    1
    User
    1
    Device
    Many applications
    User & application initiated bandwidth demand.
    Device & application (IP addr, keep alive, …) driven signaling resources.
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
    4
  • 17. Technology progress (LOGARITMIC SCALE in peak Downlink Mbps)
    Future mobile growth will be media and data centric.
    Today - 2014
    Fuelled by:
    Today
    Appealing
    Terminals
    CDMA
    OFDM 1
    TDMA
    New Usages
    Devices’ Data Usage (in MB normalized to handset usage (=100%), Dec. 2010)
    Broadband
    &
    Ubiquity
    1 DL is OFDM, UL is SC-FDMA.
    5
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 18. The smartphone decade just started.
    Socialize
    Smartphone sales 1
    (Western Europe)
    500+m Facebook users
    of which 250+m mobile.
    160+m RenRenusers
    250+m Twitter accounts
    Digitize
    5 bn. mobile phone users
    2.0+ bn. internet users
    50+ Tbgenerated / day.
    3+ bnphoto uploads/month.
    Mobile OS share of sales 1
    (Western Europe)
    Individualize
    10+ bn apps downloads.
    400+ mdifferentsmartphones.
    700+ m on social networks.
    NoteAll statistics provided are estimates of year end 2010 statistics or most recently available.
    6
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 19. Uncontrolled data growth ... Smartphone traffic tsunami.
    Smartphone indicators
    ×7
    Data signaling
    Problems!
    May – June 2010 (Netherlands).
    “iPhone overload T-Mobile (NL) network” (Volkskrant, May 2010).
    “T-Mobile (NL) gives compensation”.
    (2 month no data charge & iPhone users gets €30.)
    “T-Mobile (NL) admits not able to handle data growth in its mobile network“ (Tweakers.net).
    ×6
    Smartphones
    ×4
    Throughput
    ×5
    Volume
    December 2008 to December 2010
    7
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 20. Uncontrolled data growth ... All you can eat … network indigestion...
    June 2007 AT&T Inc. and Apple® today announced three simple, affordable service plans for iPhone™ which start at just $59.99 per month. All three plans include unlimiteddata. 
    June 2010 “AT&T wireless chief Ralph de la Vega has said the carrier is battling congestion in New York and San Francisco as a surge in smartphone use has clogged its network. “ (Bloomberg).
    June 2009 De La Vega (AT&T) said that just three percentof smartphone users are eating up 40 percent of available capacity, and that most of it is thanks to high-bandwidth video streaming apps.
    June 2009 AT&T announces unlimited data plans for all smartphones for $30 monthly charge.
    June 2010AT&T Inc “will cut wireless data-plan prices for most users next week and stop offering unlimited data plans to manage soaring demand for data-hungry devices like Apple Inc.’s iPhone.”(Bloomberg)
    September 2009 “Customers Angered as iphonesOverload AT&T.”
    (The New York Times)
    8
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 21. Profitability pressure accelerating LTE deployment.
    Cash pressure by un-controllable
    mobile data growth
    As it looks today
    Flat price plans and un-controllable mobile data growth will be very challenging to support with HSPA only.
    Free cash flow
    Trends
    • HSPA alone cannot sustain the traffic.
    • 22. LTE deployment will be accelerated.
    • 23. Home off-loading to WiFi and Femto.
    HSPA only
    -
    No LTE
    HSPA, with LTE deployment
    HSPA+LTE, 50% off
    -
    load
    2010
    2012
    2014
    2016
    2018
    2020
    Illustration
    9
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 24. The smartphone … The “killer” device and its “killer” applications…
    10
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 25. GGSN
    MME/SGW
    SGSN
    RNC
    NodeBs
    eNodeBs
    HSPA
    (CDMA)
    LTE
    (OFDM/SC-FDMA)
    Transition to LTEOffer improved scale, economy & customer experience.
    LTE vs HSPA+
    • Flexible bandwidth1 1.4 -> 20+ MHz.
    • 26. Freq. span 700 MHz-> 2.6 GHz.
    • 27. Higher speeds (×2 – ×3).
    • 28. Higher spectral efficiency (>30%).
    • 29. Much lower latency (<10ms).
    • 30. Lower signalling levels 2 (ca. 60%).
    • 31. Flat IP architecture (less nodes).
    LTE
    20 MHz
    1.4 MHz
    HSPA n x 5 MHz
    CELL_DCH
    Connected
    Handover
    CELL_FACH
    Reselection
    CELL_PCHURA_PCH
    Reselection
    The QoS and policy control in LTE are much richer and flexible.
