Mobile Broadband Working Group
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 bi-weekly basis.
• Substantial contributions from Bill Lehr and
Marie-Jose Montpetit.
– Thank you.
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?
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.
Three related issues:
• Growth in demand.
– Is raw capacity the only issue?
• Cost of usage.
– More properly, costs investment in capacity.
• Sources of revenues.
Growth
Traffic Growth per Device Type
12000
This is a prediction, not a fact.
Petabytes/month
10000
Other
8000
M2M
Exponential growth calls for
exponential responses.
Tablets
6000
Laptops
Smartphones
4000
Feature Phones
Growth is due both to new users
and to increasing usage/user.
2000
0
2012
2013
2014
2015
2016
2017
CISCO Virtual Networking Index (VNI):
http://www.cisco.com/en/US/solutions/collateral
/ns341/ns525/ns537/ns705/ns827/white_paper_
c11-520862.html
Smart phones will continue to
dominate.
What are people doing?
Mobile download U.S.
Ericsson forecasts:
http://www.ericsson.com
/news/1561267?category
Filter=reports_127067322
2_
Application
Share
YouTube
27.33%
HTTP
19.16%
Facebook
8.67%
MPEG
7.32%
Google Play
4.37%
SSL
4.2%
Netflix
3.98%
Pandora Radio
3.35%
Blackberry
1.61%
Flash Video
1.51%
Total
81.5%
Sandvine Global Internet
Phenomenon Report 1H
2013
Sandvine prediction
Comparative usage
Mean monthly 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
Total
44.7G
390M
13.4G
311M
Sandvine Global Internet Phenomenon Report 1H 2013
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.
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.
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.
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 eightyear 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
Paper
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.
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?
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.
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
Down
38.6G
346.7M
10.9G
269.9M
Total
44.7G
390M
13.4G
311M
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.
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?
Internet expenditures per BB household
Total excluding CDN
and advertising:
$479.47
($82,74 per
paying customer)
20