why is lte essential?
TRANSCRIPT
Why is LTE Essential?Operators’ ChallengesA Framework for Strategy Development
A Huawe White Paper by François Doummar
TABLE OF CONTENT
Executive Summary ---------------------------------------------------------------------------------- 1
Introduction ------------------------------------------------------------------------------------------- 2
Why is LTE Essential for Operators? -------------------------------------------------------------- 3
LTE Global Markets Status -------------------------------------------------------------------------- 5
Framework for Operators Strategy Development --------------------------------------------- 7
Manage Your Spectrum --------------------------------------------------------------------------------------8
Backhaul Holds It All ---------------------------------------------------------------------------------------- 10
Terminals Are Your Entries --------------------------------------------------------------------------------- 10
Roaming Needs Interoperability -------------------------------------------------------------------------- 11
Pricing is Key-------------------------------------------------------------------------------------------------- 11
Voice Is King, Let It Be Over LTE -------------------------------------------------------------------------- 13
Differentiate Your Value Propositions ------------------------------------------------------------------- 14
Know Your Customers Well ------------------------------------------------------------------------------- 15
Brand It Right! ------------------------------------------------------------------------------------------------ 15
Take It to the Market, Confidently ----------------------------------------------------------------------- 18
Conclusion: Paving the Way for a Bright Future --------------------------------------------- 19
About Huawei Business Consulting and Huawei Contribution to LTE development - 19
List of Figures --------------------------------------------------------------------------------------- 20
List of Tables ---------------------------------------------------------------------------------------- 20
List of References ---------------------------------------------------------------------------------- 20
About the Author ---------------------------------------------------------------------------------- 21
1
Executive Summary LTE is developing fast around the world with 159 Commercial launches
forecasted by end of 2012 and nearly 30 million subscribers.
LTE is now entering a new phase as a mainstream technology. While it solves
many of the challenges the operators are facing especially in mobile broadband,
it brings some others too, but it opens great opportunities for operators in the
actual industry context.
Many reasons drive Operators to massively invest in LTE networks. From
spectrum harmonization to brand leadership positioning, going through the
network cost efficiencies instilment and the creation of differentiated value
propositions, LTE will shape the future of mobile communications.
LTE is thought to bring a response to the present structural industry changes that
are shifting some of the business out of the operators’ hands toward devices
manufacturers and OTT players. LTE, with its feature rich technology, will help
setting the right new business models and services to ensure value for revenues
and protect against new players leaking operators’ revenues, while ensuring lean
network costs management.
Simultaneously, the changes we see in the industry are not really a threat. As the
market is growing fast, the pie is getting bigger and there is room for multiple
players. Hence, operators’ revenues, if protected wisely with the right marketing
propositions that LTE considerably helps creating, they will be able to sustain
business growth while new OTT entrants will stimulate the market for more
innovation and value.
2
Introduction LTE has been developing since 2008 with tremendous promises or expectations
not only for extended speed, bandwidth and capacity, but also for features that
2.5G and 3G/HSPA networks failed to crystallize. With the first LTE networks
launched in 2009 in North Europe, today LTE is the fastest developing mobile
system technology ever with 105 networks in 48 countries worldwide –
expecting 159 by end 2012 – serving nearly 30 million subscribers.
With mobile customers’ behavior changing from predominance of voice usage
toward a predominance of data, mobile broadband networks are expected
to grow to support exponentially increasing traffic. This change is largely
stimulated by Smartphone usage, but also by the efforts that operators have put in terms of pricing packages and go-to-market
strategies to ease customer experience.
Mobile users connecting through Mobile Broadband in their daily life are growing as well and are estimated to reach 5 Billion (70%
penetration) subscribers by 2017 with an average of 0.5 GB/user/month (Smartphone and Laptops users generating respectively
an average of 2.5 to 3 GB/month and 7 GB/month traffic). In this context, 3G is not able to provide enough capacity at reasonable
costs – because of the limited spectrum and the use of circuit switched voice alongside. Moreover, with the proliferation of Internet
applications on mobile, and the related usage behaviors, 3G will not be able to set the right – differentiating – business models
using more granular customer usage profiling that will help operators offer value for services and hence manage ARPU profitability
margins.
Having said that, LTE is thought and designed to solve most of these 2G/3G – and other networks such as WiMax and CDMA –
challenges while preserving the continuity in technologies.
But why is it so essential for operators? Simply because there is no other network technology known to date that can serve the
growing number of mobile customers relying on mobile data and voice services with continuously heavier usage, while providing
operators the tools to leverage customers value by offering them rich sets of value services.
This paper will further explain reasons why LTE is so essential for operators, and after a brief update on global market status, it will
provide a detailed framework for LTE business strategies development, taking examples from leading operators.
The framework is meant to help operators’ leaders in understanding the LTE challenges and in developing their own insights, visions
and decisions to serve their markets at best while ensuring a profitable and growing business.
3
Why is LTE Essential for Operators? While LTE markets and technology has still to fully mature, LTE is entering now a new development phase where it is becoming a
mainstream technology. Operators are investing massively in LTE networks, getting into a race for launching “first”, urging regulatory
bodies to release licenses, refarming spectrums where possible.
Because it can work on any frequency and any spectrum, and because it is an all IP network, LTE includes a set of features that help
operators:
• Accommodate for the growing number of mobile broadband users and the exponential traffic development,
• Manage network costs efficiently,
• Leverage customers’ value with differentiated value propositions.
These features offer the following capabilities:
• Higher bandwidth,
• Higher coverage,
• Higher number of simultaneous customers (capacity),
• Better pooling of network parts,
• Flat and cost effective network architecture,
• Convergence of voice and data services for better network an spectrum efficiency,
• Customers, Applications and Services profiling to set a rich portfolio of differentiated value propositions for all customers’
tastes and needs.
