operator challenges - network related - business related...2 3 0,00 0,20 0,40 0,60 0,80 1,00 macro...

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Operator challenges - network related- business related

Jan MarkendahlNovember 06, 2012

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T raffic

Revenue

V i d i t d D t d i t d

R evenue gap

T raffic

Revenue


R evenue gap

AccessInfrastructure

ValueAdd

Telecom

Content/ServicesBusiness Process

ConsumersValueChain


ValueAdd

Telecom


ConsumersValueChain

Voice services

Mobile broadband

New services??

Voice services

Mobile broadband

New services??

Revenue mix MBB profitability

What to handle for operators?

Changing business landscape

Networks

Customers

Payments

Services

Operator challenges – business related

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Macro Micro Pico WLAN

Backhaul transmission

Site buildout, installation + lease

Radio equipment, O&M, power

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Operator challenges – network related

”promised” data rateat ”low” level

”promised” data rateat ”higher” level



Cost structure

Data rate depends on range

Scalability

Spectrum allocation

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Voice services

One motivation for our researchDeclining voice revenues for mobile operators

Years

Revenues

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New services

Mobile Broadband

Voice services

Years

Revenues

One motivation for our researchNew services require new solutions

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New servicesMobile Broadband

Voice services

Years

Revenues

One motivation for our researchNew services require new solutions

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Voice services

Declining voice revenues

Years

Revenues

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Voice services

Declining voice revenues for mobile operators

Years

Revenues

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Revenues for mobile voice services in Sweden 2000-2008

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2000 2001 2002 2003 2004 2005 2006 2007 2008

EU

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TeliaSonera (EUR) ARPU Sweden (EUR)

From Mölleryd, Markendahl, Werding and Mäkitaloconference paper presented at CTTE 2010, May 2010

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Mobile data traffic will increase 26 times until 2015 .The data traffic growth will require more radio frequenciesOperators will face an ”end of profit”

..

More operator challengesFreday 4 February 2011Newsletter by M. Sjödin

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The revenue gap”de-coupling” of traffic and revenues”

• Flat rate tariffs create large increase of data traffic –Many GB per user per month–Data traffic up >100 % per year–Revenues do not follow

Traffic

Revenues

Network Cost

TimeVoice is dominating

Data isdominating

Amount of- traffic- revenues- costs

?

?

Traffic

Revenues

Network Cost

TimeVoice is dominating

Data isdominating

Amount of- traffic- revenues- costs

?

?

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Traffic, prices and revenues

Estimated price per MByte for voice, SMS and data for one Swedish operator

2007 20081,46 1,36

439,5 351,60,014 0,011

EUR per MBVoice SMSMobile data (laptop)

SMS + MMS11%

Mobile data8%

Voice81%

Mobile data75%

Voice25%

Revenues Traffic

Traffic and revenue for different services at the Swedish market Q4 2008

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One big data challenge (Thanks to Bengt Mölleryd)

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Antagande: YouTube 0.5 Mbit/s och med 5 min clip, 60 * 0.5/8*5 = 19 MB. Pris ca 0,05 kr per MB. SMS 160 bytes = 6250 SMS per MB. Pris 0,20 kr per SMS.

Vidare är SMS mycket lönsam med EBITDA på 90%. Om man antar 15% av omsättning är SMS och en total EBITDA marginal på 35% skulle ett tapp av SMS innebära att marginalen faller till ca 25%

Correspondingdata consumption

5 min clip 115 000

23 000 kr1 kr Revenues

=

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• Amount of voice data 10-20 MB per month

• Amount of mobile broadband data 1–20 GB per month – The number of mobile broad band bits are

100 – 1000 more than the number of voice bits

• But we pay more or less the same, i.e. the price per data bit is 100 – 1000 times lower=> the cost per bit must be 100 – 1000 lower

Traffic, prices and revenues

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Changing business landscapecombined with different perspectives


ValueAdd

Consumer focusTelecom Industry View

Business, society focusInternet Industry viewEU Economy View

Telecom


ConsumersValueChain

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Competetion from many actors

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Online Services

Enabling technology/services

Connectivity User interface

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”New” services

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Revenue sharing for Apps?

