disruptive business models for mobile networks in mature markets
DESCRIPTION
Delivered at ETSI's Business Innovation Summit: "The Wireless Network of the Future", London, 4th October 2011.TRANSCRIPT
Disruptive Business Models for mobile networksin mature markets.ETSI’s Business Innovation Summit 2011, 4th October 2011..
Dr. Kim Kyllesbech Larsen, Technology Economics
Technology, Deutsche Telekom.
Changing business models …
2Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
Mobile OperatorGarden
CS VoiceSMS
Mobile Data
NetworkSIM Bill ing
50 – 700MHzCloud
SIM
“New”Billing
Whitespace
OTT Apps
Coolstuff
Smartdevices Regulation
The mega disruptive challenges …
3Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
Mega bits
Mega bucks
Mega Hz
ARPU … OTT Mobile Apps topline impact.Mobile revenues in an Apps-centric world could decline rapidly.
4
22.41 23.01
12.7
1 Source 2010 & 2015 Pyramid Research March 2011 Western Europe.
2010A 2015EMobile centric(“worry-free”)
2015EApps centric
(“doom”)
(Free) OTT VoIP and Messaging Apps can lead to adramatic loss of most profitable MNO revenues
CS Voice SMS & MMS PS Data
15.7
3.4
3.3
13.0
3.8
6.2
6.5
6.2
Illustration
?By 2015
more than 70%of users have a smartphone
Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
ARPU
• End of Profit in WEU next 5 years?
• Accelerate LTE deployment
• Manage traffic via pricing, policy & control.
• Spectrum re-purpose & acquisition.
• End of Profit in WEU next 5 years?
• Accelerate LTE deployment
• Manage traffic via pricing, policy & control.
• Spectrum re-purpose & acquisition.
Tellabs global study1 …The End of Profit.The end to the mobile-only business model as we know it?
5
Western Europe mobile carrier“End to Profit” (Tellabs study).
What can be learned?
Western Europe assessment
Businessmodelbreakdown
Mounting cashpressure
Annual Growth Projection until 2020.
5%
20%
70%
87%
47% 47%
0.5% 1.0%
61% 61%
28% 28%
0%
20%
40%
60%
80%
100% 2010 - 20152015 - 2020
Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
New business models and operation will be required.
6Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
Total Revenue
Technology Cost (ca. 15% – 20%)
Usage Cost (Voice dominated 10% - 20%)−
Market Invest SAC & SRC (ca. 20%)
−
= EBITDA (WEU ca. 37% 1)
Personnel Cost (<20%)
Other Cost (5% - 10%)
−
−
−
Network depreciation (ca. <20% of Revenue)−
Spectrum Amortization−
Capex (ca. 7% to 15% of Revenue)−
Mobile Profit & Loss - Today
1 BoA ML Global Wireless Matrix 1Q11, margin data for 4Q 2010.
70% of Total Revenue Today
= Maintain Today’s EBITDA of ca. 37%
Mobile Profit & Loss - Tomorrow
Reduce Cost with 30%!
↓→
↑→
→
↑
New business, operation and cooperation modelsNew business, operation and cooperation models
•Network sharing (i.e., EE UK).
•Network Factory /Network spin-off.
• Increased purchasing powerDT-FT Procurement JV.
New partnership models – de-risk mobile.
•Network sharing (i.e., EE UK).
•Network Factory /Network spin-off.
• Increased purchasing powerDT-FT Procurement JV.
New partnership models – de-risk mobile.
New Business Models
↓
↓
Technology Cost (15% - 20%)
Personnel Cost (<20%)
Data demand exceeding spectral efficiency gains.”Houston we have problem”.
Spectral demand could exceed spectral efficiency by
as early as 2014.
Spectral demand could exceed spectral efficiency by
as early as 2014.
7Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
10 20 40 60 85 120 120 120 120 120 120
0
5
10
15
2010 2012 2014 2016 2018 2020
Total spectrum in use for mobile data demand
Inc
rea
se
ove
r 20
10
Spectral Efficiency (*)
Spectral demand (limited)
Spectral demand (unlimited)
Data demand:CAGR 71% < 2015CAGR 61% 2016
1 Illustration for a mobile operator with 20MHZ @ 800 MHz, 20MHZ @ 900MHZ, 50MHZ @ 1800MHz and 30MHZ @ 2100MHZ.
Illustration 1
(*) Report for Ofcom,: 4G Capacity Gains, Final Report, January 2011.
More spectrum.
Leapfrog network capacity:
Pico – Femto cells.
Smart antenna systems.
White-space systems.
Price, Control & Policy.
More spectrum.
Leapfrog network capacity:
Pico – Femto cells.
Smart antenna systems.
White-space systems.
Price, Control & Policy.
Leapfrog network Innovation!
8Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
Mobile data growth in for a crash ... unless managed.”
• 80% of data traffic carried by 3 sites.
• 20% of users generate 80% of traffic.
• Off-loading is an effective financial remedy … but not easy to achieve!
• 80% of data traffic carried by 3 sites.
• 20% of users generate 80% of traffic.
• Off-loading is an effective financial remedy … but not easy to achieve!
Off-loading benefits are tremendousBut it demands new partnership models for mobile-only.
9
Off-loading Economics.
What can be learned?
Mobile data is “80% fixed”
31
2 3 4 3 3 2 2 2 1 1 1 1
0
5
10
15
20
25
30
35100% traffic80%+ traffic
“20% data mobility”
Data traffic per user
Free Cash Flow
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
HSPA only, No LTE HSPA + LTE 50% off-load from 2012
Businessmodel
breakdown
Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
Innovation
LTE deployment requires available spectrum.
UL(75 MHz)
DL
UL(35MHz)
DL
UL(70 MHz)
TDD(50 MHz)
DL
900 MHz (2G → 3G)
1,800 MHz (2G LTE)
2,6001 MHz (LTE)
UL(60 MHz)
TDD(100 MHz) DL
2,100 MHz (3G)
3GTDD
part TDD(mainly APAC)
2,300 – 2,400+ MHz
FDD part TDDThis band provides interesting backhaul P2P
options in some Greenfield scenarios
3,400 – 3,500+ MHz (WiMax → LTE)
White-space
TDD
(20 MHz)
(20 MHz)
3GTDD
1 The shown structure consistent with European band plan. In USA this band is held by Clearwire and primarily used forTDD WiMax.
UL(30MHz)
DL
800 MHz (LTE)
UL(58 MHz)
DL
1,500 MHz (MSS L-band)
TDD
10
UL DL
2,100 MHz (MSS S-band)
Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
700 MHz50 MHz
Data traffic trend to be considered.Optimized service delivery – macro-level.
Traffic Profile
30+% in-fill possibility.
Cognisant network.
Optimized service delivery
Network friendly apps.
Cloud-Device optimization.
E2E SON.
30+% in-fill possibility.
Cognisant network.
Optimized service delivery
Network friendly apps.
Cloud-Device optimization.
E2E SON.voice
data
11Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
Primary indoor usage → off-load possibilitiesPrimary indoor usage → off-load possibilities
What can be learned?
Off-busy-hour In-fill deliveryOff-busy-hour In-fill delivery
The cognisant network experience.Cognisant experience – aggressive innovation.
12Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
BH time frame (sec by sec)
Averageload
Capacity limit
Smart & Interconnected (ad-hoc) Devices
Self-O
ptim
ized
& Cog
nisa
nt N
etwor
kNetwork optim
ized OS & Apps
Rural / Nation-wide: Digital dividend up-to 900 MHz
Cost-optimized LTE deployment models.Availability of a wide range of frequencies will be essential for economical network deployment.
13
Urban – Suburban:
Up-to 2100 MHz
Hot-Spots
2.3To
3.6 GHz
Throughput / Capacity
2.3 - 3.6 GHz Typical BWs/Operator > 40 MHz
Femto/Pico cells & smart-antenna systems.