In short, LTE helps operators serve a demanding and growing mobile broadband mass market at the best cost, maximizing revenues
and segments values with future proof investments.
Figure 1 provides some operators responses and the below points describe our detailed thoughts about the matter:
Figure 1: What is your primary motivation for deploying LTE?
4
• LTE is bringing a harmonization of Mobile technologies – including WiMax and CDMA – with great spectrum flexibility
and smooth evolution path. It is also available for FDD as well as TDD technologies, and paves the way for LTE Advanced
making the “dream” anywhere, anytime, any screen, any content a reality.
• It allows operators to set Premium MBB offering with higher bandwidth for elite customers.
• Operators see LTE as an opportunity to disrupt from the “unlimited” pricing package model – which has put strain not only
on the network, but also on the ROI case – introducing innovative pricing models.
• With more and more users going MBB and an increased traffic per user month on month, LTE introduces an enhanced
seamless MBB users experience and offloads 3G mobile networks from congestion.
• LTE enables operators to offer quickly and easily Internet solutions for consumers, education and other government bodies
as well as businesses, in areas where FBB is difficult or costly to deploy.
• Core LTE features, such as Quality of Service, priority and latency control, enable the creation of differentiated service
offerings and value added applications in the “Home” and the “Business” markets.
• Because of the nature of LTE network architecture and the spectrum harmonization, LTE attains a highly reduced bit cost
and cost per user, hence it offers operators the means to manage network costs much more efficiently.
• Operators willing to keep their brand image leadership, always try to be the “first” to launch in competitive markets to
confirm brand superiority through innovation.
• LTE will shape the future of mobile communications because it provides access anywhere and on any device – pervasive
and ubiquitous network. Operators should plan for LTE services introduction as a learning curve – for them and for their
customers – because the race is open, who does not enter, will lag far behind in the future. Moreover, once a strong
player launches LTE, competitors are pressured to respond to maintain customer retention and remain competitive.
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Table 1 : TOP LTE Operators by subscriber base (as of June 2012)
Source: Informa press reports, LTE Maps, Value Partners analysis
LTE Global Markets Status Hundred and five operators worldwide have already launched LTE services. Leading operators achieving over a million subscribers
are Verizon Wireless, SK Telecom, AT&T Mobility, NTT DoCoMo and LGU Plus (Table 1 below reports top operators list and
subscriptions’ achievements).
Operator LTE subscribers (000) LTE subs as % of total Network coverage Bands
Verizon Wireless 10,900 9.7% 67% Population 700 MHz
SK Telecom 2,933 10.8% Nationwide coverage800 MHz1800 MHz
AT&T Mobility USA 2,838 2.7% 24% population700 MHz1.7/2.1 GHz (AWS)
NTT DoCoMo 2,736 4.5% 30% population, 70% by end 2012 1.5GHz
LGU+ 2,040 20.6% Nationwide coverage 1800 MHz
KT Corp 863 5.0% Nationwide coverage 1800 MHz
Metro PCS 743 8.0% 14 metropolitan areas 1.7/2.1 GHz (AWS)
Rogers Wireless 600 6.4%35% residential areas, 60% population by end 2012
1.7/2.1 GHz (AWS)
Telstra 383 2.6% 100 regional and metropolitan centers 1800 MHz
Yota 350 100.0% 3 cities, 5 cities by Sept 2012 2.6 GHz
Bell Wireless Affiliates
224 3.0% 16 million or 48% population1.7/2.1 GHz (AWS)2.6 GHz)
Vodafone D2 193 0.6% 40% pop coverage 800 MHz
TeliaSonera Sweden 150 2.3% 61% population800 MHz2.6 GHz
T-Mobile Germany 85 0.2% 50 cities, 1,800 rural areas800 MHz1800 MHz
Tele2 Sweden 70 1.9% 60% population800 MHz1800 MHz2.6 GHz
Polkomtel 60 0.4% 28% population 1800 MHz
T-Mobile Austria 20 0.5% 12% population 2.6 GHz
Telia Denmark 15 1.0% 75% population 2.6 GHz
6
From this picture, we see LTE markets led by the US and Asia. However, different reasons lead for these markets’ uptake. The Japan
and Korea markets are natively data hungry by culture since the advent of i-mode. Therefore LTE has come as a natural transition
from mature 3G data usage. In addition, for the Korean market, all three competing operators have a nationwide deployment
strategy which considerably stimulates the market. Moreover, SK Telecom has set an aggressive marketing strategy to reach
confidently 7 million LTE customers by end of year 2012. As for the US operators, the strategy goes toward cost efficiency and lean
management with the intent of phasing out 2G and CDMA as soon as possible.
In Europe, Northern Countries have set the diapason for LTE in Sweden and Norway as both operators TeliaSonera and Net4Mobility
– a Telenor-Tele2 joint initiative set to optimize MNO efforts – were the first operators worldwide to launch LTE with operations
in both countries. But they struggled to upscale subscribers bases despite all the efforts in price reduction and promotions the
operators initiated. Germany was in the second wagon in LTE launches with Vodafone and T-Mobile. Speed based premium pricing
strategy and priority to deploy rural areas on 800 MHz spectrums were the main directions for LTE development in Germany. French
operators have acquired both 800 MHz and 2600 MHz spectrum in 2011~2012 but still have not launched any LTE services, though
SFR seem to be leading the dance with a real field trial planned by end 2012 in Lyon, the third largest city.
