Material correct as of the time of writing (2009)

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. 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

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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

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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

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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
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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
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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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• 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

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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

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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

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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

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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

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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

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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

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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

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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

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Copyright © 2008, magicnode
Thank you !
Contact
george@magicnode.com