WIMAX vs. LTE: Opportunities for Greenfield Operators


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WIMAX vs. LTE: Opportunities for Greenfield Operators

  1. 1. © 2008 Magicnode George Sarmonikas, MSc. CEng. Independent Consultant Opportunities for Greenfield Operators and New Entrants in the MBB Ecosystem: WIMAX vs. LTE MarcusEvans Annual 3G/HSPA Evolution & Optimization Conference January 2009 Prague, Czech Republic
  2. 2. Page: 2 Copyright © 2008, magicnode Company Information an independent telecom consulting, training and solutions provider firm Background • Operating since 2004 • World leading WIMAX experience, since 2001 • Proven expertise on 3G / HSPA planning & optimization Expertise • Radio Access Networks 3G, HSPA, LTE, WIMAX, WiFi, WSN • IP Networks E2E performance optimisation, VoIP (SIP) • Mobile Value Added Services Data messaging, WAP, MMS, Mobile 2.0, Mobile computing, Mobile OS Client locations • Europe (ISPs) • Middle East (WISPs, MNOs, R&D organisations) • Asia, SE Asia (MNOs, ISPs) System IntegrationSystem Integration WIMAX network deploymentWIMAX network deployment Mobile VAS solutionsMobile VAS solutions Customised mobile softwareCustomised mobile software Mobilisation of the WebMobilisation of the Web WIMAXWIMAX 3G, HSPA, LTE3G, HSPA, LTE TDTD--SCDMASCDMA WiFiWiFi, UWB,, UWB, ZigbeeZigbee PacketPacket--domain coursesdomain courses Customised coursesCustomised courses Telecom market analysis, research, strategic advisoryTelecom market analysis, research, strategic advisory TechnoTechno--economic studies & vendor due diligenceeconomic studies & vendor due diligence Feasibility studiesFeasibility studies Network planning / design / optimisation / auditingNetwork planning / design / optimisation / auditing
  3. 3. Page: 3 Copyright © 2008, magicnode Current Mobile Broadband Market Advantages and Disadvantages of entering the market at this time Critical factors that will determine technology choice WIMAX vs. LTE: From the perspective of a new entrant Positioning strategies to gain differential advantage Agenda 1 2 3 4 5
  4. 4. Page: 4 Copyright © 2008, magicnode The necessity for Mobile Broadband • Consumers demand more… • Connectivity A laptop computer without internet access has limited potential and value • Variety Many different devices and brands with many different connectivity options • Convenience Always have access to your services at any time and any place • Broadband benefits the society • Personal efficiency & freedom, • Business opportunities, • Social interaction (Web 2.0 communities) • Entertainment via User Generated Content • Creates growth to the individual and the country • Mobile Broadband sets you free & connects the unconnected Source:Source: NGMN.orgNGMN.org 1
  5. 5. Page: 5 Copyright © 2008, magicnode Impressive growth of Mobile Broadband • Shape of things to come: • The wireless industry is reshaping to: ““Ubiquitous alwaysUbiquitous always--on highon high--speed accessspeed access” • Number of Mobile Broadband subscribers will overtake fixed broadband subscribers by 2012 • The mass market of MBB will happen due to: • Low & flat rate pricing • Advanced ubiquitous access • User friendly devices • MBB expands the current broadband market by introducing: • Consumer Electronic devices which are always connected embedded MBB modules • Enhance already existing multimedia services and “mobilise” current web services Source: OvumSource: Ovum Mobile Broadband has brought fast growth of data services and high revenues 1
  6. 6. Page: 6 Copyright © 2008, magicnode The Mobile Broadband Ecosystem ConsumersConsumers Good price/performance Quality of Service Good MBB experience OperatorsOperators Reuse of assets Interoperability Complete product portfolio customer satisfaction VendorsVendors Feature rich devices economies of scale global reach long term roadmap Mobile Broadband is already here! There are >400 different MBB devices, from 80 vendors, currently commercially available 2