Source: IDATE

Type I-Mode Apple

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Mobile operators “joins forces” and form Wholesale Applications Community

• The alliance launched by the 24 operators, is backed by the GSMA, and device manufacturers LG Electronics, Samsung and Sony Ericsson

• The alliance "will build a new, open ecosystem to spur the creation of applications that can be used regardless of device, operating system or operator"

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Many actors have business relations with the end-users

Network vendors

OthersMobile Network

Operators

OthersEnd-users

Vendors of user equipment

Providers ofapplications

Network vendors

OthersMobile Network

Operators

OthersEnd-users

Vendors of user equipment

Providers ofapplications

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T raffic

Revenue


R evenue gap

T raffic

Revenue


R evenue gap


ValueAdd

Telecom


ConsumersValueChain


ValueAdd

Telecom


ConsumersValueChain

Voice services

Mobile broadband

New services??

Voice services

Mobile broadband

New services??




Networks

Customers

Payments

Services


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T raffic

Revenue


R evenue gap

T raffic

Revenue


R evenue gap


ValueAdd

Telecom


ConsumersValueChain


ValueAdd

Telecom


ConsumersValueChain

Voice services

Mobile broadband

New services??

Voice services

Mobile broadband

New services??




Networks

Customers

Payments

Services


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T raffic

Revenue


R evenue gap

T raffic

Revenue


R evenue gap


ValueAdd

Telecom


ConsumersValueChain


ValueAdd

Telecom


ConsumersValueChain

Voice services

Mobile broadband

New services??

Voice services

Mobile broadband

New services??




Networks

Customers

Payments

Services


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Cost structure


Scalability

Spectrum allocation

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GSM Coverage Tele2 - Telenor - Telia

~90% covered area~65% covered area ~70% covered area

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Coverage maps – Telia web page

Jan Markendahl Från teleekonomi till mobilsamhälle 2012-09-06

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Downtown Stockholm and close to ”here”

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HSPA year 2008 LTE year 2010 LTE year 2010

Assuming 3 sector site20 MHz of bandwidthand cell averagespectral efficiency0,7 bps per Hz (HSPA)1,7 bps per Hz (LTE)

Siteand

Trans

Radio

SiteAnd

Trans

Radio

Trans

Cost for upgrading

an existingsite ~ 30k€

Capacity ofradio base station site~ 10 Mbps


Total costfor new site

~ 110k€


Radio

Siteand

Trans

Radio

SiteAnd

Trans

Radio

Trans

Cost for upgrading


Capacity ofradio base station site

Mbps



~ 110k€


~ 20 k€

~100k€

5 MHz

Cost structure, bandwidth and capacity

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Radio

Siteand

Trans


~ 200k€

Radio

SiteAnd

Trans

Radio

Trans

Cost for upgrading





~ 110k€


Radio

Siteand

Trans


~ 200k€

Radio

SiteAnd

Trans

Radio

Trans

Cost for upgrading





~ 110k€


20 MHz

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Radio

Siteand

Trans


~ 200k€

Radio

SiteAnd

Trans

Radio

Trans

Cost for upgrading





~ 110k€


Radio

Siteand

Trans


~ 200k€

Radio

SiteAnd

Trans

Radio

Trans

Cost for upgrading





~ 110k€


20 MHz 20 MHz 20 MHz


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Cost of radio equipment is decreasing rapidly

512 MSEK (50 MEuro)~6 KEuro per base station

~ 750 MSEK

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Base station site location in urban areasfrom PTS “Transmitter map” web page, December 2009

Downtown Stockholm

Kista Industry Area

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Examples of Base station densities(Urban areas in Sweden )

Name and type of area Total density

of sites Typical densities

for operators

Residential area in Uppsala ~6 per km2 1 3 per km2

Residential area Akalla ~ 14 per km2 3 5 per km2

Central part of Uppsala ~ 20 per km2 3 8 per km2

Industry area Kista ~ 50 per km2 7 20 per km2

Central part of Stockholm ~ 130 per km2 20 40 per km2

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To handle increasing user demand

• Two main development paths• Improve network performance and capacity• Add more spectrum

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From Ericsson Capital markets day

May 2008

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From Ericsson Capital markets day

May 2009

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Peak data rate ~10 - 20 bps per Hz Cell border rate < 0,10 bps per Hz Average data rate ~1 -2 bps per Hz

Averagecell border

Peak data rate ~10 - 20 bps per Hz Cell border rate < 0,10 bps per Hz Average data rate ~1 -2 bps per Hz

Averagecell border

Distance from base station

To improve the spectral efficiency – i.e. more bits/second per Hz of spectrum

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From Ericsson Capital markets day, May 2008

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Spectrum, capacity and cost

• High bandwidth means high capacity per site,i.e less number of base station sites

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Numner of base station sites

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Used spectrum (MHz)

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mb

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of

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es Spectral eff = 1,70

(LTE type)

Spectral eff = 0,70(HSPA type)

Amount of spectrum and number of sites

Example: New Kista area, 10 000 office workers

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Short exercise – work in 4 groups• How many base station sites need to be deployed in

the following cases?

