March 2011

MWC 2011: Operators Roll with 4G

by Chris Nicoll, Distinguished Research Fellow, cnicoll@yankeegroup.com

The Bottom Line

At Mobile World Congress 2011, it was clear the buzz is back in the telecom industry. Operators are talking about their next-generation networks, services and solution implementations while taking advantage of a broadening ecosystem of 4G devices that are capturing user attention and driving the adoption of 4G services.

The Market Is on a Positive Trajectory

The 4G industry is growing at an incredible rate, with the expectation that by the end of 2011, 400 million mobile broadband users will join the 600 million users already connected for a total of 1 billion users. The LTE ecosystem mirrors this growth, with 100 LTE devices expected by the end of this year, compared to 10 at the beginning. Despite the strong focus on LTE this year, HSPA+ looks to remain king of the mobile broadband market in terms of size and revenue as a number of key operators see a service synergy between their HSPA+ and LTE networks and more vendors look to accommodate them (see the March 2011 Yankee Group Report MWC 2011: Vendors Look to 4G for Differentiation). The most common questions we receive from operators have to do with the challenges of 4G: Should I deploy LTE? What about HSPA+? What is the difference between the two? What devices will be available, and when will they be ready? How do I charge for the service? Will my subscribers be able to roam? What does the future hold? Yankee Group believes 4G is much more than just a radio access network (RAN) technologyit is a fundamental shift in the industry that touches every element of the operators organization (see our February 2011 report Whats Hot at Mobile World Congress 2011). This view was clearly borne out by the breadth and depth of demonstrations, presentations and discussions at Mobile World Congress (MWC) 2011 and by the operators comments. This report highlights the key messages, demonstrations and discussions from the show related to the market for 4G and operator strategies in particular.

4G ITU Definition or Otherwise Has Arrived

Operators around the world are making strides toward 4G, although the market varies widely across the global regions. Europe was clearly first thanks to TeliaSoneras network launch in 2009, and that operator remains an LTE leader with the fastest network in the world. Other European operators are competing as well: Telenor is starting to launch competitive services, but over the past year the service has been rolled out fairly slowly and has remained dongle-based. DT in Germany is following regulations and rolling out rural LTE coverage first. Orange, Telecom Italia, Vodafone, Wind and others are evaluating their current spectrum positions or deciding whether to bid on upcoming 4G spectrum. The Asian market is proving to be unique, with mobile user behavior and population density conditions seen nowhere else in the world. Asian operators are starting to make forays into 4G: NTT DoCoMo launched Japans first LTE network in December 2010, with expected download speeds approaching 75 Mbps. SoftBank is upgrading its 3G network after moving all its 2G users to its 3G network, and it signaled its intentions to develop TD-LTE solutions with China Mobile, Vodafone and Bharti Airtel.

Copyright 2011. Yankee Group Research, Inc. All rights reserved.

MWC 2011: Operators Roll with 4G

KDDI s strategy of running multiple networks to meet different subscriber requirements seemed anathema at one time. However, with so many operators around the world looking at how LTE and HSPA+ will coexist, it is clear where the precedent came from. In the Latin American/South American marketplace, 4G looks very similar to the early implementation of LTE in Europe: Its primarily dongle-based and used as a wireless replacement for fixed mobile services. Smartphones are starting to enter the fray, but the regulatory environment remains a barrier (see the February 2011 Yankee Group Report Mobile World Congress: Key Takeaways for Latin America). This leaves the North American marketplace in a unique position. It was not first to market, but it is now the leader in 4G network deployment and competition: AT&T, Clearwire, MetroPCS, Sprint, T-Mobile and Verizon Wireless are all currently running 4G networks, defined as HSPA+, LTE and WiMAX. Price points and go-to-market models vary widely, providing device, coverage and price plan options to subscribers (see the February 2011 Yankee Group Report US Is Fast Becoming a Key 4G Proving Ground). Operator focus at MWC was clearly on using 4G to provide the best user experience. Notable for their focus were announcements and discussions by LTE operators including TeliaSonera, Telstra and AT&T, where it was clear that technology religion was taking a back seat to customer-oriented services. Each of these vendors discussed a strong HSPA+/LTE dual-service strategy backed by device partners such as Qualcomm and Sierra Wireless, which are committed to providing seamless roaming between the two networks.