  7. 7. Page: 7 Copyright © 2008, magicnode Mobile Broadband penetration today ~466M Population ~210M Internet users Potential for Mobile Broadband Fixed Broadband subscribers 58M Huge unHuge un--tapped market can be addressedtapped market can be addressed todaytoday Europe: 13.2 0.8 3.0 0 5 10 15 2000 01 02 03 04 05 06 07 Developed Developing World Mobile broadband households per 100 households World: MBB penetration so far: 13.2% in developed countries 3.0% in developing countries In Europe & CIS countries, MBB penetration is only: 7.8% Source: ITUSource: ITU 2
  8. 8. Page: 8 Copyright © 2008, magicnode Advantages of entering the market at this time • It is an ideal time to enter the MBB market • Greenfield Operators & New Entrants have an advantage because: • Global MBB penetration is still very low < 3% Can gain a big piece of the pie • New entrants can get a high market share from fixed players xDSL penetration is < 6% • MBB ecosystem is already here today Fast time to market Economies of scale • “Mobile Broadband": the killer application Increased revenues due to increased data traffic • Users are aware of “Mobile Broadband” No significant customer training is required • Users require higher data rates and better offers from their current MBB offerings Innovative new entrants with attractive offerings will have an advantage • The MBB “recipe” is already successful Can learn from the success of already existing MBB operators • Mobile Broadband is here to stay Permanent revenue stream • Internet Access is changing; the rise of “personal broadband” Only mobile broadband can satisfy users’ needs • Flat rate pricing; benefit from volumes and not the single price MBB pricing tends to be lower than fixed attracting users 17.7 2.3 5.2 0 5 10 15 20 98 99 2000 01 02 03 04 05 06 07 Developed Developing World Fixed broadband households per 100 households Source: ITUSource: ITU Successful MBB countries Source: Analysys Mason 2008Source: Analysys Mason 2008 2
  9. 9. Page: 9 Copyright © 2008, magicnode Disadvantages of entering the market at this time • MBB may look risky due to low ARPU • ARPU is expected to half in the next 4 years negative business case • In some countries/markets MBB is already very competitive; cheaper than xDSL Difficult to compete • End-user experience may be poor if network capacity and/or coverage is not sufficient • Network Economics might prove difficult. Infrastructure CAPEX might be very high up to 3.5x higher than HSPA Source: EricssonSource: Ericsson Source: Magicnode 2008Source: Magicnode 2008 2
  10. 10. Page: 10 Copyright © 2008, magicnode Which factors determine technology choice? There are many technologyThere are many technology candidates for Mobile Broadbandcandidates for Mobile Broadband ……and intense competitionand intense competition HSPA EvDo TD-CDMA TD-SCDMA iBurst FlashOFDM WiBro WiMAX WiFi WIMAX Evolved 802.20 802.22… LTE UMB Evolved EDGE 3
  11. 11. Page: 11 Copyright © 2008, magicnode Which factors determine technology choice? Ecosystem Regulation Supporting Lobbies Standardisation Technological Mature & sustainable ecosystem Variety of devices Economies of scale Low cost National & International regulatory aspects are very important Operating band is governed by Regulations affects coverage Licensed or Unlicensed band? affects interference Spectrum usage & Transmit Power affects performance Organisations that promote their preferred technology for MBB i.e.: WIMAX Forum, GSMA, IEEE, NGMN Lobbying power great influence & support Technological / Commercial steering committees Open standard or proprietary technology? Open standard Is there a roadmap for the future? Is the technology interoperable with other technologies? How much radio spectrum affects cost & performance Capacity & Coverage performance Maximum system data rate Easy of deployment 3
  12. 12. Page: 12 Copyright © 2008, magicnode Which technologies satisfy best the decision criteria? All MBB technologies are good… but “PEST” rules: Politics, Economics, Social Technology 11 22 Five technologies satisfy best the MBB criteria, however WIMAX and LTE are more suitable! 4