In the Middle East, there is no one common motive leading operators to deploy LTE. Markets behaviors are different depending
on countries. Presently only few leading Telco principally in the GCC community have launched LTE, others are preparing while
regulatory authorities are still inactive on spectrum licensing matters. Perhaps the KSA market is the most dynamic one for LTE
development. Mobily is a strong Etisalat established brand for 3G operator with stakes in fixed services through WiMax. Mobily
succeeded to be the first to launch 4G LTE in a strong marketing message, swapping WiMax customers. STC as the incumbent
immediately launched 4G LTE services with a strong branding campaign and Zain to follow. However, operators’ LTE strategies
differs, while Mobily is focusing on fixed wireless services on 2.6 GHz TDD network, Zain refarmed 2G 1.8GHz network on FDD and
addresses the mobile services. Typically, all 3 operators introduced iPhone 5, however, only Zain customers can enjoy LTE high speed
capability.
The UAE market has strong FBB offerings from both operators with excellent penetration. 3G networks aren’t overloaded yet by the
present customers’ behaviors. Though, Etisalat launched 4G for brand, innovation and market leadership. Du has to do the same to
maintain customers’ loyalty on the long run. Notwithstanding that it is also an excellent learning experience for operators to start
smoothly preparing for 4G with no risk for technology choice as LTE is ascertain to pursue the mobile experience journey over the
coming decencies.
On the other hand the Kuwait 3G networks are reaching congestion limits especially in some populated and/or high traffic areas
due to the lack of proper fixed broadband offerings. Operators urged the regulatory authorities to accelerate the 4G/LTE license
issuing to bring some oxygen into the MBB services.
7
Framework for Operators Strategy DevelopmentHaving understood the necessity for leading operators to implement LTE, it is important to understand how to develop the strategy
addressing their markets and the related practices or tactics to take most advantage of the technology capabilities in capturing
customers’ value.
It is important to clearly define the reasons why an operator wants to deploy LTE services. Is it to impose brand image (at any cost)?
Is it to offer premium services for elite customers to ensure satisfaction and/or incremental ARPU? Is it to fight or partner with OTT
players with the adequate business models? Is it to serve the fixed wireless segment? Is it to drive convergence? Is it to offload
congested 3G networks? Is it to phase out less efficient 2G networks? Or most probably, is it a combination of some or all of these
reasons?
Figure 2: Framework for Operators' Strategy DevelopmentWhile LTE helps solving many of these operators’
challenges, the technology brings many others. Matters
need to be handled smartly throughout the entire
ecosystem, from spectrum management to go-to-market
strategies in order to manage customer experience
expectat ions as wel l as the network operator’s
profitability.
For example, while LTE harmonizes spectrum usage
bringing certain flexibility, it is challenging device
manufacturers to avail on a single chipset the multi-band
capability and the backward support of 2G/3G modes.
This on another hand is putting pressure on the terminal
price, which is an entry barrier for customers take up.
In this chapter, a framework is developed, detailing
point by point the entire LTE ecosystem, taking examples
from leading Telco practices, to assist services providers
in understanding the key LTE challenges and insights in
developing successful business strategies.
Spectrum
Backhaul
Terminals
Roaming
Pricing
VoLTE
DifferentiatedValue
Propositions
Segmenttation
Branding
Go-to-Market
Framework forStategy
Development
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• Manage Your SpectrumLTE brings the necessary flexibility to spectrum management which becomes crucial for delivering the promised mobile
broadband experience; delivering enough coverage and capacity for customers where they are, as they need.
Although LTE could theoretically work on as many frequencies as stated by the 3GPP standards
Figure 3: Global, LTE launches by technology and band,
1Q12
Figure 4: Which spectrum bands do you intend to use to
deploy LTE? (Multiple choices)
Figure 5: LTE Spectrum Auction Pricing in Europe
(see Fig 3 and 4), operators need to find the right balance between many parameters when selecting the spectrum for LTE
launch:
• Spectrumand frequenciesavailability fromregulatoryauthoritiesandthesubsequentprice topay for the
acquisition. It is getting into a practice nowadays that the higher in frequency the spectrum is, the cheaper per MHz it is.
That is because a high frequency spectrum provides smaller cells, thus less coverage and therefore the network expansion
cost will be higher. This is why high spectrums are more likely to be used for fixed or nomadic value propositions or to
offload congested 3G/HSPA networks in dense zones and low spectrum are used to provide mobility and wide zones
coverage.
Also, the 1800 spectrum is getting
a great momentum nowadays as it
provides an excellent balance between
capacity and coverage. Moreover,
while slowly phasing out 2G voice
se r v i ces toward more e f f i c i en t
spectrum usage on both 3G and LTE,
1800 can be refarmed to LTE, while
3G can provide good MBB coverage in
rural areas on 900 until digital dividend
reallocation is completed and full LTE
services are deployed.
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• Integrationofnew4G/LTEserviceswithintheexisting2Gand3Gservicesportfolioandsubsequentevolution
planningfromexistingservicestoLTE (mobile broadband and voice services) with the necessary spectrum refarming.
Typically, though LTE can work on almost any spectrum, 2G standards are set on 900 and 1800, 3G on 900 and 2100, it
is highly recommended to spare the 800 and 2600 for LTE and lead regulatory authorities to comply with these practices
when it is related to mobile offering, while 2300 shall focus on fixed/nomadic services as a continuation of WiMax and
CDMA spectrums. In the latter case, TDD technologies are mostly used because of the bands allocations dissymmetry and
the possible fragmentation inherited from previous spectrum usage.
• Frequenciesandbandwidthplanning forcoverageandcapacityaspermarketdemographicsand traffic
development. Because of the flexibility of LTE standards, operators may start with LTE on small bands allocations, as small
as 1.4 MHz (which would provide limited speed and capacity for end customers) and up to 20 MHz per carrier. However
it is important to plan and ensure the necessary acquisition of additional future bands from the regulatory authorities and/
or refarming from 2G/3G spectrums as per the market demographics and the customer traffic patterns distribution in
geographic areas.