agreement: When the panel was asked if it considered HSPA+ a 3G or 4G technology, both Telstra and Vodafone Germany commented that they are not selling technology, they are selling servicesand it does not really matter what the technology is as long as its the right service for the user. TeliaSonera and AT&T have taken the same stand. Bravo! Thus a number of carriers are in the vanguard pursuing both HSPA+ and LTE, but with a smart eye toward interoperability. The discussion is moving from HSPA+ or LTE to HSPA+ and LTE. However, with so much attention being paid to LTE, a bit of a levelset regarding the ecosystem was also provided: By the end of 2011, Ericsson expects 100 LTE devices to be available, up from just 10 at the beginning of the year. Compare that to approximately 2,000 available HSPA devices. How best to gauge the intersection of HSPA+ and LTE is a consistent question we hear from operators, and it was a hot topic on the MWC floor this year.

Operators at MWC: 4G Is Less About the Technology and More About the Service
With all the activity around the operators at MWC, AT&T, TeliaSonera, Telstra and Verizon Wireless provide a good representation of operator issues presented at the show.

AT&T
AT&T did not focus much on its upcoming LTE launch to augment its HSPA+ network, but instead focused on its views of the embedded market, which it termed the fastest growing market segment. The idea that connectivity can be embedded in nearly every common device opens a wide range of service opportunities that will benefit consumers and allow for more seamless and automatic operation. While perhaps not shown to best effect at MWC, AT&T highlighted the huge and important role of Wi-Fi in its strategy. Our own figures bear this out, showing significantly higher data usage on Wi-Fi compared to cellular connections. Clearly, 4G is not diminishing the role of Wi-Fi for consumers or enterprises, and we will see more developments in this area.

HSPA+ vs. LTE

So much has been written regarding the International Telecommunications Union (ITU) definition of 4G and the role of HSPA+ (see the October 2010 Yankee Group Report Early 4G Leaders and Followers). Operators at MWC 2011 strongly weighed in with their views on the subject, with unusual

Copyright 2011. Yankee Group Research, Inc. All rights reserved.

March 2011

TeliaSonera
TeliaSonera, the No. 1 operator in Sweden and No. 2 in Finland, operates HSPA in the 2.1 GHz band. The operator maintains a nationwide HSPA+ network and is using LTE for urban highspeed mobile broadband (MBB). Its LTE provider, Nokia Siemens Networks (NSN), did a booth interview with TeliaSoneras Senior VP Indra Asander, head of Product Management, Mobility Services, who provided several keen insights. Her position is that 4G is about moving pictures (video and still), which is pretty astute given that video numbers are steadily increasing to nearly two-thirds of Web traffic according to Ciscos Virtual Networking Index (VNI). This also may come from the fact that this operators experience has been exclusively dongle-based: Dongles are a means of getting early (and heavy) traffic onto the network while minimizing the traffic engineering issues involved with a lot of inter-cell traffic. However, with experience gained from the past year and an ecosystem that is rapidly expanding, Asander announced that Samsung will be providing TeliaSoneras first LTE smartphone in Q3 of this year. Samsung is going places with 4G, providing handsets to MetroPCS, Verizon Wireless and now TeliaSonera. Along with TeliaSoneras first-mover status with LTE, Asander also highlighted a pricing strategy Yankee Group sees as the future for 4G services: Since TeliaSoneras customers initially did not understand tiered pricing, the operator moved to flat-rate pricing. Given that flat-rate pricing is not sustainable in the face of enormous data growth, TeliaSonera is now looking at a valuebased pricing plan. Subscribers pay a base rate, then additional fees for packages they want to use. Think VoIP (yes, TeliaSonera will charge for it), sports, movies, gaming, etc. Dongle-based plans based on speed and volume may be offered, keeping in line with dongle-oriented services.

An interesting observation made by Asander regarding TeliaSoneras HSPA+ and LTE networks is that the latency improvements in LTE are noticeable to users and the experience just feels better. Clearly TeliaSonera is crafting a careful strategy of HSPA+ and LTE coexistence, which we saw repeated by other operatorsnotably Telstra.

Telstra
Australian operator Telstra brought partners Ericsson and Sierra Wireless into its press conference to announce not just LTE and HSPA+ upgrades, but the capability for seamless roaming between its national 850 MHz HSPA+ 21/42 network and the 1.8 GHz LTE network. LTE is positioned in denser urban areas for coverage and capacity, while HSPA+ is the broader coverage technology where capacity is less of an issue. The operator stated it will not have to add a single base station to its network to support the LTE build-out. Telstra is committed to continued HSPA+ investment in the network, with a particular focus on providing a seamless experience between the two services, as its customer surveys indicate that reception/signal quality is users top concern (followed by ease of use, screen quality and battery life). With partners Ericsson and Sierra Wireless handling the technology part of the solution, Telstra expects to have dongles available for the handover by the end of 2011, with hotspots, smartphones and voice over LTE (VoLTE) arriving in 2012. HD voice is also in the works, with Ericsson specifically pointing out the need not just for data capacity planning, but signaling capacity planning as well.

