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Mobile Broadband Working Group Interim progress report.

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Presentation on theme: "Mobile Broadband Working Group Interim progress report."— Presentation transcript:

1 Mobile Broadband Working Group Interim progress report

2 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.

3 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?

4 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.

5 Three related issues: Growth in demand. – Is raw capacity the only issue? Cost of usage. – More properly, costs investment in capacity. Sources of revenues.

6 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): /ns341/ns525/ns537/ns705/ns827/white_paper_ c html

7 What are people doing? Ericsson forecasts: /news/ ?category Filter=reports_ _ ApplicationShare YouTube27.33% HTTP19.16% Facebook8.67% MPEG7.32% Google Play4.37% SSL4.2% Netflix3.98% Pandora Radio3.35% Blackberry1.61% Flash Video1.51% Total81.5% Mobile download U.S. Sandvine Global Internet Phenomenon Report 1H 2013

8 Sandvine prediction

9 Comparative usage U.S FixedU.S. MobileEU FixedEU Mobile Up6.0G43M2.5G41M Down38.6G346.7M10.9G269.9M Total44.7G390M13.4G311M Mean monthly usage Sandvine Global Internet Phenomenon Report 1H 2013

10 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.

11 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.

12 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.

13 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 # 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 LTEcapacity and cost aspects, Nokia Siemens Networks, White Paper

14 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/GBone tenth of mobile. – But incremental might be closer to wireline costs.

15 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?

16 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.

17 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 FixedU.S. MobileEU FixedEU Mobile Up6.0G43M2.5G41M Down38.6G346.7M10.9G269.9M Total44.7G390M13.4G311M

18 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.

19 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?

20 Internet expenditures per BB household Total excluding CDN and advertising: $ ($82,74 per paying customer)


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