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
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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)