    Idle
    Idle
    Reselection
    5
    HSPA
    2
    LTE
    LTE is much better optimized for short packet transmission.
    1 Single sided, i.e., UL or DL, 2 For data handling.
    11
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 32. LTE deployment requires “free” spectrum.
    900 MHz (2G some 3G)
    400 MHz
    700 MHz (LTE)
    800 MHz (LTE)
    UL
    (35MHz)
    DL
    UL
    DL
    UL
    DL
    UL
    (30MHz)
    DL
    1,800 MHz (2G)
    1,500 MHz (MSS L-band)
    UL
    (75 MHz)
    DL
    TDD
    UL
    (58 MHz)
    DL
    TDD
    (20 MHz)
    2,100 MHz (MSS S-band)
    2,100 MHz (3G)
    2,300 – 2,400+ MHz
    DL
    UL
    (60 MHz)
    TDD
    (100 MHz)
    DL
    3G
    TDD
    part TDD
    (mainly APAC)
    3G
    TDD
    UL
    (20 MHz)
    2,600 1 MHz (4G & LTE)
    3,400 – 3,500+ MHz
    UL
    (70 MHz)
    TDD
    (50 MHz)
    DL
    part TDD
    This band provides interesting backhaul P2P options in some Greenfield scenarios
    1 The shown structure consistent with European band plan. In USA this band is held by Clearwire and primarily used for
    TDD WiMax.
    12
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 33. Spectrum pricing & perceived value.2.6 GHz is perceived to be of low value compared to lower frequency spectrum that offers economical and efficient coverage.
    Average spectrum price in US$/MHz/Pop.
    UMTS2.1 “hyper-hyped” value
    Log-scale
    10
    D
    UK
    Economical
    coverage
    Artificial scarcity
    NL
    US 1
    CAN
    India 3 Max
    Very dense, small area coverage, high GDP.
    1
    US
    D 2
    • Very dense, small area coverage (HK).
    • 34. Low absolute price compared to GDP.
    • 35. Perceived value add (DK, SE).
    India 3
    HK
    NL
    DK
    US
    SE
    CAN
    0.1
    D 2
    NOR
    Capacity
    enhancement
    AT 5
    D 2
    • Capacity overlay.
    • 36. No (real) demand.
    • 37. Government push for new entrant.
    0.01
    India 3 Min
    FI
    Large area, low pop density, very low GDP
    US 700 MHz auction 2008,
    German 800 MHZ – 2.6 GHz auction 2010
    Indian 3G / BWA 2.3GHz auction 2010.
    Dutch 2.6 GHz auction 2010.
    Austrian 2.6 GHz auction 2010.
    NL4
    0.001
    0.5
    1.0
    1.5
    2.0
    2.5
    3.0
    Auctioned spectrum in GHz
    13
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 38. Spectrum re-farming … a very complex process...Additional spectrum provides control & mitigate risks.
    Today
    situation
    E.g., GSM
    3G
    Ready for
    re-farm
    Complex &
    Difficult to control
    Time
    2G
    Add “new”
    spectrum
    Migrate
    Traffic
    E.g., LTE
    Illustration
    14
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 39. Spectrum benchmarking.2.6 GHz requires least 9×the site density to match 800MHz.
    800 MHz
    DL power
    UL power (typical limitation for coverage)
    2.6
    GHZ
    Large
    Very small
    Coverage area
    ×9
    ×1
    ×6
    ×4.5
    2.1 GHz
    2.6 GHz
    1.8 GHz
    900 MHz – 800 MHz (digital dividend)
    2×35 MHz
    2×30 MHz
    2×60 MHz
    2×75 MHz
    190 MHz
    Low
    High
    Available bandwidth for LTE
    Illustration
    15
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 40. LTE deployment models.Availability of a wide range of frequencies will be essential for economical network deployment.
    Throughput / Capacity
    Hot-
    Spots
    2.3
    to
    2.6
    GHz
    2.3 - 2.6 GHz
    Femto-cells
    Rural Fixed-like
    LTE connectivity
    Urban – Suburban:
    Up-to 2100 MHz
    Rural / Nation-wide: up-to 900 MHz
    Illustration
    16
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 41. Backhaul will force you to re-think network design.LTE’s extremely power-full air-interface, i.e., 100+ Mbps, will require extensive backhaul fiber deployment.