Verizon Wireless
2011 marked the first time Verizon Wireless exhibited at MWC, and demonstrations highlighted not just key advancements in VoLTE, but also other service-oriented capabilities including video quality, live multi-player gaming and a breadth of devices. Of particular note was that the booth was all about 4G LTE, not Verizon Wireless services in general. It was small in size, but had a razor focus.

Copyright 2011. Yankee Group Research, Inc. All rights reserved.

MWC 2011: Operators Roll with 4G

One consistent message coming out of Verizons demos was that 4G means multi-user or multi-device. At every demo station, it specifically pointed out that its 4G LTE smartphones support up to eight Wi-Fi users, while its netbooks support up to 10. This is old news to Sprint and its hotspot-integrated devices, especially the still-cool HTC EVO 4G phones, but this feature seems to be important to Verizon Wireless as well. Perhaps to blunt some of the criticism the company has garnered because its iPhone cannot support simultaneous voice and data sessions, from day one all Verizon Wireless LTE smartphones will support simultaneous circuit voice (via the CDMA network) and data (over LTE). It is not yet clear what this will do to battery life and heat, but the expectation is that four smartphones (the HTC Thunderbolt, Motorola Droid Bionic, LG Revolution and a Samsung phone) will launch between February and June 2011, in addition to hotspots from Samsung and Novatel in the same time period. Verizon Wireless is also paying close attention to the user experience, focusing on providing a relatively smooth handover from LTE to CDMA and back. Initial transitions will not be seamless, with CDMA-to-LTE requiring the devices to go idle first. Also notable is the operators apparent embrace of over-the-top (OTT) players and its move to open an Application Center in San Francisco, Calif., this year to facilitate partner collaboration. Verizon Wireless sees OTT players as an opportunity, not just competition, since it believes devices plus applications equal differentiated services. AT&T has a similar developer-friendly outlook.

TeliaSonera should push the pricing models forward. With smartphones arriving in Q3, TeliaSonera should push its value-based pricing plan with aggressive content packages that are clearly defined and include VoIP. Telstra needs to keep up the progress. With a leading view on HSPA+ and LTE roaming, Telstra needs to follow up its early announcement with speedy execution if it wants to drive the global ecosystem and roaming standards. Verizon Wireless must show that global roaming is a priority. Booth staff highlighted the global nature of LTE and made it clear Verizon Wireless was there to sign up roaming partners. Now the operator needs to follow up with truly global devices and roaming agreements to avoid remaining the CDMA island it is today.

Conclusions and Recommendations

With so few operators actually deploying 4G networks at this point, a clear message about the move to the next generation was being sent at MWCby both equipment vendors and operators. Each operator claimed being first to market is a key differentiator for them. For operators and regulators looking to understand the key issues, challenges, benefits and business models around 4G, MWC provided many key insights. It was not just about LTE. Yankee Group recommends: AT&T should talk LTE/HSPA+. A key benefit of HSPA+ is the ecosystem, and now that Telstra and TeliaSonera are driving interoperability, AT&T should join in and launch seamless global roaming and interoperability capabilities.

Copyright 2011. Yankee Group Research, Inc. All rights reserved.

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Chris Nicoll, Distinguished Research Fellow

Chris Nicoll, distinguished research fellow, is a member of the Yankee Group Research Council and is chartered with the responsibility of providing thought leadership to the research organization. Comprising senior research leaders, the Research Council provides outreach to clients and the broader Yankee Group community, as well as ensures that the companys research agenda addresses the needs of business leaders. Chris drives the strategic thinking of the research organization and helps shape the research direction. His expertise involves working with customers to establish competitive positioning in their markets and to gain and maintain a leadership position.

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Copyright 2011. Yankee Group Research, Inc. Yankee Group published this content for the sole use of Yankee Group subscribers. It may not be duplicated, reproduced or retransmitted in whole or in part without the express permission of Yankee Group, One Liberty Square, 7th Floor, Boston, MA 02109. All rights reserved. All opinions and estimates herein constitute our judgment as of this date and are subject to change without notice.

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