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Mobile Industry Preparing to Surf the 4G Disruption Wave: Key CTIA Takeaways


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Frost & Sullivan Analysis: Mobile Industry Preparing to Surf the 4G Disruption Wave: Key CTIA Takeaways

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Mobile Industry Preparing to Surf the 4G Disruption Wave: Key CTIA Takeaways

  1. 1. Mobile Industry Preparing to Surf the 4G Disruption Wave: Key CTIA Takeaways Ronald Gruia Program Leader, Principal Analyst - Emerging Telecoms Frost & Sullivan ICT Practice March 31, 2010
  2. 2. Surfing the 4G Disruption Wave: CTIA Roundup Agenda • CTIA 2010: Facing Challenges Ahead of 4G • Explosive Mobile Data Growth • Mobile Data Traffic Growth Drivers • Operator Ways to Mitigate Mobile Data Traffic Explosion • The Move to 4G / LTE • “LTE Steeplechase” • LTE Value Proposition, Trial Feedback & Deployment Options • Elaborating a Compelling Application Strategy • Conclusions 2
  3. 3. 2010: 25th Edition of CTIA 3
  4. 4. CTIA 2010: Facing Challenges Ahead of 4G • Tremendous mobile data consumption increase causing operators to focus on backhaul and core spend • Operators also focusing on other ways to mitigate the data growth explosion, including: Usage-based pricing (usage caps) Data traffic prioritization Throttling down the access speed (once user’s monthly limit is reached) • Carriers are evolving their next-gen services strategies (opening up opportunities for app stores and third-party application developers), and gradually shifting towards two-sided business models • Growth in data traffic will also spur the migration to 4G as operators start to put new spectrum to use and to attain LTE spectral efficiency gains • LTE upgrade strategies will vary on a carrier-by-carrier basis 4
  5. 5. Explosive Mobile Data Growth Source: Cisco Systems VNI, Feb. 2010 Source: AT&T Presentation at the CES, January 2010 • Explosive growth: 108% CAGR or 39x over the next 5 years • Video (e.g. YouTube, DVD, HD) responsible for the lion’s share of the growth (66% of total mobile data traffic by 2014) • AT&T revealed a a $2B increase in wireless and backhaul spending and an aggressive fiber backhaul plan (~20k sites per year in 2010/11) • Verizon will spend to have 80% backhaul fiber coverage 3G sites by 2011; T-Mobile aiming for 75% coverage 5
  6. 6. Mobile Data Traffic Growth Drivers Higher iPhone / Smartphone Data Usage Higher Global Mobile Broadband Penetration Mobile Content Consumption iPhone Smartphone Avg. Feature Phone 70% % of US Mobile Subs 60% 50% 40% 30% 20% 10% 0% Source: Banc of America Securities Music Games Social Web Search IM News Video Networking Mobile BB Penetration: 18% (over 1B subs) by 2013 Spread of Advanced Services Larger Throughputs HSPA Carrier Frequency LTE Mail 15 Source: NTT DoCoMo Bandwidth 4x deco mail 85 News (top page) 220 5 MHz 20 MHz Transmittable Data I I GPS 430 Volume / Carrier Data Modulation i-channel 470 Formula 1.5 x Q Q deco-anime 640 16-QAM 64-QAM Chaku-uta full (1.5Mbyte) 12,700 4 bit Transmittable Data 6 bit Volume / Carrier Movie (5Mbyte) 42,500 Transmission 4x Multiplexing 1 10 100 1,000 10,000 100,000 w/o MIMO Source: Frost & Sullivan w/ 4x4 MIMO 6
  7. 7. Operator Ways to Mitigate Mobile Data Traffic Explosion • Several carriers hinted their desire to Source: NSN move towards usage-based pricing (e.g. AT&T) but none wants to be the first to move in that direction for fear of subscriber backlash • That said we believe a “toll road” approach will eventually prevail, with usage caps, traffic prioritization, retreat from “all-you-can-eat” smartphone offers and an a case being made against extreme net neutrality policies • Carriers will set bandwidth caps at a much higher level than the current 3G usage; Clearwire’s 7GB/sub/month threshold remains the offer to beat and makes pricing more challenging for other operators • CTIA released its mobile data traffic for the US market for 2H09: 107.8 bill. MB ≈ 58 MB/month/person (equivalent to Japan’s level) 7
  8. 8. The Move to 4G / LTE LTE Operator Commitments (Global) EMEA Asia / Pacific Hutchison 3 Austria North America EMEA Australia New Zealand Hutchison 3 Ireland USA KPN, Netherlands Telstra New Zealand Telecom Mobilkom Austria China Philippines Aircell Elisa, Finland MTS Uzbekistan Piltel AT&T Mobility DNA, Finland Orange Austria China Mobile, China Singapore CenturyTel SFR, France Orange France China Telecom, China M1 Cox Cell C, South Africa Tele2 Sweden Hong Kong Starhub Metro PCS Vodacom, South Africa T-Mobile Austria China Mobile South Korea T-Mobile USA Zain, Saudi Arabia T-Mobile Germany CSL Limited KTF Verizon Wireless STC, Saudi Arabia Hutchison 3 LG Telecom Telecom Italia, Italy PCCW SK Telecom Canada Telefonica O2, Spain Taiwan Bell Canada Telia Sonera, Sweden SmarTone-Vodafone Chunghwa Telecom Rogers Wireless Telia Sonera, Norway Japan Telus Telenor Sweden eMobile Brazil Telenor Norway KDDI Vivo TMN NTT DoCoMo Vivacell-MTS Armenia SoftBank Mobile 59 operator commitments for Vodafone Germany Source: GSMA, GSA LTE in 28 countries (Feb. 2010) Zain, Bahrain • 16 additional LTE trials ongoing (at the pre-commitment stage) • Carriers regard the 4G evolution as an opportunity to migrate to usage-based pricing • SPs will leverage LTE to put more spectrum to work and get spectral efficiency gains 8
