Roa consulting lte2.0 begins


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This strategy report shows coming LTE 2.0 world in global market and analyzes South Korean LTE market as a significant case of the LTE 2.0.

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Roa consulting lte2.0 begins

  1. 1. ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806 “LTE 2.0 Begins”, leading to another phase in the Telecom industry What will be the smart business strategies for LTE 2.0 service which accounts for 73% of total mobile users in Korea in 2013? David Kim, CEO/Head Consultant Kyung Hyun Lee, Senior Consultant 1 James Kang, Senior Consultant/InfographerSource 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited
  2. 2. ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806Part I. What Is LTE 2.0? – Concept and Understanding of LTE 2.0LTE 2.0 is on the rise.How is LTE 2.0 distinct from LTE 1.0? LTE 1.0 refers to the mobile market competition in Korea to secure anation-wide LTE network and was begun with LGU+’s full-coverage efforts to overcome its limitations in the3G market with LTE. Accordingly, the three mobile carriers in the domestic market were concentrated on twofactors with their LTE marketing: whether to secure a nation-wide LTE network, and whether to offer betterquality and faster services compared to WCDMA. Now, however, the argument over ‘the nation-wide LTEnetwork’ is completed. The focus of TV ads for LTE service is fast moving from the network to contents andservice platform. Then, what is LTE 2.0 and how that can be defined? ROA Consulting defines LTE 2.0 asfollows. Figure 1. Evolution from LTE 1.0 to LTE 2.0Source: ROA Consulting 2Source 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited
  3. 3. ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806Definition of LTE 2.0 – LTE 1.0 can be defined as the competition to expand ‘Network Coverage’ among thethree mobile carriers and LTE 2.0 is the competition for the ‘Maximization of Service Utilization’ byproviding users with big contents and better service platforms through a stabilized and sophisticated network.To maximize LTE service utilization, which is the final goal of LTE 2.0, progresses must be made with thefollowing order of Network à Device à Service à Utilization. l Network – Infrastructure Enabler (Stabilization and Sophistication of Networks) - As LTE is developing into LTE-A (LTE-Advanced here after) or the development is being prepared, CA (Carrier Aggregation) and Multi Carrier technologies are being adopted (LTE is required to utilize spectrums allocated for other purposes to guarantee a faster service). l Device – Smart Media Device (Introduction and Growth of LTE Devices) - In addition to LTE smartphones, new media devices such as reasonably-priced tablet PCs and other M2M devices are being introduced. l Service – Big Data, Big Content Service (Big Data and Big Contents) - Big content services including HD Voice (VoLTE) and cloud-based games are being expanded thanks to the faster network. - More and more platform-based services, social, commerce and payment services in particular, are being used. l Utilization – Utility Value (Enhanced Utilization Value) -Subscription-based content use is replacing streaming and pay per view-based utilization. -Bundle products offering various contents with reasonable prices are being introduced.As seen from the case of Multi Carrier, which was developed by SKT for the first time in the world, LTE 2.0started with introduction of technologies improving early-stage of LTE networks into LTE-A. Accessibility tohigh quality and big data services equipped with HD video and sound is improving as smartphones andtablet PCs such as Nexus 7 (Google) and Suffice (MS) are playing the role of a new media offering a betteruser experience with reasonable prices. In addition, bundle products (game bundle services and music bundleservices) are providing attractive service rate for the large data services which were impossible with CDMAand WCDMA. In the age of LTE 2.0, mobile market paradigm of Korea will be shifted by those who controlthe value chain comprising Network à Device à Service à Utilization.This report is written to analyze the mobile carriers’ Network / Device / Service / Utilization businesses and toprovide strategic points in accordance with the definition of LTE 2.0 by ROA Consulting. 3Source 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited
  4. 4. ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806Part II. Analysis of Current LTE 2.0 Market Competition1) LTE Subscriber Increases from 2012 to 2013As of July 11, 2012, as many as 89 mobile carriers in the world have succeeded in commercialization of LTEservice. In Korea, LTE has been commercialized for one year and has secured 8.25 million users as of July 20,2012. According to the analysis of ROA Consulting, LTE subscribers is expected to post a rapid growth inKorea with increasing to 15.98 million by late 2012, and to 42 million or 73% out of total mobile users inKorea in 2013. In 2013, most new mobile handsets in the market will be smartphones, 70% of which are LTEhandsets (WCDMA smartphones will account for 30%).Combined LTE subscription goals of the three mobile carriers for 2012 totals 16 million, similar to the analysisof ROA Consulting, and their advertisement and marketing of the last half of 2012 is being concentrated onLTE. All in all, 2013 is expected to be the year when LTE market expands exponentially. Figure 2. LTE Subscriber Increases from 2012 to 2013 in South KoreaSource : ROA ConsultingSKT, the leading mobile service provider of Korea, is maintaining its dominant position in the domestic LTEmarket, and ranks 2nd in the global LTE market following Verizon. The achievement was possible as the 4Source 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited
  5. 5. ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806company upgrade its 3G to LTE networks rapidly and successfully. LGU+, the third player, obtained 2nd placein the domestic LTE market by following the trend. On the other hand, KT is lagging behind its competitorswith LTE subscribers less than half of SKT and LGU+ due to its belated lunch of LTE service in January 2012.SKT has a goal to secure 7 million LTE users by the end of 2012. KT, on the other hand, is poised to attract 4million LTE users and LGU+ is to secure 5 million. Combined subscription goals of the companies reach 16million (similar to the analysis of ROA Consulting) or 29.3% of total mobile users in Korea, hinting that theywill be involved in an intensifying competition to secure more LTE users. Table 1. LTE Subscribers in South Korea End of End of Goal for End of End of End of End of End of End of As of July November January the end of Coverage December February March April May June 20 the year (2011) (2012) Nation-wide, 84 cities and 889 local districts with covering SKT 380,572 634,311 1,002,642 1,336,753 1,766,325 2,380,880 2,908,964 3,400,000 4,000,000 7,000,000 99% of total population (as of June) Nation-wide, 84 cities and 889 local districts with covering KT - - 111,929 232,434 350,921 580,319 926,605 1,200,000 1,400,000 4,000,000 90% of total population (as of June) Nation-wide, 84 cities and 889 local districts with covering LGU+ 315,578 557,023 849,275 1,153,894 1,484,375 1,889,274 2,268,464 2,700,000 2,850,000 5,000,000 99% of total population (as of March) Total 696,150 1,191,334 1,963,846 2,723,081 3,601,621 4,850,473 6,104,033 7,300,000 8,250,000 16,000,000Source : ROA Consulting, Korea Communications Commission, Reports of Each Mobile carrierConsidering that all mobile carriers in Korea have secured a nation-wide LTE network covering even smalllocal districts, they can’t guarantee a differentiated LTE service with large service coverage any more. Themarket competition surrounding LTE are ushering in another phase or LTE 2.0 in which mobile carriers striveto be differentiated with competitive devices, networks, service platform and service utilization. 5Source 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited
  6. 6. ROAconsulting_Special Report_LTE 2.0 Begins_2012_08062) Analysis of Market Competition for LTE 2.0 Ø Network l SpectrumWireless spectrum is the key asset for mobile carriers because their network capacity is dependent on them.Insufficient spectrum leads to slow network speed, which is the barometer for users to evaluate mobilecommunications service. In addition, mobile carriers are required to secure so called ‘golden spectrum’ for abetter international roaming service. Table 2. Allocation and Use of Spectrum in South Korea SKT KT LGU+Frequency bands 800MHz 1.8GHz(2x10MHz) 800MHz 1.8GHz(2x10MHz) 900MHz(2x5MHz) 2.1GHz(2x10MHz : Plan to use : Plan to useSource : ROA Consulting, Report of Each CompanySKT has commercialized MC (Multi Carrier)1 for the first time in the world and is offering LTE with 40 MHzbandwidth by combining 800MHz and 1.8GHz spectrum. KT and LGU+ is offering the service with 20 MHz,utilizing 1.8GHz and 800MHz, respectively. As of now, KT strives to secure 900MHz and LGU+ is poised toobtain 2.1GHz for LTE service. In case of the US, 700MHz is the main spectrum and 2.6GHz is being used inEurope for LTE. The three mobile carries in Korea are expected to compete with each other to secure 700MHzand 2.6GHz for an international LTE roaming service. 1 The technology allocates traffics to various spectrums for a flexible and faster service 6Source 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited
  7. 7. ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806 l Network TechnologyTechnologies to make full use of the allocated spectrums are also playing an important role for betteringcommunications service. To level the playing field, the Korean government has banned on monopoly ofspecific spectrums, allowing the mobile carriers to utilize various spectrums of various bandwidths. CA (CarrierAggregation) is one of the key technologies for LTE-A as it allows various spectrums to be used just like onebig bandwidth. Multi Carrier(MC) is similar to CA in terms of improving efficiency of spectrum utilization. MCdistributes traffics to various spectrums seamlessly for a faster and more flexible service. The technologyenables SKT to enhance its service speed and stability by utilizing the two spectrums for LTE more efficiently.MC has been commercialized by SKT for the first time in the world and was launched in July in Korea. Byearly 2013, MC utilization will expand to 23 cities across the nation. LGU+ is poised to build MC in threepopular places in Korea including Myeongdong, Sinchon and Hongdae in late July this year. KT will follow suitin late 2012.SKT also adopted Advanced-scan, which improved call quality by controlling signal interference between basestations, in January and commercialized it in March 2012 for the first time in the world. KT is offering it withthe name of Warp. LGU+ plans to adopt CCC2 technology in late 2012, to apply it to its network across thenation. On top of that, SKT commercialized