• Definitionandplansfortheroadmapofvaluepropositions intermsofmobility,fixed,broadband,voiceand
M2Mservices. Deciding on the type of spectrum and technology (FDD/TDD) used for LTE will have a direct impact on the
types of products and services to offer for both consumer and business markets or vice versa. Therefore it is important to
define and plan the future service offerings and decide on spectrum and technologies accordingly. Typically, mobile voice
services over LTE would require full mobility, which implies wide coverage and handover between cells, therefore low band
frequencies 700/800 would be recommended. Whereas, fixed wireless broadband services would require high capacity,
high bandwidth in dense zone, hence high band frequencies 2300/2600 would be indicated. M2M services for vertical
markets would depend on the market itself. The Oil & Gas market for example, requires some telemetry solutions in wide
desert zones sometime, hence wide coverage and low capacity meets the requirements. The industry used to operate
TETRA networks on 450 Mhz. Operating LTE on such band will bring great opportunities to provide richer solutions to the
Oil & Gas industry with the adequate security and real time communications requirements.
• Terminaldevicesavailabilityforthelocalcustomersaswellasforinboundandoutboundroamers. This is one of
the most important topics to consider when selecting the spectrum. Availability and price of the devices will have direct
effect on the subscriber take up and revenue plan. On the other hand, due to the wide range of frequencies used by
LTE, devices manufacturers may provide multi bands LTE terminals in addition to multi mode radios for 2G and 3G. But
they may not include all frequencies. As the markets consolidate to reach significant economies of scale, there will be
equilibrium between the cost of fully integrated multi-mode, multi-band chipsets and the price of the end users terminals.
Therefore, for price effectiveness, it is recommended to use the most commonly used LTE spectrums to maximize the
scales. This will have a positive impact on inbound and outbound roamers whose revenues will consolidate the business
case. Unless the service offering is limited to a Local Mobile or Fixed/Nomadic ISP offering, in which case the operator
may use non-common spectrum and terminal devices. In that case the operator may need to bundles the device with the
service, setting the adequate terms and conditions, and possibly SIM locking the subsidized devices.
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• Backhaul Holds It AllWith LTE providing up to 300 Mbps per sector on the radio side, an LTE base station reaches nearly the Gigabit per second
on the backhauling side, not to mention other 2G and 3G/HSPA traffic as well as internal signaling and other protocols, and
the plans for future evolution to LTE Advanced. Therefore backhaul planning and management is important to consider when
planning for LTE launch.
In addition, as LTE provides core features, such as QoS and latency control. Operators willing to leverage on such value
propositions need to ensure the services are delivered throughout the end to end network parts.
Our Network Consulting White Paper on “Mobile Backhaul Based on Fiber” provides comprehensive details on backhauling
strategies for LTE.
• Terminals Are Your EntriesAs discussed in the first part “Spectrum Management”, the availability of devices have a direct impact on LTE services take up.
One of the reasons we saw a slow take up in most markets where LTE was launched in early schedules – typically in North
European markets – is the limited number of devices and the relatively late introduction of LTE Smartphones. Typically, Verizon
Wireless saw clear uptake in its LTE subscriber’s base when it introduced a range of Smartphone terminals.
At the same time the spectrum fragmentation between regions and countries can’t help vendors realize economies of scale
for bringing LTE phones prices to lower levels for wide market segments affordability. Nonetheless, the LTE iPhone 5 launched
in Q3 2012 is expected have a significant positive impact on LTE subscription uptake in markets where the Smartphone can
operate on their networks. However, while Apple is focusing on capturing in priority the North American markets – where
LTE accounts for nearly half of the LTE subscribers worldwide – through the availability of iPhone 5 on 700 MHz, AWS and
1900 MHz band, others vendors such as Samsung, LG and HTC are capturing more standardized spectrums with 800 MHz,
1800 MHz and 2600 MHz . To date Huawei’s Ascend P1 LTE supports the widest range of frequencies for both FDD and TDD
technologies adding the 2100 and 2300 MHz bands to the 800/1800/2600 MHz list.
Therefore, taking example on leading operators in the market, we strongly recommend operators to enrich their device
portfolio for a quicker LTE market uptake. Many operators started with dongles and routers which seem to be still the entry
points for LTE services. But operators have to complement their portfolios with personal MiFi units followed by a wide range of
Smartphones and Tablets.
It is obvious that the mass market will come from Smartphone usage in LTE. However in this game, the Smartphone prices
ranging from 300$ to 800$ or higher set the barrier for mass market entry. Therefore operators and vendors are thinking
together how to lower this barrier. Vendors are working on multi-mode multi-band Chipset integration. Operators multiplying
creative initiatives to package and promotes services for all market segments. Typically MetroPCS is launching an “LTE for All”
initiative promoting LTE devices around 100$.
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In all cases, the terminal ecosystem is very important for wireless technologies and especially for LTE because the technology
evolution into an all-IP wireless network introduces a number of parameters that could help operators offer differentiated
value propositions including VoIPoLTE, Mobile Broadband, Fixed/Nomadic Broadband and Internet-of-Things. When designing,
planning and launching a value proposition, operators need to think it end-to-end, meaning from the terminal application to
the terminal device going through the smart network.
• Roaming Needs InteroperabilityLTE hasn’t yet reached a mass scale where roaming gets critical for users. And voice services over LTE are still in very early
stages to create pressure on LTE roaming agreements. In addition, in the present situation, we are more stressing on device
interoperability on different networks while abroad rather than on the international interconnection gateways.