• Operator A, LTE in the 2.6 GHz• Operator B, HSPA in the 2.6 GHz• Operator C+D, LTE in the 2.6 GHz band and share network• Operator E, LTE using unlicensed 1800 MHz band

• You are allowed to ask me one question per group

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(LTE type)


Cases for different Swedish operators using 2.6 GHz band


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Brazil operators

UK operators


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• Deployment for low or medium data rates

• Coverage for high data rates with existing sites

• Deployment needed forhigh data rates

Scalability of cellular systems For a specified amount of spectrum and for the same type of radio technology deployment of N times more capacity at data rate X will imply N times higher costs

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”Offered” bit rate vs coverage & load





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Marketing by mobile operators

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Industry focus• Three main strategies to increase radio network

capacity is described (Landström et al, 2011). ; • to improve the performance of the macro layer, • to build a denser macro layer (more base stations) • to add low power pico or femtocell base stations

• Current focus for R&D and standardization• To increase the peak data rate• To combine spectrum into larger chunks• To offload heavy data traffic from macro layer

to local networks: picocells, femtocells or WiFI

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Data rate, bandwidth andaggregation of carriers or bands• The higher bandwidth the higher the data rate

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To offload data traffic from the macrolayerFrom Vodafone:Investor relation info, March 2008

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The capacity needs to be increase at least 1000 times the coming years

Contributions• One enabler is ”more spectrum” • Another contribution comes from ”better technology”

(improved spectral efficiency )• A third contribution is from ”denser network”

3 minute discussion – discuss in groups• How do you think the different aspects contribute? (More spectrum)*(improved spectral eff.)*(denser network ) = 1000

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Cooper´s law• “the number of “conversations” that can theoretically be

conducted over a given area in all of the useful spectrum is doubled every two-and-a-half years (www.arraycomm.com/technology/coopers-law)

• The improvement in spectrum utilization has been over a trillion times in the last 90 years and a million times in the last 45 years.

• “Of the million times improvement in the last 45 years, • 25 times were the result of being able to use more spectrum • 5 times can be attributed to the ability to divide the radio

spectrum into narrower slices• Modulation techniques like FM, SSB, time division multiplexing,

another 5 times or so• The remaining sixteen hundred times improvement was the

result of confining the area used for individual conversations to smaller areas, what we call spectrum re-use”.

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To handle increasing user demand

• Two main development paths• Improve network performance and capacity• Add more spectrum

• Current focus for R&D and standardization• To increase the peak data rate• To combine spectrum into larger chunks• To offload heavy data traffic from macro layer

to local networks: picocells, femtocells or WiFI

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BUT, there are two ”buts”1. Spectrum alone is not the main issue

• The traffic increases 1000 times the coming years• Only 2 – 5 times more spectrum is discussed

2. Regions and countries in the world are different– The world it is not like a ”Sweden XL” – In countries like Sweden and Germany :

• There is a lot of fixed line infrastructure• Operators have ”quite a lot of” spectrum

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Differencies between countries

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Cost structure


Scalability

Spectrum allocation

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T raffic

Revenue


R evenue gap

T raffic

Revenue


R evenue gap


ValueAdd

Telecom


ConsumersValueChain


ValueAdd

Telecom


ConsumersValueChain

Voice services

Mobile broadband

New services??

Voice services

Mobile broadband

New services??




Networks

Customers

Payments

Services


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Thanks for your attention• Link to my PhD Thesis, February 2011

”Mobile Network operators and cooperation– A tele-economic study of infrastructure sharing

and mobile payment services”http://www.impgroup.org/dissertations.php

• Link to Telia investor relation informationhttp: //www.teliasonera.com/investors/reports-and-presentations/presentations/

operator challenges - network related - business related...2 3 0,00 0,20 0,40 0,60 0,80 1,00 macro...

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