Rural Fixed-likeTypical BWs/Operators < 20 MHz
LTE connectivity
Illustration
Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
DWDM
DWDM
DWDM
DWDM
100 GbpsDWDM
EvolvedPacketCore
Backhaul will force re-thinking the network design.LTE’s extremely power-full air-interface, i.e., 100+ Mbps, will require extensive backhaul fiber deployment.
14
FTTS1 100+ Mbps
LTE air-interface30mean to 100+peak Mbps
(per sector)
eNode
100GbE
Illustration
32:1 320:1eNodes per element 3200:1
BH Throughput 3+ 32+ 320+ In Gbps
Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
Our Connected Life ... @Home, @Work and on-the-Go The drive and strive for convergence
Node
Sharing 100 Mbps with up-to 7000+ devices
per macro-cellular radio node.
FTTS 100 Mbps
AP (e.g., WiFi or Femto,..)
Out-side in coverage
Home Environment with ca. 2.3 people
per Home
versusIn-side out coverage
FTTH 100+ MbpsCable 100+ MbpsVDSL 40+ Mbps
• Transparent off-loading strategies.• Boost out-side in coverage-capacity
Fiber-to-the-Site.• Inside-out coverage
In-home “backhaul” connectivity.• Always-best-connected offers.
• Transparent off-loading strategies.• Boost out-side in coverage-capacity
Fiber-to-the-Site.• Inside-out coverage
In-home “backhaul” connectivity.• Always-best-connected offers.
15Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
Technology trends
• Network Factory concept• Beyond network sharing.• Multi-party sharing (>2 parties).
• Mobile-Fixed JVs.• Network spin-offs.
• Network Factory concept• Beyond network sharing.• Multi-party sharing (>2 parties).
• Mobile-Fixed JVs.• Network spin-offs.
New partnership models
2020 Western Europe
Max 2 mobile network infrastructures (per country)
connected to 1 Fiber or DOCSISx networks(1 pan-European mobile LTE network incl.
S-band & white-space).
Max 2 mobile network infrastructures (per country)
connected to 1 Fiber or DOCSISx networks(1 pan-European mobile LTE network incl.
S-band & white-space).
16Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
Prediction 1
Cognisant network and massive interconnected smart-devices.(more than 50% mobile data traffic being
off-loaded to fixed, cloud storage/computing)
Cognisant network and massive interconnected smart-devices.(more than 50% mobile data traffic being
off-loaded to fixed, cloud storage/computing)
Prediction 3
Most MNOs have spun-offtheir mobile networks or
leasing their infrastructure to Global Service Providers.
(mobile-fixed-media JVs and mergers).
Most MNOs have spun-offtheir mobile networks or
leasing their infrastructure to Global Service Providers.
(mobile-fixed-media JVs and mergers).
Prediction 2
Smart-device and application oriented business models rules across all platforms & channels.
(provided by GSPs)
Smart-device and application oriented business models rules across all platforms & channels.
(provided by GSPs)
Prediction 4
Re-think the Mobile-only business model.What we need to be passionate about.
New partnership models optimizing across Mobile, Fixed & Device.New partnership models optimizing across Mobile, Fixed & Device.
Mitigate spectrum crunch → acquisition, off-loading & policy. Mitigate spectrum crunch → acquisition, off-loading & policy.
17
Innovation across network, device & OS → The Cognisant Network.Innovation across network, device & OS → The Cognisant Network.
Dr. Kim Kyllesbech Larsen, ETSI’s Business Innovation Summit, October 4th 2011, London.
New financing structures → public funding, supplier financing, …New financing structures → public funding, supplier financing, …
Thank you for your interest!
Contact: [email protected]: +31 6 2409 5202http://nl.linkedin.com/in/kimklarsen
Acknowledgement: I am indebted to my fantastic team for always being patient with my data requests, for their great suggestions and support in creating this presentation.