To date, dual/triple mode devices 4G/3G/2G allow roamers to access mobile broadband services on 3G/HSPA offerings and
voice services on circuit switched networks (CS fallback). However, on the long run, operators need to ensure their LTE
customers can roam while abroad, but also they need to host inbound LTE roamers.
The LTE spectrum fragmentation and the device ecosystem readiness aren’t making the task easy for operators. It is important
that operators, device manufacturers and regulatory authorities reach a common agreement on a common spectrum supported
by all terminals in different countries.
Typically in the Middle East, most operators are launching Mobile LTE services (FDD) on 1800 spectrum except Qatar. This sets
a common basis for devices and customers roaming. However, people from the GCC countries, while roaming in Qatar or in
Europe need to ensure the possession of terminals supporting 800 spectrums especially that 2600 may only be available in
hotspots in urban zones. Similarly, Qatar Telecom needs to ensure that LTE devices can operate on 1800 for citizens to travel
across other GCC countries.
It is the responsibility of the operators to ensure customer education and compatible devices support in their value proposition
design and their go-to-market strategy.
• Pricing is KeySince the first operators’ launch of LTE networks, LTE services pricing – mainly MBB – has gone through three different stages
and probably more will come as VoLTE start spreading.
In the early stages, most operators focused on Premium MBB pricing for LTE services where 4G price per GB was sold at up to
40% premium price than 3G/HSPA or sometime higher.
Very soon, facing slow take up, the late readiness of LTE Smartphones, and the lack of serious need for mobile broadband
speeds faster than 3G, as well as the lack of a clear value proposition for LTE other than MBB, operators had to evolve their
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Table 2: Evolution of LTE MBB pricing models
Table 3: Verizon Wireless Case: shared data allowance with terminal line monthly access
pricing models toward a seamless MBB offering where the device capability allowed customers to use indifferently 3G or 4G
where available. This move had the advantage of making more fluid the MBB traffic and offloading the 3G networks where
congested. Hence speed based pricing appeared on both 3G/4G combined where the bigger the data allowance is, the higher
the speed is. This new model helped operators move out, especially in Europe, from the “unlimited” bundles that put lots of
strains of the 3G networks and on the business case profitability.
Background Value Propositions
Early Launches • USB Dongles and Router• LTE sold as Premium• Higher prices per GB (up to 40% higher than 3G)
Evolution Phase
• Seamless MBB / offloading 3G• First Smartphone introduced• No price differentiation 3G/4G. LTE reserved to higher data bundles• Speed based pricing with higher speed for higher allowance
Future Trends
• Voice becomes commodity with large or unlimited plans• VoLTE starting and large number of devices available • Customers owning multiple devices, Smartphones and Tablets• Tethering and/or Pocket WiFi usage• Home & Office Solutions, Multi-screen service
As voice becomes more of a commodity service with large or unlimited minute’s plans to face competition from OTT voice
service providers such as Skype and Viber, and as VoLTE services start crystallizing, the game of value proposition stands
nowadays on MBB offers packaging with the right terminals and consumer behaviors. New pricing models that define charging
based on data allowances plans including the voice service start emerging. The voice based value plans – bundled with a
number of SMS and data gigabytes – start moving toward data centric MBB value plans – bundled with limited or unlimited
voice and SMS. Shared data plans are found to be an excellent value proposition by people using multiple devices (e.g.
Smartphone + dongle + Tablet), but also by family members or business teams.
Verizon Wireless introduced the concept of shared data allowance with a monthly fee for the allowance itself and an additional
line access fee for each terminal device sharing the allowance including unlimited voice and SMS (see table 3 below).
Monthly plan charge Shared data allowance Shared minutes
and SMS Terminal Device Monthly line access
40 USD 300 MB Unlimited Tablet 10 USD
50 USD 1 GB Unlimited MiFi/ Router/ USB modem/ Notebook 20 USD
60 USD 2 GB Unlimited Basic phone 30 USD
70 USD 4 GB Unlimited Smartphone 40 USD
80 USD 6 GB Unlimited
90 USD 8 GB Unlimited
100 USD 10 GB Unlimited
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• Voice Is King, Let It Be Over LTEWhile LTE is still in early adopter phase in some markets, few leading operators start initiating VoLTE services especially in North
America and Asia with the first VoLTE service announced last August by Metro PCS. There are few important drivers leading
operators to start VoLTE services:
• LTE Smartphone start spreading forcing operators to implement mandatorily the circuit switch fall back (CSFB) solution,
which becomes the necessary transition solution to full IMS based VoLTE implementation (IMS–SRVCC). Verizon Wireless
made the choice to leap straight to IMS based VoLTE without CSFB for call quality considerations as well as for cost
efficiencies, however it need to reach a minimum LTE mass coverage with full mobility before launch. SK Telecom
introduced VoLTE as an “HD Voice” service at a premium price differentiated from existing CS voice calls.
• VoLTE increases network capacity and improves spectral efficiency since all traffic – for both voice and data services – is
transmitted on the LTE all IP network. With the widespread deployment of VoLTE, operators will ultimately be able to shut
down their 2G and 3G networks refarming spectrum to LTE services for enhanced customer experience and better cost
efficiencies. AT&T is planning to phase out 2G networks toward LTE soon for more efficient spectrum usage with VoLTE.
Figure 6: What do you think will be the primary solution for voice over LTE?