    LTE air-interface
    30mean to 100+peak Mbps
    (per sector)
    DWDM
    DWDM
    Evolved
    Packet
    Core
    100 Gbps
    DWDM
    eNode
    100
    GbE
    DWDM
    DWDM
    FTTS1 100+ Mbps
    32:1
    320:1
    eNodesper element
    3200:1
    BH Throughput
    3+
    32+
    320+
    In Gbps
    Illustration
    17
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 42. The backhaul challenge … macro vs micro.Distribute mobile broadband traffic differently.
    Illustration
    LTE provides up-to 100Mbps
    per sector
    AP (e.g., WiFi / Femto,..)
    Node
    FTTS1 100+ Mbps
    100+ to
    40 Mbps
    300 – 7,000 active devices
    per macro-cellular node
    (dense-urban / urban)
    100+ Mbps
    shared with
    up to 7,000 devices.
    Home Environment
    with ca. 2.3 people per Home 1
    connected to Fiber, Cable or VDSL.
    Up-to 100+ Mbps
    shared by
    2+ people.
    1 Average for Western Europe.
    18
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 43.
    • Today 50+% on 3G/HSPA
    • 44. 2011+ Ramp-up LTE deployment.
    • 45. 2015 620 mio mobile subs …10% LTE.
    • 46. 2020 670 mio mobile subs …60% LTE.
    LTE later in Growth markets, but will catch up fast.
    Western Europe 1
    LTE in Europe
    Growth Markets 1 2
    LTE in APAC Growth Markets
    • Today less than 20% on 3G/HSPA
    • 47. Before 2015 limited LTE deployment.
    • 48. 2017 4.0 bn mobile subs …10%+ LTE.
    • 49. 2020 4.5 bn mobile subs … 60%+ LTE.
    1 Pyramid Research (April 2011) until 2015. After 2015 technology diffusion model applied to technology development favoring LTE as main conversion technology.
    2 China, India, Indonesia, Malaysia, Pakistan, Philippines, Taiwan, Thailand, Vietnam.
    19
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 50. Capex … for Western Europe (mature markets).Introducing LTE will increase the capital demand.
    +5.0%
    Illustration
    Capex to
    Revenue
    Ratio
    12+%
    +3.0%
    Revenue +3%
    8.0%
    LTE
    Intro
    New RAN Technology
    Introduction
    Incl. modernization.
    Capex -30%
    New Equipment ca. 10%
    New Site Build ca. 20+%
    Maintenance
    Business cycle
    Rollout intensive
    business cycle
    Examples of Capital opportunities:
    • Price erosion
    • 51. Sync with modernization cycle.
    • 52. Sharing opportunities.
    • 53. Efficient multi-mode SDR equipment.
    Examples of Capital risks elements:
    • Spectrum acquisition (not incl. above).
    • 54. Fiber backhaul invest (not incl. above).
    • 55. LTE grid mismatch with legacy grid.
    • 56. High legacy capacity investments.
    NOTE The above is an illustration of the average mobile operator. Depending on country and specific operator variations to the above should be expected. Though variations
    are lot less dramatic as compared to growth markets.
    20
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 57. Capex … Growth Markets in Asia.Its complicated and with substantial capital uncertainties.
    Illustration of Asia Growth Markets
    Capexto
    Revenue
    Ratio
    Revenue +8%
    30%
    ?
    • + 1.7+ Bn mobile subs
    • 58. +165+ m 3G subs
    • 59. + US$100+ Bn revenue.
    • 60. Average margin 46%
    • 61. >90% prepaid
    <18%
    Ca. 10% (lower band)
    2004
    (<20%)
    2010
    (70%)
    2015
    (>100%)
    Mobile
    penetration
    Grow 1.5+ bn mobile data customers
    NOTE The are some very wild swings from country to country as well as in the country. Working with averages is only meaning full as an illustration.
    21
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 62. Key challenges.What we need to be passionate about.
    Backhaul -> Gbps will be needed -> Think Fiber and off-loading.
    Radio nodes-> multi-mode SDR capabilities to mitigate uncertainty .
    Spectrum -> acquisition and re-purposing of legacy bands.
    Prepare for early LTE deployment -> might be needed sooner than later.
    22
    Kim Kyllesbech Larsen, 4G World China 2011, May 20th, 2011, Beijing
  • 63. Thank you for your interest!
    Contact: kim.larsen@t-mobile.nl
    Mobile: +31 6 2409 5202
    http://nl.linkedin.com/in/kimklarsen
    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.