  13. 13. Page: 13 Copyright © 2008, magicnode • • • • • • Computers (with communication) Sell products, subsidise services Broadband bit pipes Best effort service (QoS) Internet architecture (flat All-IP) Mainly TDD radio technologies LTELTEMobile WIMAXMobile WIMAX IT Industry Telecom Industry Two main routes to Mobile Broadband • (Smart) Phones • Sell services, subsidise goods • Mobile Value added services • Reliable and secure • Telecoms architecture (flat All-IP only w. LTE) • Mainly FDD radio technologies Some facts: Mobile WIMAX is here today; LTE isn’t, it will be available in 2010 Mobile WIMAX and LTE are very similar (>80% of the technology is the same) WIMAX and LTE are for different customers in different spectrum no strong competition LTE is an evolution of 3G (not a revolution) Both technologies might converge under IMT-Advanced (4G) ~ 2011 4
  14. 14. Page: 14 Copyright © 2008, magicnode It is expected that the costs of infrastructure and maintenance for New Entrants will be lower for mWIMAX than for LTE (Greenfield scenario). → New Operators will be able to deploy their all-IP based core and access networks using low-cost off-the-self equipment such as IP routers switches and servers. Assuming that the number of base stations required for both technologies are the same, then the Total Cost of Deployment (TCD – equipment + site acquisition) is lower for Mobile WiMAX than LTE. But... if New Entrants choose Mobile WIMAX , they should acquire frequency spectrum in bands lower than 3.5GHz. Only in some markets there is availability of low-freq. bands i.e. <2.6GHz. Comments WIMAX vs. LTE: Assessment Low Spectrum Cost Infrastructure Cost (CAPEX) Operational Cost (OPEX) Terminal Cost Highest Revenue (ARPU) Highest Capacity Best Coverage Low Deployment Complexity Mobile WIMAX LTE Remarks 3 1 WIMAX’s spectrum cost is lower than LTE’s spectrum cost in most markets 2 3 LTE equip. are expected to cost higher than current mWIMAX. 1 2 WIMAX maintenance cost can be very low since it is based on pure IP network nodes. 2 1 Initially, LTE devices will be expensive however, due to economies of scale their cost will drop lower than WIMAX devices 2 2 ARPU is expected to be more or less the same for both technologies 3 4 The useful spectral efficiency of LTE is higher than mWIMAX for the same bandwidth, offering slightly higher data rates 1 4 The high operating frequency of mWIMAX (3.5GHz in most regions) is prohibiting large scale coverage. 3 2 LTE is inheriting some complexity from 3G making it more difficult to deploy than WIMAX Lower Total Cost 3 2 Overall Mobile WIMAX proves cheaper 4
  15. 15. Page: 15 Copyright © 2008, magicnode WIMAX vs. LTE: Which is better for new entrants? • Mobile WIMAX proves to be cheaper to deploy and run than LTE • But, Deployment Cost is relative to Frequency Band • Europe & MEA : 3.5GHz & 5GHz bands Expensive if large deploymentExpensive if large deployment • Cell size directly relative to frequency band: •• High frequencyHigh frequency small cell sizesmall cell size high investmenthigh investment & •• Low frequencyLow frequency large cell sizelarge cell size low investmentlow investment • WiMAX (3.5GHz) require 2x the sites of LTE (2.6GHz) for same coverage • If LTE refarming at 900MHz, then WIMAX will require 4x more investment for same cov. • WIMAX (3.5GHz) indoor coverage in dense urban areas proves very difficult. Solution: High site densityHigh site density, or WIMAX FemtocellsWIMAX Femtocells • WIMAX will be more successful in the Emerging markets •• In countries with 2.3GHz, 2.5GHz and (possibly) 700MHz bands,In countries with 2.3GHz, 2.5GHz and (possibly) 700MHz bands, WIMAX technology is preferableWIMAX technology is preferable.. • It is forecasted that by 2012, WIMAX will have: 50% share in the Emerging markets • LTE will be more successful in the Mature markets • Existing IMT-2000 spectrum is expensive for new entrants or Greenfield operators; New entrants could wait for the 2.5GHz, 700MHz or 900MHz reNew entrants could wait for the 2.5GHz, 700MHz or 900MHz re--farm, which will be cheaperfarm, which will be cheaper •• LTE will be the preferred choice by New Entrants with GSM spectrLTE will be the preferred choice by New Entrants with GSM spectrum (900MHz) orum (900MHz) or MVNOsMVNOs Notice: Mobile WIMAX at 700MHz TBD in EMEA & NA 4
