The smartphone challenge (a European perspective).High-Tech Forecasting & Planning Summit, San Francisco,15th April 2011.<...
The smartphone … The “killer” device and its “killer” applications…<br />Kim Kyllesbech Larsen, High-Tech Planning & Forec...
The smartphonechallenge… The killer device and its killer applications…<br />Kim Kyllesbech Larsen, High-Tech Planning & F...
A bygone time … ca. 36 month ago … When 1 + 1 was close to 2.<br />Blablabla<br />... Bla …<br />Mobile Network<br />We ta...
A new paradigm … 1 + 1 is no longer “just” 2 ... Applications have “taken over” the communications.<br />1<br />User<br />...
Uncontrolled data growth ... Smartphone traffic tsunami.<br />Smartphone indicators<br />×7<br />Data signaling<br />Probl...
Uncontrolled data growth ... All you can eat … network indigestion..<br />June 2007 AT&T Inc. and Apple® today announced t...
Uncontrolled data growth ... Apple iTune promotion in NL ... free downloads.<br />180 GB & 855 Mbps<br />9× increase in pe...
Growth drivers.Smartphones and apps driving all growth indicators.<br />Average annual growth rates 2010 - 2015<br />Illus...
20+ -> 30+ Apps per device.</li></ul>Typical App size<br /><ul><li>iPhone App 12±16 MB (Wireless).
iPad App 80±125 MB (WiFi).</li></ul>200%<br />180%<br />130%<br />25%<br />2%<br />Traffic prioritization and apps control...
Your chatty smartphone.iPhone vs Android – same volume, twice the Signaling.<br />Signaling msg per Device<br />×3<br />Il...
Forecast and planning challenge ... How to deal with hyper-growth and the unknown.<br />MARKET MODEL INCLUDING<br /><ul><l...
TECHNOLOGY CHOICES  (HSPA+, LTE, RENEWAL. etc…)</li></ul>NETWORK MODEL<br />SIZING<br />INPUT CONFIGURATION OF INSTALLED B...
Smartphone business challenge… Smartphone is not only a network challenge.<br /><ul><li>New revenue opportunities.
Expand value chain.
Better network monetization.</li></ul>Total Revenue<br />−<br />Usage cost<br />−<br /><ul><li>Increased demand, increased...
Subsidies of high cost smartphones.
Churn prevention (SRC1).</li></ul>Market invest<br />−<br />Personnel<br />−<br />Technology cost (ca. 15% – 20% of Opex)<...
More sites and equipment.
Higher backhaul costs.</li></ul>−<br />Other cost<br />=<br />EBITDA<br />−<br />Network depreciation (ca. 10% to 20%)<br ...
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The Smartphone Challenge (a European perspective)

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Presented at the High-Tech Forecasting & Planning Summit, San Francisco, April 15th 2011.

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The Smartphone Challenge (a European perspective)

  1. 1. The smartphone challenge (a European perspective).High-Tech Forecasting & Planning Summit, San Francisco,15th April 2011.<br />Dr. Kim Kyllesbech Larsen, Technology EconomicsTechnology, Deutsche Telekom.<br />
  2. 2. The smartphone … The “killer” device and its “killer” applications…<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />2<br />
  3. 3. The smartphonechallenge… The killer device and its killer applications…<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />3<br />
  4. 4. A bygone time … ca. 36 month ago … When 1 + 1 was close to 2.<br />Blablabla<br />... Bla …<br />Mobile Network<br />We talked (a lot)<br />Rarely did we use the (mobile) web.<br />We SMS’ed (even more)<br />ILLUSTRATION<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />4<br />
  5. 5. A new paradigm … 1 + 1 is no longer “just” 2 ... Applications have “taken over” the communications.<br />1<br />User<br />1<br />Device<br />Many applications<br />User & application initiated bandwidth demand.<br />Device & application (IP addr, keep alive, …) driven signaling resources.<br />ILLUSTRATION<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />5<br />
  6. 6. Uncontrolled data growth ... Smartphone traffic tsunami.<br />Smartphone indicators<br />×7<br />Data signaling<br />Problems!<br />May – June 2010 (Netherlands).<br />“iPhone overload T-Mobile (NL) network” (Volkskrant, May 2010).<br />“T-Mobile (NL) gives compensation”. <br />(2 month no data charge & iPhone users gets €30.)<br />“T-Mobile (NL) admits not able to handle data growth in its mobile network“ (Tweakers.net).<br />×6<br />Smartphones<br />×4<br />Throughput<br />×5<br />Volume<br />December 2008 to December 2010<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />6<br />
  7. 7. Uncontrolled data growth ... All you can eat … network indigestion..<br />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. <br />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).<br />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.<br />June 2009 AT&T announces unlimited data plans for all smartphones for $30 monthly charge.<br />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)<br />September 2009 “Customers Angered as iphonesOverload AT&T.”<br />(The New York Times)<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />7<br />
  8. 8. Uncontrolled data growth ... Apple iTune promotion in NL ... free downloads.<br />180 GB & 855 Mbps<br />9× increase in peak throughput.<br />More than twice the total volume.<br />30+ thsd downloads in the peak.<br />Promotion day<br />Normal<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />8<br />
  9. 9. Growth drivers.Smartphones and apps driving all growth indicators.<br />Average annual growth rates 2010 - 2015<br />Illustration<br />300%<br />2010 – 2015 Worldwide estimates<br /><ul><li>10+ -> 60+ Billion App downloads.