Other (please specify)3.4%
Dual radio (e.g., Verizon’s model: LTE for data, CDMA for voice)
12.4%
Circuit-switch fallback(CSFB)11.0%
Operator-managedOTT VoIP
13.5%
Unmanaged OTT VoIP(e.g., Skype, Viber, etc)
11.7%
IMS-based VoIP(OneVoice/VoLTE)47.9%
Source: Informa Telecoms & Media
• With VoLTE, operators are able to fight competition from VoIP OTT players. This is because operators’ voice traffic over IP
is managed under guaranteed bit rate (GBR) and hence presents higher quality than VoIP over Internet with OTT players. In
addition, with the usage of higher GBR Quality of the Service, operators like SK Telecom can offer premium HD Voice for
their customers.
Table 4 shows some case studies from the leading operator in VoLTE launch.
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Table 4: VoLTE Case studies from leading operators
Table 5: Typical Examples for Class of QoS usage
Operator Description
SK Telecom• Competition is high between 3 players. All 3 deployed Nationwide LTE• VoLTE Strategy: Premium HD Voice service• Aggressive Go-to-Market targeting 7 mln subs by EOY2012 from ~3 mln by H1
Metro PCS• First VoLTE service in US and it doesn’t want the customers to notice (seamless voice service with Circuit Switched)• Strategy to manage spectral efficiency and offload CDMA network to further refarm frequencies.
Verizon Wireless
• Strategy to implement IMS-SRVCC without CSFB for call quality considerations and lean network cost management purposes.• Expects to reach a minimum critical mass of coverage with full mobility before going live• Smart pricing and aggressive terminal strategy
• Differentiate Your Value PropositionsMobile customers are reaching high scales and mobile broadband is reaching mass markets, therefore operators need to seek
and satisfy their customers with more targeted offerings and differentiated value propositions to maximize segments value.
LTE is not only a matter of bandwidth or speed. There is more in LTE!
LTE is a feature rich technology with many possibilities for operators’ marketing to develop differentiated value propositions to
a diversity of market segments. To illustrate the concept, LTE can be assimilated to a large fiber cable with many pipes inside
providing different signal quality as shown in figure 7.
Figure 7: Different LTE Quality of Service Classes
LTE EPS bearer
(same QCI**)
Service Data Flow* (up to 16)
e.g. video streaming
e.g. WEB browsing
e.g. e - mail
Same QoS behavior!
QoS Classes allow defining specifically for a customer profile: the resource type, the priority for data sessions, the delays in data
transfers (latency – so important for M2M solutions or on-line gaming profiles) and the acceptable rate for data packets losses
(see Table 5 below).
QCIResource
TypePriority
Packet Delay
Packet Error Loss Rate
Example of Services
1
GBR
2 100ms 10-2 Conversational Voice
2 4 150ms 10-3 Conversational Video (live streaming)
3 3 50ms 10-3 Real Time Gaming
4 5 300ms 10-6 Non-conversational Video (buffered streaming)
5
Non-GBR
1 100ms 10-6 IMS Signaling
6 6 300ms 10-6Video (Buffered Streaming); TCP-based (e.g. www, e-mail, chat, ftp, p2p file sharing, progressive video, etc.)
7 7 100ms 10-3 Voice,Video (Live Streaming),Interactive Gaming
8 8 300ms 10-6Video (Buffered Streaming);TCP-based (e.g. www, e-mail, chat, ftp, p2p file sharing,progressive video, etc.)
9 9 Best effort
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Figure 9: Examples of Customers Differentiated Value Propositions to Monetize LTE
The objective is to apply different level of QoS on customer profiles to define Gold, Silver, Bronze types of profiles and different
levels of QoS on target applications to define the customer experience requirements such as Web browsing, Voice calling,
Video Streaming, on-line gaming, etc…
Figure 8 below explains such mechanisms.
Figure 8: Application to Building Differentiated Marketing Propositions
Own/3rd party Own/3rd party Any providers
Use
rs Q
oS
Max Average
Then the marketing propositions in 4G become a game of creating differentiated service quality for a range of customer profiles
related to various types of applications.
Typical example to illustrate the differentiated value propositions in Bronze, Silver, and Gold concept is to set Student,
Household, VIP/Business profiles:
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• Students are served based on best efforts for all types of accessed applications such as Web browsing, audio and video
streaming, downloads etc… They pay little value for their mobile broadband services and they agree to leave the space as
other high-priority profiles need to access the network. Not that they agree to only access the network when resources
are free, but they even agree to be disconnected when a VIP requires to access a very busy network. Moreover, operators’
creativity can lead to offer free access to students with some targeted interactive advertisements on their Smartphone’s
browsers.
• Households pay higher price and have priority on Students. They can connect when resources are available. They cannot
be disconnected, neither force Students to be disconnected when resources are not available. They can have priority on
certain type of traffic and guaranteed bit rate for VoIP calls.
• VIP can breakthrough on network access anytime. Student can be disconnected to free up resources for VIP access. They
have priority on all types of traffic and guaranteed bit rate for VoIP calls, Video Conferencing and large files downloads.
Figure 10: A Roadmap to Convergent and Cloud ServicesOn another hand, operators can create
specific MBB plans at a higher value or create
optional add-on functionality to existing MBB
plans guaranteeing bit rates on VoIP calls
only. Customers subscribing to such offer can
access their OTT voice services using their MBB
connection and enjoy better quality of voice
calls while the operator is taking part of such
value propositions. Furthermore, operators
can offer the option free of charge to those
customers who subscribe to the operator’s
native VoLTE service setting their own VoLTE
service and OTT voice services in one paid
packaged offering.
Moreover, operators can offer such features
(e.g. GBR on VoIP, GBR on Video Stream, low
latency on gaming profiles, etc…) free of
charge to end customers if OTT players agree
to pay for it on behalf of their subscribers, a typical example of win-win two sided business model.
On the long run, with VoLTE services, operators can develop a full set of convergent and cloud services for the “Home” and
“Business” markets.
