Mobile Broadband Working Group Interim progress report Status
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 M 2 M Tablets 6000 Laptops Smartphones 4000 Feature Phones Exponential growth calls for exponential responses. 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 /ns 341/ns 525/ns 537/ns 705/ns 827/white_paper_c 11 -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 You. Tube 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 1 H 2013
Sandvine prediction
Comparative usage Mean monthly usage U. S Fixed U. S. Mobile EU Fixed EU Mobile Up 6. 0 G 43 M 2. 5 G 41 M Down 38. 6 G 346. 7 M 10. 9 G 269. 9 M Total 44. 7 G 390 M 13. 4 G 311 M Sandvine Global Internet Phenomenon Report 1 H 2013
My conclusions • Growth is not exogenous. – Important to understand what will shape it. • Netflix, Qo. E, • 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 Wi. Fi (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, Mc. Kinsey, 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 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. 0 G 43 M 2. 5 G 41 M Down 38. 6 G 346. 7 M 10. 9 G 269. 9 M Total 44. 7 G 390 M 13. 4 G 311 M
Europe? • Vodafone UK : usage £ 5 for 4 GB ($2/GB) • Samsung Galaxy Note 3 (4 G) – 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? • Qo. E? Lack of equivalent set of apps?
Internet expenditures per BB household Total excluding CDN and advertising: $479. 47 ($82, 74 per paying customer) 20
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