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Mobile Broadband Working Group - PowerPoint Presentation

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Mobile Broadband Working Group - PPT Presentation

Interim progress report Status report Goal of working group is generation of a white paper with additional papers on narrower topics possible Ongoing phone calls on biweekly basis Substantial contributions from Bill Lehr and MarieJose ID: 229958

cost mobile wireline usage mobile cost usage wireline costs capacity growth investment broadband incentive exponential total cells upgrades revenues paper network white

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Slide1

Mobile Broadband Working Group

Interim progress reportSlide2

Status report

Goal of working group is generation of a white paper, with additional papers on narrower topics possible.

Ongoing phone calls on bi-weekly basis.

Substantial contributions from Bill Lehr and Marie-Jose

Montpetit

.

Thank you.Slide3

Incentive to invest

The overall ecosystem depends on the facilities owners continuing to invest in upgrades to capacity and capability.

Investment must be justified by return on investment and overall profitability.

Could broadband access stagnate?Slide4

Important differences

In U.S.

wireline

, investment has been stimulated by facilities competition.

But might this stimulus fade?

In EU

wireline

, facilities unbundling has driven retail costs down, but reduced incentive to invest.

Shared infrastructure may be an answer.

In mobile world, both competition and higher costs.

Hypothesis: the mobile world may be a more challenging case to study.Slide5

Three related issues:

Growth in demand.

Is raw capacity the only issue?

Cost of usage.

More properly, costs investment in capacity.

Sources of revenues.Slide6

Growth

This is a prediction, not a fact.

Exponential growth calls for

exponential responses.

Growth is due both to new users

and to increasing usage/user.

Smart phones will continue to

dominate.

CISCO Virtual Networking Index (VNI): http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-520862.htmlSlide7

What are people doing?

Ericsson forecasts: http://www.ericsson.com/news/1561267?categoryFilter=

reports_1270673222_

Application

Share

YouTube

27.33%

HTTP

19.16%

Facebook

8.67%

MPEG

7.32%

Google Play

4.37%

SSL

4.2%

Netflix3.98%Pandora Radio3.35%Blackberry1.61%Flash Video1.51%Total81.5%

Mobile download U.S.

Sandvine

Global Internet Phenomenon Report 1H 2013 Slide8

Sandvine predictionSlide9

Comparative usage

U.S Fixed

U.S. Mobile

EU

Fixed

EU Mobile

Up

6.0G

43M

2.5G

41M

Down

38.6G

346.7M

10.9G

269.9M

Total44.7G390M

13.4G311MMean monthly usageSandvine Global Internet Phenomenon Report 1H 2013 Slide10

My conclusions

Growth is not exogenous.

Important to understand what will shape it.

Netflix,

QoE

,

Exponential growth requires exponential response.

New spectrum, spectrum efficiency are linear.

Slow the need to take other steps.

Only exponential response I can see is smaller cells.

Could this be a “Clay Christensen” event?

Use of

WiFi (offload to wireline network) is important trend. (May be 50% of total device traffic).

In

wireline

world, subscriptions may be saturating. Unclear about mobile, but will happen sometime.Slide11

Costs

Mobile costs are of several kinds.

Upgrades to new technology (e.g., LTE).

Capacity upgrades to existing cells.

New base stations (smaller cells).

Increasing demand has two sorts of effects.

Popular cells get overloaded.

Less loaded cells are more efficiently used.

Wireline

can engineer for usage, mobile must also engineer for coverage.Slide12

Cost models

Regulators and other observers seek cost models to understand implications of usage.

But models are hard to come by, and are highly influenced by accounting decisions. No surprise.Slide13

Some estimates

It is possible to get down to a fully loaded network cost of less than EUR 1/GB at a level of around 15% average network utilization. Looking at capacity upgrades, it is possible to easily double capacity at a cost per GB of EUR 0.1 to 0.2.”

Greger

Blennerud

, Mobile

broadband –

busting the

myth of the scissor

effect, Ericsson white paper EBR #2 2010

Operators can (and must, to remain profitable) reduce costs to $1/GB by 2013

0.1 cent per MB: ensuring future data profitability in emerging markets,

McKinsey,RECALL_No_17, 2011

”Monthly network Capital Expenditure (CAPEX) and Operational Expenditure (OPEX) can be kept below 3 EUR per subscriber over an eight-year depreciation period. This is true if the average mobile broadband penetration is at least 500 subscribers per site, and if subscribers use less than 2 GB per month.” “If total data use is high, …, the cost per GB can be below 1 EUR.”

Mobile Broadband with HSPA and LTE—capacity and cost aspects, Nokia Siemens Networks, White PaperSlide14

Conclusions

There are more dimensions to the cost issues around mobile than around

wireline

.

But mobile depends on

wireline

.

Estimates of total cost for

wireline

are around $0.10/GB—one tenth of mobile.

But incremental might be closer to

wireline

costs.Slide15

Revenues

A recurring conversation centers on the sources of revenues for ISPs.

Today the consumer pays essentially all the costs of the access provider.

Is there an alternative frame in which other parts of the ecosystem contribute to the cost of access?

Advertising?

Paid content?Slide16

Revenues

Other sources?

See previous talk.

Usage-based billing.

Creates positive incentive for ISP, negative incentive for user.

Zero-rating?

Charging for priority?

A way to benefit from ecommerce.Slide17

Cost vs.revenue

Current pricing for additional usage:

Verizon: $5/GB

AT&T $10/GB

Looks like plenty of incentive for U.S. providers to facilitate usage.

But how much is user discouraged by price point?

U.S Fixed

U.S. Mobile

EU

Fixed

EU Mobile

Up

6.0G

43M

2.5G

41M

Down38.6G346.7M

10.9G269.9MTotal44.7G390M13.4G311MSlide18

Europe?

Vodafone UK : usage £5 for 4GB ($2/GB)

Samsung Galaxy Note 3 (4G)

Voda

UK: £49+ £52/m, ($79 + $84/month)

VZ US $299 + $110/month

UK price for equal product is cheaper.

UK usage cost is much lower. Slide19

Possible conclusions

Assume

Voda

is not actually losing money.

VZ (and ATT) must be making a good profit.

Does this drive investment or bottom line?

Why has competition not driven prices to UK levels?

Raises fundamental questions about user behavior.

Unlimited plans from Sprint do not seem to pressure VZ.

Coverage issues?

If cost of usage is a barrier, why is mobile usage so similar in US and EU?

Are there other barriers?

QoE? Lack of equivalent set of apps?Slide20

Internet expenditures per BB household

Total excluding CDN and advertising: $479.47

20

($82,74 per

paying customer)