VoLTE
CloudServices
M2MInternet of
ThingsSolutions
Presenceinformation
Fixed MobileConvergence
Solutions
Smart CallForward,
CallDistribution(presence
based)
SmartUnified
Messaging
NextGeneration
Rich Content& Social
OfficeSolutions
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• Know Your Customers WellIn this game of 4G marketing propositions, “one size fits all” doesn’t work anymore if operators want to optimize revenues and
break even on LTE investments. In order to maximize segments values, operators should multiply their efforts in understanding
their customers’ budgets, behaviors and interests. Roughly shaped market segments, often based on usage intervals in voice
minutes or data gigabytes are not enough anymore. The solution in 4G services marketing resides in micro segmentation
addressed by targeted value propositions.
This is how Big Data arose; to support Telco in understanding those details from data explosion and provide meaningful
information to see customers’ deepest desires. Operators need to utilize advanced data analytics to provide nearly personalized
service offerings and differentiated value propositions.
Value added service providers had long time needed to rely on the Telco golden asset – the customer information and billing
databases – and channels to deliver their services to the end customers. Now social networks and OTT players nearly took over
this direct customer relationship asset. Has the game changed? Not yet, but their key to success is their deep utilization of
analytics on customers’ information, behaviors and interests from their Web access and other applications usage.
Operators should do the same without infringing customers’ privacy. And they should realize that they have a greater
opportunity and advantage of being able to see the big picture in customer behavior at the root of all customer traffic and
destinations.
If they don’t do so, they incur the risk of leaving the stage open for more agile niche players, such as MVNOs and OTT players,
while they will be forced to retrench in their network operations endeavors in wholesale business models.
• Brand It Right!While telecom operators think how to market LTE as a premium service, they wonder whether to market it as a separate brand
for higher impact or not.
Actually, a few branding opportunities can be considered when launching LTE services depending on the operators’ Value
Proposition and Go-to-Market Strategy:
• ANewIndependentBrand can be considered only and only if the operator is starting a different new network with a
new subscriber base. However, in such case the operator will miss the synergies that can be leveraged in the network, in
marketing and in the use of existing subscriber base. Moreover, most LTE devices are multi-mode including 3G, and the
customer experience works seamlessly on both 3G and 4G network. Using a new brand may confuse the customer and
disrupt brand loyalty. Unless the operator has a clear strategy to do so, starting a new brand wouldn’t be recommended.
As an example of an operator who may have gone for such branding strategy is the Russian Yota who went for a pure LTE
network – with no 3G precedence – and swapped all his 300 K customers from WiMax to LTE overnight.
• ASubBrand would be better used instead, when the operator have real need to separate LTE from existing offers. Like
NTT DoCoMo did when launching LTE with the Xi – Crossy – brand, marketing LTE as a premium different offering and
price plans from 3G.
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Figure 11: NTT DoCoMo Crossy Brand for LTE
Figure 13: STC 4G LTE QuickNet
Product Tag
Figure 12: SK Telecom premium "HD Voice" Service
• AProductBrandingorTrademarkorTag will be used in many cases to identify a Premium LTE offering, such as “HD
Voice” for the premium VoLTE service by SK Telecom. STC uses both “4G LTE” tags to refer to the LTE MBB offer, though
it combines both 3G and 4G services together for the high end bundles of the existing QuickNet Mobile Broadband
offerings.
• TheOperatorCoreBrand should be the main stream for LTE
services branding as long as LTE introduces an enhanced MBB
experience but it is still the same MBB. Institutional branding
campaigns shall be used to strengthen corporate image in the
marketplace as the leading Telco in innovative technology era.
New pricing models, plans and packages are being introduced in
consistent complement to the existing MBB price plans or merged to
reshape the MBB prices with new plans. The MBB experience therefore will depend on the device capability which could
be tagged to refer for LTE or 4G support. The typical example for this case is Verizon Wireless who set a very aggressive
institutional campaign for its new 4G/LTE Network “Lightening Fast, Lightening Strong” with a range of devices offering
4G/LTE support.
• TakeIttotheMarket,ConfidentlyDepending on operators strategies, the go-to-market should focus on different level of activities, customer education and
information push:
1. Above The Line (ATL) campaigns to position the brand leadership and increase brand notoriety in its superior position as a
telecom solutions provider, helping its customers improve their daily life and/or business performance through the usage the
best technology innovations and most effective communications services.
2. Strong product level communication and promotions – including terminal bundling and price plans – to call for customers
subscriptions and market uptake stimulation. A particular effort need to be set on the product positioning as compared
to other MBB offerings in order not to confuse the customers. Customer segmentation and targeted campaigns will
accompany the product branding and position if such cases apply.
3. A number of activities shall be orchestrated to educate and inform wisely the customers about the reasons, the benefits
and the ways to use LTE technologies as well as the requirements in terms of terminal devices that accompany the services
and the implications in using such devices or services while abroad. These activities can range from informational ATL ads to
flyers, emailing and road shows demonstrations in public places.
Figure 14: Verizon Wireless 4G Campaign
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Conclusion: Paving the Way for a Bright Future LTE is gaining momentum as Smartphone terminals are spreading all around the world, and people’s access to Internet become as
important as, if not more, the access to voice calling lines. Therefore LTE is not only bringing the necessary speed for the excellent
internet experience the customers want, but also the necessary capacity to the increasing population in quest for permanent
Internet access.
On the other hand, LTE has been designed and thought to optimize effectively the spectrum, the data traffic and the network costs
challenges as well as to provide the means to leverage the business with differentiated service offerings through its feature rich
technology capabilities.