  16. 16. Page: 16 Copyright © 2008, magicnode mWIMAX vs. LTE: Conclusion • The business case for a new entrant is challenging no matter which technology is chosen • Choosing the right technology path depends on each operator’s individual situation • Regional Constraints • Social trends • Politics • Local ecosystem Greenfield OperatorGreenfield Operator mWIMAXmWIMAX LTELTE New EntrantNew Entrant ((WirelineWireline Operator)Operator) New EntrantNew Entrant (Mobile Operator)(Mobile Operator) Scenarios Depends on the region (frequency): WIMAX if frequency < 3.5GHz, alternatively LTE Converged services can be offered LTE if spectrum is available. Deployment timeframe → now >Q4 ‘09 4
  17. 17. Page: 17 Copyright © 2008, magicnode • Check your competitors • Use this model to better understand the market you operate. • Develop an edge over rival operators • Know your strengths • i.e. low frequency, available bandwidth etc.. • Know your core competencies • i.e. coverage, capacity etc.. • Position by leveraging core competencies & strengths • Three possible generic strategies • Cost Leadership • Offer the cheapest services in the market • Differentiation • Differentiate by offering additional innovative services • Focus • Focus on specific market segments i.e. vertical markets • What market segments are available within the MBB market? How to position in the MBB ecosystem? Porter’s 5 forces MBB Positioning Strategies Target Scope Advantage Low Cost Service Uniqueness Broad (Industry Wide) Cost Leadership Strategy Differentiation Strategy Narrow (Market Segment) Focus Strategy (low cost) Focus Strategy (differentiation) 5
  18. 18. Page: 18 Copyright © 2008, magicnode MBB Service Model: Consumer Market • MBB can satisfy the consumers’ needs Basic Internet Access Broadcasting/Multicasting Other VAS Communication ConsumerConsumer MarketMarket • Instant Messaging • Video conferencing • VoIP • Email • Wireless Office • Telematics • Location aware services • Online gaming • Real time streaming • Video on Demand • IPTV • Web Surfing • Social Community Networks 5
  19. 19. Page: 19 Copyright © 2008, magicnode MBB Service Model: Vertical Market • MBB can offer value added services to the vertical businesses • Very promising market; expected to boom in the next 5 years Commodity Utilities Manufacturing Property & Security & Law enforcement Tourism TelecommutingVerticalVertical MarketMarket Some applicationsSome applications • Airports, harbors, railways • Transportation • Broadband inside trains • Hotels, Resorts, shopping malls • Tour guide, entertainment, etc.• Construction & property mgmt • Remote monitoring, automation • Video Surveillance • Emergency services • Police wireless data network • Fleet Management • Maintenance, surveillance • Telematics • Power, Water, Oil, Gas • Telemetry • Can reuse their assets i.e. poles, fiber etc… 5
  20. 20. Page: 20 Copyright © 2008, magicnode MBB Service Model: B2B Market • The MBB Wholesale Opportunity: • Enable the creation of Data MVNOs • Rent MBB data to those with no spectrum • B2B is all about partnership & advertisement BenefitsBenefits • Enhance value • Attract business partners • Control the access in hotspots business zones with High QoS • Exploiting assets from non- telcos brands • High usage of Value-Added Data Services in hot spots DescriptionDescription • Allow to share a Mobile Broadband infrastructure between several Network Service Providers or MVNOs. • The Data MVNOs provides IP connectivity and other VAS services to MBB subscribers with a Service Level Agreement Business modelsBusiness models • In-building public and private MBB • Video surveillance • Telemetry (building, control systems...) • Public safety services • Partner with advertisement companies B2BB2B 5