  10. 10. 20+ -> 30+ Apps per device.</li></ul>Typical App size<br /><ul><li>iPhone App 12±16 MB (Wireless).
  11. 11. iPad App 80±125 MB (WiFi).</li></ul>200%<br />180%<br />130%<br />25%<br />2%<br />Traffic prioritization and apps control essential for managing growth.<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />9<br />
  12. 12. Your chatty smartphone.iPhone vs Android – same volume, twice the Signaling.<br />Signaling msg per Device<br />×3<br />Illustration<br />Android<br />×1.2<br />Android<br />Apple iOS<br />Volume per Device<br />iOS<br />Volume<br />Signaling<br />Browsing<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />10<br />
  13. 13. Forecast and planning challenge ... How to deal with hyper-growth and the unknown.<br />MARKET MODEL INCLUDING<br /><ul><li>SITE ROLLOUT
  14. 14. TECHNOLOGY CHOICES (HSPA+, LTE, RENEWAL. etc…)</li></ul>NETWORK MODEL<br />SIZING<br />INPUT CONFIGURATION OF INSTALLED BASE.<br />TRAFFIC MODEL<br />FINANCIAL MODEL<br />REVENUE, OPEX & CAPEX<br />Optimize<br />PROFIT & LOSS<br />Re-invest in business<br />Conceptualview<br />Free Cash Flow<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />11<br />
  15. 15. Smartphone business challenge… Smartphone is not only a network challenge.<br /><ul><li>New revenue opportunities.
  16. 16. Expand value chain.
  17. 17. Better network monetization.</li></ul>Total Revenue<br />−<br />Usage cost<br />−<br /><ul><li>Increased demand, increased usage cost.
  18. 18. Subsidies of high cost smartphones.
  19. 19. Churn prevention (SRC1).</li></ul>Market invest<br />−<br />Personnel<br />−<br />Technology cost (ca. 15% – 20% of Opex)<br /><ul><li>Network expansions.
  20. 20. More sites and equipment.
  21. 21. Higher backhaul costs.</li></ul>−<br />Other cost<br />=<br />EBITDA<br />−<br />Network depreciation (ca. 10% to 20%)<br />=<br />Contribution Margin (after depreciation)<br /><ul><li>Spectrum demand.
  22. 22. Acquisition/auction cost.</li></ul>−<br />Spectrum amortization<br />=<br />EBIT<br /><ul><li>Network expansions (i.e., capacity, sites, cell splits).