In that sense, LTE is a response to the present structural industry changes that are shifting some of the business out of the operators’
hands toward devices manufacturers with their related Cloud services and the multiple OTT players. LTE will help setting the right
new business models and services to ensure value for revenues and protect against new players leaking operators’ revenues.
Simultaneously, these changes shouldn’t be seen as a threat. As the market is growing fast, the pie is getting bigger and there will
be room for multiple players to cooperate. Hence, operators’ revenues, if protected wisely with the right marketing propositions
that LTE considerably helps creating, will be able to sustain great business growth while new OTT entrants will stimulate the market
for more innovation and value.
About Huawei Business Consulting and Huawei Contribution to LTE development This document is a production of the Huawei Business Consultancy team, who work as a leading advisory team to our customers,
developing propositions and proposals on a global basis, as well as within our own business. The purpose of this and our additional
series of thought leadership documents is to share with you our views and experience either from a generic perspective or within
a particular area of interest. The idea being that by sharing and developing the discussion together we will benefit from enhanced
perspectives to grow our business in a more successful manner. We would welcome additional engagement with you to share
our ideas, experience and capabilities as a leading supplier of products and market solutions in the field of Information and
Communications Technology.
Huawei have been very actively involved in 3GPP LTE definition and implementation, and ranks as number 1 contributor to the 3GPP
standardization for LTE. On the field, out of the 105 operators who launched LTE, 61 have signed with Huawei as the main LTE
network equipment provider.
This document assesses Huawei deep knowledge and experience in best LTE and telecom practices. Our vision is that LTE will
shape the future of mobile telecommunications providing ubiquitous and pervasive network services to customers’ new lifestyles,
behaviors and needs.
Setting up strong and strategic partnerships with our operator clients, together we can crystallize the vision of such services
enriching people’s lives through communication.
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List of Figures Figure 1: What is your primary motivation for deploying LTE? --------------------------------------------------------------------------------------------------------------3
Figure 2: Framework for Operators' Strategy Development -----------------------------------------------------------------------------------------------------------------7
Figure 3: Global, LTE launches by technology and band, 1Q12 -------------------------------------------------------------------------------------------------------------8
Figure 4: Which spectrum bands do you intend to use to deploy LTE? (Multiple choices)-----------------------------------------------------------------------------8
Figure 5: LTE Spectrum Auction Pricing in Europe -----------------------------------------------------------------------------------------------------------------------------8
Figure 6: What do you think will be the primary solution for voice over LTE? ----------------------------------------------------------------------------------------- 13
Figure 7: Different LTE Quality of Service Classes ----------------------------------------------------------------------------------------------------------------------------- 14
Figure 8: Application to Building Differentiated Marketing Propositions ------------------------------------------------------------------------------------------------ 15
Figure 9: Examples of Customers Differentiated Value Propositions to Monetize LTE -------------------------------------------------------------------------------- 15
Figure 10: A Roadmap to Convergent and Cloud Services ----------------------------------------------------------------------------------------------------------------- 16
Figure 11: NTT DoCoMo Crossy Brand for LTE -------------------------------------------------------------------------------------------------------------------------------- 18
Figure 12: SK Telecom premium "HD Voice" Service ------------------------------------------------------------------------------------------------------------------------ 18
Figure 13: STC 4G LTE QuickNet Product Tag --------------------------------------------------------------------------------------------------------------------------------- 18
Figure 14: Verizon Wireless 4G Campaign ------------------------------------------------------------------------------------------------------------------------------------- 18
List of Tables Table 1 : TOP LTE Operators by subscriber base (as of June 2012) ---------------------------------------------------------------------------------------------------------5
Table 2: Evolution of LTE MBB pricing models -------------------------------------------------------------------------------------------------------------------------------- 12
Table 3: Verizon Wireless Case: shared data allowance with terminal line monthly access ------------------------------------------------------------------------- 12
Table 4: VoLTE Case studies from leading operators ------------------------------------------------------------------------------------------------------------------------- 14
Table 5: Typical Examples for Class of QoS usage ---------------------------------------------------------------------------------------------------------------------------- 14
List of References I. ISuccessful LTE strategies – How to use LTE to build a compelling broadband strategy --- White paper by Informa Telecom & Media
II. LTE operators adopt next-generation pricing models --- Analysis Paper by Wireless Intelligence
III. LTE pricing strategies for consumer handsets – Case Studies of NTT DoCoMo and Verizon Wireless --- Analysis Paper by Analysis Mason
IV. LTE Innovation Update: August 2012 – VoLTE Has Arrived --- Update Paper by Current Analysis
V. LTE What Happened and What’s Next --- Telecom Asia news article by Value Partners - September 2012.
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Senior Manager, Business Consulting – Huawei Middle East HQ
François is a Telecom Executive with over 20 years experience in strategic marketing
management with telecom operators.
He joined Huawei’s Middle East HQ Business Consulting Team in 2010. He contributed in
setting up the methodological framework for customers’ consulting projects and assisted a
number of customers’ projects in launching 3G/4G and boosting Mobile and Fixed Broadband
value propositions.
Prior to Huawei, François held executive roles at Qatar Telecom where he led the marketing & strategy department for
Qtel Business Solutions BU. With his team, he successfully launched a number of products & services in both "Consumer"
and “Business” Markets, and consolidated the 3 years business plan.
François started his career at Capgemini Telecom working on big projects for the French operators, he pursued his path
in Product Marketing Management with American and French Telecom Software Providers.
François holds an engineering degree in Telecommunication and a Masters of Science in Design and Architecture of
Computer Systems from Telecom ParisTech (1990). He completed his education later on with an MBA program from EM
Lyon Business School in partnership with Carnegie Mellon University in Pittsburgh, USA.
François Doummar
About the Author