  9. 9. 2 7 3 5 2 LTE “Steeplechase” 1 4 6 1 3 6 2 7 4 5 2 7 3 5 • Radio network speed is proportional to available spectrum, 1 6 3 4 1 2 7 spectral efficiency and spectrum re-use 5 • From CTIA, the latest US operator LTE info: • AT&T: Planning to have initial deployments in late 2010 for launch in 1H 2011 • Sprint: Selling first 4G handset (HTC EVO 4G - GA: Summer’10) Wi-Fi enabled • T-Mobile: Currently focused only on HSPA+ deployment • Verizon: On track for ~20+ cities by YE 2010; LTE data handoffs demos in Boston and Seattle w/ avg. throughputs of 5-12 Mbps down and 2-5 Mbps up • The migration from HSPA+ to LTE will be mostly software-based (i.e. light in hardware) and will require a lower level of civil engineering, thereby yielding a good bang-for-the-buck (in terms of Mbps/$): • Orange estimates €50 - €100M to upgrade 2 large French cities from 3.75 to 4G • Telenor’s LTE overlay tender is worth about $200M over 6 years • Increased evidence that operators are playing Chinese players such as Huawei off other vendors (ALU, Ericsson, NSN) • 3.75G and 4G kit prices expected to drop over time, perhaps slightly faster than what happened with 3G 9
  10. 10. LTE Value Proposition, Trial Feedback & Deployment Options • Initial trials focused on web browsing, file sharing (upload/download), VoIP calls and streaming video • Operators such as Verizon believe in a significant improvement in the QoE for a subscriber, with an 8-fold increase in its network capacity vis-à-vis 3G, download throughputs of 7-12 Mbps and upload speeds of 3-5 Mbps • Data modems will clearly be the initial focus upon the introduction of LTE service • Spectrum considerations: mobile carriers will have 4 options when deploying LTE: Deploy on digital dividend spectrum (e.g. 700 MHz - Verizon) Rollout utilizing new bands (e.g. 2.6 GHz IMT extension band) Utilize re-farmed spectrum (e.g. white spaces) at 850, 900, 1800, 1900, 2100 MHz, etc. Use new LTE spectrum bands (450 MHz or 3.6 MHz may emerge) 10
  11. 11. Elaborating a Compelling Application Strategy • Our discussions with operators at CTIA revealed their concern that “over the top” players can easily bypass the centralized LTE service control layer which is currently not being used by third parties • Therefore carriers increasingly believe that the current ecosystem must change and that they have to evolve their mindset to help foster an environment in which new services can be developed, hence the advent of initiatives such as RCS, One API (ongoing Canadian operator trial w/ Bell, Rogers and Telus) and the recently announced WAC (Wholesale Application Community) • These initiatives help achieve more uniformity for third party developers and stimulate the creation of new app stores; they also indicate that operators are exploring alternative sources of revenue and also tapping into new opportunities such as sponsored services and targeted mobile advertising • We believe that over time, operators will gradually embrace a “two- sided” business model and start focusing on upstream customers 11
  12. 12. Conclusions • 2010: 25 years of CTIA and the start of LTE • Besides backhaul and 4G, another key investment area is the optical upgrade to 100 Gbps (current strategy is 100 Gig optical pipes to large MPLS routers, as “pure optical” systems remain years away • Operators will devise strategies to help alleviate the current mobile data crunch, including the ones previously discussed and some demand-management approaches (roll-out of “off-load” solutions such as femtocells or Wi-Fi and the eventual migration of voice from circuit switched to packet switched / VoIP on the radio network) • Application stores remain very much a hot topic as does third-party application development; operators hinting that they could consider a two-sided model variant to the original NTT DoCoMo “bill-on- behalf” i-mode strategy 12
  13. 13. Q & A Session Thank You Ronald F. Gruia Program Leader - Emerging Telecoms, Principal Telecom Analyst +1-416-490-0493 Twitter: 13
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  17. 17. For Additional Information Brian Cotton, PhD Jake Wengroff Vice President Corporate Communications Information & Communications (210) 247-3806 Technologies (416) 490-0983 Ronald Gruia Program Leader & Principal Analyst, Emerging Telecoms (416) 490-0493 17