  21. 21. Page: 21 Copyright © 2008, magicnode Strategic Alliances are vital • Strategic alliances are key for gaining differential advantage • Alliances are key to MBB success • Horizontal segment – to keep risks & costs down • Site sharing can reduce costs up to 45% • Vertical segment – to achieve maximum value • Outsourcing service creation can reduce costs up to 30% • Partner with content providers & aggregators • Universal, Sony, Warner Bros etc… • Create strategic alliances with global Web 2.0 players • Google, Yahoo, Apple etc… Equipment manufacturers ApplicationServiceProviders Source:Source: NGMN.orgNGMN.org 5
  22. 22. Page: 22 Copyright © 2008, magicnode Hyper Segmentation • Enter the consumer market with more than 3 – 4 segmented brands. i.e. for the mobile broadband affine youth segment No. of connection (segment size) Segmentvalue(peruser) Low end users Second home No broadband alternative Mobile Internet everywhere Corporate users Students Low cost users Tourists Casual users Youngsters 5
  23. 23. Page: 23 Copyright © 2008, magicnode Convergence & Bundles Convergence is key • The “worst case scenario” is to reduce to Internet Bit Pipes no value • Services/VAS is the solution • Integrating many services in single devices or single offering, i.e. MBB + DVB-H + VoIP.* • Converge: fixed, wireless, TV, Internet and Voice into one service offering → MBB * Offer bundles • Bundle your offering with content • Create bundles with vertical applications: • Security (i.e. Firewalls, Antivirus etc…) • Parental Control • Mix, games with MBB Online Gaming • Successful example: H3G Austria • Create “service abundance”: flat rate voice + MBB + Mobile TV + VoD Convergence ? • Successful example: H3G Italy MBB converged offering 5 * In South Korea
  24. 24. Page: 24 Copyright © 2008, magicnode End User Experience is king ! • Ensure high average end-user data rates > 200Kbps (less than 200Kbps is not considered broadband anymore) • Ensure good coverage and try to avoid having “dead spots” • Take advantage of network utilisation through a “Differentiated QoS Strategy” • Silver : Best effort service • Gold : Allow prioritised access • Platinum: Allow highest availability • Offer easy to user products and services • Feature rich devices & price simplicity • Offer a consistent end-user experience • User-customisable devices & products gain differential advantage • Allow customer “involvement” & “interactivity” good customer relation 5
  25. 25. Page: 25 Copyright © 2008, magicnode Conclusion – key points to remember • Advantages & disadvantages of entering the market at this time • There is no better time to enter the MBB market but now • Mobile Broadband is the killer application you are looking for! • Critical factors that determine technology choice • Political, Economic, Social factors rule. These change country-by country • Both Technologies are about the same. It does not matter which one you choose. • WIMAX vs. LTE from the perspective of a new entrant • Mobile WIMAX is ideal for the emerging markets & for those with low frequency bands • LTE is an ideal technology for the developed market & for current Operators with GSM spectrum • WIMAX & LTE are 80% same → They have extremely similar performance. • Positioning strategies to gain differential advantage • Depends primarily on New Entrant’s individual strategy • Flat Rate Data Tariffs – Key Driver • but….not always the best solution → cannibalisation, network over-utilisation, reduce to dump bit-pipe • Embrace the open internet → Open Garden Strategy • Follow a suitable Telco 2.0 strategy • Hyper Segment • Offer complete product portfolio & subsidise end-user terminals • Convergence & Bundles can provide key differential advantage • Consider the “Vertical Markets” → Very high revenue potential in the next 5 years • Speed, Speed, Speed • Coverage, Coverage, Coverage
  26. 26. Page: 26 Copyright © 2008, magicnode Thank you ! Contact george@magicnode.com