  23. 23. Forced technology migration</li></ul>….<br />−<br />Capex (ca. 7% to 15%)<br />1 SRC = Subscriber Retention Cost.<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />12<br />
  24. 24. Revenue<br />Smartphone profitability challenge... Will it lead to the End of Profitability?<br />12% CAGR<br />Positive<br />Free Cash Flow<br />Traffic growth<br />Negative<br />70% CAGR<br />Illustration<br />Flat price plans and uncontrolled traffic growth<br />will accelerate the road to The End.<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />13<br />
  25. 25. Smartphone spectrum challenge ...Mobile data will accelerate spectrum shortage.<br />3G spectrum crunch!<br />3G capacity crunch. <br />Re-farming spectrum.<br />New spectrum demand.<br />Empty 2G roads - in time?<br />Re-farming GSM!<br />HSPA+ versus LTE ?<br />Technology timing!<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />14<br />
  26. 26. Smartphone the network challenge...Network expansion as traffic “management” remedy.<br />Air/TRX/Site<br />Spectrum &<br />Floor space<br />Nodes<br />Processing<br />capacity<br />Backhaul<br />bandwidth<br />Backbone<br />bandwidth<br />Core<br />Switching<br />Web<br />Apps servers<br />Bandwidth, CPU & Storage.<br />traffic pressure points<br />due to aggregation<br />+ Sectorization<br />+ Additional spectral capacity (if available)<br />Off Loading<br />(AP, Femto, …)<br />RNC<br />GGSN<br />SGSN<br />RNC<br />GGSN<br />SGSN<br />LL -> MW -> Fiber <br />-> + Colors<br />Packet<br />Core<br />Web 2.0<br />Node<br />+CE<br />+ Colors<br />+ switching capacity<br />+ CPU<br />+ switching <br />capacity<br />+CPU (i.e., CE, etc.)<br />(up-to system limit)<br />100:1<br />2000:1<br />Nodes per element<br />4000:1<br />Illustration<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />15<br />
  27. 27. Remedies for traffic management.FUP & Throttling … Fair and efficient?<br />FUP flavors<br /><ul><li>Hard volume-limit throttling.
  28. 28. BH throttling.
  29. 29. Service based (dpi) throttling.
  30. 30. Traffic de-prioritization … etc…</li></ul>Volume per User<br />Throttling<br />64 kbps<br />FUP Limit<br />2 GB<br />Days of<br />“normal” usage<br />1 Mbps<br /><ul><li>Re-active remedy.
  31. 31. Typically capture <10% of users.
  32. 32. Little structural network impact.</li></ul>0<br />31<br />Subscription days per month<br />FUP implementations might not be very efficient<br />as traffic management remedies.<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />16<br />
  33. 33. Data traffic trend to be considered.Mobile data usage is very different from voice.<br />Traffic<br />Maximum load<br />Current BH load<br /><ul><li>Evening peak busiest hour.
  34. 34. ca. 16 traffic hours.
  35. 35. 30% traffic in-fill possibility.</li></ul>data<br />voice<br />traffic management, traffic shaping and<br />new business models.<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />17<br />
  36. 36. Data traffic trend to be considered.Most mobile data traffic is fixed based.<br />Number of sites utilized per<br />usage category.<br /><ul><li>80% subs generates <20% traffic.
  37. 37. 80% data traffic carried by 3 cells1.
  38. 38. Remaining 20% carried over 28 cells.</li></ul>“20% mobility”<br />Traffic off-load & throttling policies and<br />new business models.<br />1 on a per user basis.<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />18<br />
  39. 39. Smartphone & application trends.Plenty of opportunities to make moneyor loose them.<br />Smartphone & application trends (far from exhaustive).Plenty of opportunities to make money <br />Social network application continue to grow and develop.<br />Share everything anytime across all platforms.<br />Increased interactivity between Apps and Web (and users).<br />Security and threat issues will increase exponential.<br />Paperless society.<br />Increased integration of network functionality in Apps.<br />Near-field communication and tethering.<br />Augmented reality, 3D displays and interactive gaming.<br />Data mining, intelligent profiling/layering and smart-apps, etc...<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />19<br />
  40. 40. Key challenges.What we need to be passionate about.<br />Intelligent traffic management of data growth -> monetization.<br />Modeling & Forecasting smartphone usage and business impact.<br />Smartphone is a business challenge with great opportunities.<br />Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco.<br />20<br />
  41. 41. Thank you for your interest!<br />Contact:<br />kim.larsen@t-mobile.nl<br />Tel: +31 6 2409 5202<br />http://nl.linkedin.com/in/kimklarsen<br />Acknowledgement: I am indebted to my great team for always being patient with my data requests, for their great suggestions and support. For this work I am in particular thankful to Veli-Pekka Kroger, Minoo Abedi and Xi Bin.<br />

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