LTE femtocell. As seen, all three mobile carriers are pursuingvarious measures to sophisticate their networks in an aggressive manner.During the late half of 2012, VoLTE will be main target of mobile market competition. VoLTE enables bettercall quality and photo and video transfer during voice call as it offers voice communications service with datapacket through LTE networks. SKT will start the service in September 2012. LGU+ will begin it in Septemberor October 2012 while KT plans to launch the service in October. According to SKT, its ‘HD Voice’ will providemuch enhanced voice communications service with a high-quality voice codec, 2.2 times larger spectrum anda reduced connection time by more than 100%. Ø DeviceUnlike 3G, there is no common spectrum for LTE service in the world, which resulted in SpectrumFragmentation. Accordingly, the mobile carriers are required to secure not only technologies but also devicessupporting various spectrums. Over the past year, as many as 16 LTE handsets have been released. Amongthem, SKT has launched 14 models, while KT and LGU+ released 9 and 10 models, respectively. Consideringthat smartphones are the main devices for key services of LTE 2.0 age, demand and supply of LTE devices are2 CCC refers to the Cloud Communication Center. SKT’s CCC is named SCAN and KT’s technology is Warp. 7Source 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited
  8. 8. ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806becoming more and more important. In 2013, 7 out of 10 new devices will be LTE smartphones while shareof WCDMA will drop. Ø Service PlatformEven though LTE offers 5 times faster service compared to 3G and state-of-the-art devices are beingintroduced, they are useless without high-quality contents and service platforms. Securing competitivecontents and service platforms is all the more important in the age of LTE 2.0. The service platforms ofmobile carriers include Media Platform for TV and music contents, Commerce Platform, Game Platform beingoffered via the app store, SNS Platform and others. a. Media Platform l Broadcasting and MobileKorea’s IPTV market has 5.3 million users and has been growing faster than another other countries in theword. IPTV has a high chance of being utilized for interactive services such as N-Screen and T-commerce andindividualized ads. KT’s Olleh has been leading the domestic IPTV market with securing 3.34 million users asof April 2012, followed by SKT’s BTV with over 1 million. LGU+ has 0.89 million IPTV users with U+TV service.SKT launched mobile Btv targeting LTE subscribers in July 25, and is about to offer a real-time broadcastingservice with Hoppin’s N-screen based on Btv. KT and LGU+ are preparing their version of mobilebroadcasting service named ‘Olleh TV now’ and ‘U+HDTV’ respectively, to connect mobile broadcastingplatform with IPTV platform.They are offering free mobile cloud service with which users can store and utilize contents via mobile devices.KT’s cloud service offers 50GB, the largest storage, while SKT’s Tcloud and LGU+’s U+box provides 10GB and15GB, respectively. 8Source 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited
  9. 9. ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806 l MusicMusic is the most important contents in the LTE environment as it is picked as the most frequently usedservice by more than 85% smartphone users. Among the mobile music services, SKT’s Melon has the largestmarket share of 37.33%, followed by LGU+’s Mnet with 21.19% and KT’s Olleh music with 12.61%. b. Commerce PlatformSKT is the only mobile carrier operating online open market service named ‘11st,’ which happens to be thelargest domestic online commerce service. Now, it is about to expand the service to the mobile platform.During the first half of 2012, KRW 100 billion worth of transactions were made on mobile 11st, growing 6times for just one year. SKT also offers ‘Basket’ connecting SNS and commerce platform via both online andmobile networks. Basket allows users to compare product prices, gain shopping information and shareproduct evaluation through SNS.KT is in provision of ‘Olleh TV Open Market’ enabling product search and purchase through IPTV service.However, KT’s service is limited to Olleh TV users. c. SNS PlatformIn the SNS market, competition surrounding mobile messenger service has been intensifying more than ever.SKT launched mobile Nateon, its hugely successful online chatting service boasting largest number of onlineusers in Korea, but the service is lagging behind KaKao Talk. SKP, the subsidiary of SKT has taken over TiKToKto strengthen SNS service of the company. KT and LGU+ launched their version of mobile messenger servicenamed Olleh Talk and Wagle, respectively. But they ended up securing only 1.3 million and 1 million usersrespectively. The three mobile carriers are about to jointly introduce ‘Joyn,’ the RCS3 encompassing all typesof messaging services, and to develop it a next-generation communication platform in a way to securecompetitiveness in the field.3 RCS, Rich Communication Suite: the service integrates multimedia elements such as text, video clip,chatting and file sharing. 9Source 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited
  10. 10. ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806 d. Game PlatformMobile game market is expected to post a rapid growth, recoding annual growth rate of 33.6% from USD 3.4billion in 2009 to USD 14.6 billion in 2014 (SERI report in 2011). As of now, social network games are mostand second most popular applications in Apple’s app store and Google Play. In line with the growth, revenuefrom mobile game contents will increase. Mobile games will become one of the most important contentsoffering 50% of application sales of mobile carriers. Development to LTE will be the catalyst for future growthof mobile games by allowing PC-based high quality games to be enjoyed on the mobile network.Against this backdrop, the three mobile carriers are involved in the competition to secure better gamecontents and game platforms. SKT launched Kartrider Ruch+, the mobile version of Kartrider, therepresentative online game developed by Nexon and succeeded in securing 5,000 subscribers in only twoweeks. LGU+ introduced Portess and Freestyle for LTE users.Currently, SKT is in operation of Game Center to offer further various and convenient user experience. TheGame Center was designed to increase immersion and incentive for mobile game users. On July 18, LGU+launched ‘C-Games’ with cloud game platform which offers games based on its cloud server. Ø UtilizationCurrently, LTE encourages content utilization mostly through streaming. However, streaming generates hugedata traffics, placing users under an enormous cost burden. Without bundle and package products to allowLTE users to enjoy high quality contents and services with reasonable costs, they will become a pie in the sky.Introduction of bundle and package product is another key to vitalize LTE service.The three mobile carriers strive to increase content utilization by LTE users by introducing attractive monthlysubscription plans, while conducting various promotion activities. For instance, SKT’s ‘BTV Study Program’which is an IPTV service, allows the program subscribers to enjoy the same contents from the smartphone ortablet PC without paying additional costs. All they have to do is sighing up ‘Smart SSam’ application. Theprogram is designed to encourage content utilization in the LTE environment. 10Source 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited
  11. 11. ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806 Table 3. Bundle Products (Subscription Plans) in each Mobile Operators SKT KT LGU+ -Btv Monthly Subscription Olleh TV now Pac: Monthly -U+HDTV Plan fee of KRW 5,000, 3GB data (mobile TV service) LTE T -Hoppin TV 10 Free: HDTV Moa: Monthly fee of V offering 10 TV programs KRW 5,000: U+box 100 GB and 2GB data for monthly Media fee of KRW 9,000Platform -Genie Pack: For Monthly M -Melon: Monthly fee of -Mnet: LTE Music Moa: KRW 6,000: Melon fee of KRW 4,000, Genie Mnet online and mobile U Streaming and unlimited Streaming and unlimited streaming and unlimited S data data (reduced by 30% with data with monthly fee of I T-membership point and KRW 5,000 50% discount for mp3 c monthly subscription)Source : ROA Consulting, Report of Each Company 11Source 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited
  12. 12. ROAconsulting_Special Report_LTE 2.0 Begins_2012_0806Part III. Who Will Become the Leader in the Age of LTE 2.0?Over the past year, we went through LTE 1.0, in which the mobile carriers have been concentrated onconnecting the entire nation with LTE network faster than others. Now, LTE 2.0 will continue for one yearahead (from late 2012 to 2013), during which users are accustomed to the much-enhanced serviceexperience and different utilization value compared 3G (WCDMA) offered by specific service providersbased on the faster and stabilized LTE network across the nation.Much-enhanced service experience refers to big content services which were possible but limited with the3G network (video services such as HD TV and high-quality video call, cloud–based network games and otherSNS games allowing various gamers to be connected simultaneously, and digital content services such asmusic streaming) and service platforms (not content-based but platform-based services including commerce,SNS, App Market in which various 3rd players can be involved). Thanks to the LTE network, they will becomemore and more available with much better accessibility.Utilization value can be generated when the new service experience spreads among users thanks toreasonably–priced bundle products and service rate plans. Unlike the 3G network offering unlimited data, LTEshould seek measures to enable users to have the new service experience. For this reason, various bundleproducts are being introduced to provide unlimited contents (game and music) with minimum service rate. Itis difficult to evaluate strengths and weaknesses of the LTE bundle products because each of the products isfitted to the characteristics of the mobile carriers which have been developing them competitively. But, SKP(SK Planet), subsidiary of SKT, seems to be better than others in terms of obtaining users’ experience valuesas seen in Part II of the report.Now, service experience and utilization value are becoming more and more important. During the age of 2G-3G network, the service providers are required to operate multi-networks including CDMA – WCDMA –WiMax (WiBro). They have to compete with each other for the various networks. In terms of 4G, however, allplayers are pursuing a Single Network of LTE. As a result, the company securing devices and maximizingservice experience and utilization value will rise to the absolute leader.Who will dominate age of LTE 2.0? LTE 2.0 is the key issue and task the mobile carriers of Korea areconfronting. 12Source 2012 ROA Consulting, Inc. All rights reserved. Reproduction in whole or in part is prohibited