Scalability challenge of Telecom networksThe India Perspective

Manas Ganguly31st January 2014

Generations of Cellular Technology

1G 2G 2.5G 2.75G 3G 3.5G 4G 5G

GPRS1xRTT

EDGEeGPRS

UMTSW-CDMA

EVDO Rev.A

HSPAHSDPAHSUPAEVDO Rev.BHSPA+

WiMAX

LTETDD LTEFDD LTE

Cognitive Radio

1983 1991 1997 1999 2003 2008 2009 2020

Voice SMSInternet on the move

High Speed data

Video ??? AI

3GPP

802.11

802.16/-2009/m

Flash - OFDM

UMTS/3GSM

CDMA 2000

GSM

HIPERMAN/ 802.20

HSPA+ 21 – 672Mbps LTE 100-300MbpsLTE Advanced

1Gbps

Rev.0 2.4Mbps

Rev.A3.1Mbps

Rev.B14.7Mbps

802.11 a6-54Mbps

802.11 b1-11Mbps

802.11 g6-54Mbps

802.11 n7.2-

150Mbps

802.11 ac87.6-

866.7Mbps

WiMax Rel. 137Mbps

WiMax Rel. 1.583Mbps

WiMax Rel 2110-365Mbps

GPRS116 Kbps

EDGE116-384Kbps

Enhanced EDGE400Kbps – 1Mbps

Flash OFDM (Mobility upto 200 mph)5.3- 15.9Mbps

UMTS/ WCDMA.384Kbps-14.4Mbps

UMTS TDD16Mbps

Telecommunication System & Standards

HIPERMAN 56.9Mbps

iBurst /802.2 (Cell Radius 3-12 kms)95Mbps

Spectrum, Technology and Standards

http://niviuk.free.fr/index.html

2100/ S- Band 1900/ PCS 1800/DCS

AWS/+(2.1 & 1.8 GHz)

850/+ / JTACS 2600 900 /TACS

1500 U/L/ L Band

700 ac/c/PS/BC 800 L/U/DD 3500 2500

2000 S Band

1600 L band 1900+

800/SMR/PAMR 700APT/de 2300 WCS 450 390

1800 PCS Korea

400 PMAR / European

PMR

LTE UTRAN P P P P P P P P P P P P P P P P P P PLTE TDD P PUMTS P P P P P P P P P PHSPA+ P P P P P PGSM P P P P P P P

CDMA P P P P P P P P P P P P P

1900 2000 PCS L/U/C 2300 2500 2600 3400 3600

LTE UTRANLTE TDD P P P P P PUMTS P P P PHSPA+ PGSM P

CDMA

Wireless Broadband: Fast Facts• Mobile broadband network deployments

– 532 commercially launched HSPA networks in 203 countries– 84% of networks support peak downlink of at least 7.2Mbps– 338 (i.e over 63%) are HSPA+ networks– 145 (27% of HSPA operators) commercially launched 42Mbps DC-HSPA+ systems in 75 countries

• LTE is mainstream– 508 operators investing in LTE in 144 countries– 456 network commitments + 52 pre-commit trials– 263 commercially launched networks/ 97 countries including 28 LTE TDD (TD-LTE)– 75% YoY– 1371 LTE user devices launched (by 132 suppliers)– 705 new products in the past year– Includes 483 LTE 1800 terminals – Includes 304 products supporting TDD mode– 533 LTE smartphones representing 39% share of all devices

• Mobile broadband subscriptions– 1.373 billion WCDMA subs including HSPA– 157.7 million LTE subs (110.1 million growth in 12 months)

LTE Devices Eco-System: 1371 user devices

• 705 new LTE devices in 12 months• Number of OEMs: +52% YoY• 533 LTE smartphones (39% share of all LTE devices)• 42 VoLTE phones• 304 LTE TDD User devices• 142 Category 4 terminals

304

LTE

TDD

Use

r Dev

ices

1068

LTE

FDD

Use

r Dev

ices

1800 MHz Band 3 is the most popular band for LTE deployments and is poised to have the largest

user devices eco-system

Data: GSMA January 24th 2014

The dichotomy of convergence & divergence: The LTE conundrum

• Harmony : Converging GSM and CDMA?• Complexity: 41 Bands• Scale: CMCC and Jio• Compromises: 2300MHz, Really now?• Trade-offs: Hazards, Investments

Indian Telecom iGDP expected to hit $100 billion by 2015

• Internet subs - 330 million by 2015• Internet’s contribution to India’s GDP to

grow from 1.6% in 2011 to 3.4% in 2015.

• The Indian Telecom Industry accounts for 13% subscriptions & 2.3% share of the global telecom revenue.

Internet Subs Mobility Subs

EOY 2012 135 mln 864 mln

EOY 2013 205+ mln 904 mlnNo. of Mobile Internet Users: IAMAI

Indian Telecom Vital Stats: COAI/TRAI

Smartphone versus Mobile Phone shipments: CMRSource: McKinsey

Indian Telecom: 2G versus 3GIndia currently has amongst the lowest wireless broadband penetration in the Asia-Pacific below Malaysia, Philippines and China and nearly equal to Pakistan.Merely 16% of ARPU coming from data. Comparison: Japan (64%) , Australia (50%), Indonesia (41%), Malaysia (38%), China (35%) and even Thailand (22%).

Indian Telecom: Current Status

• Policy Enablers: 2013 – Mergers and acquisitions policy: Dominant players can now hold up-to 50% telecom

market shares. – Foreign equity participation of 100% in Telecom sector

• Low cost driving reach and affordability would be critical but a derivative of a favorable Tax regime.

– Telecom tower companies given slew of benefits (gap funding, external commercial borrowing, lower import duties, excise exemptions) with Infrastructure status is a major step forward in this direction.

• Telecom players were looking for market capitalization and consolidation. – The operators have started to focus on subscriber quality and have done away with the

lucrative dealer commissions and promotional minutes. – After 2008, for the first time, India has witnessed a surge in voice tariff

• Spectrum Re-farming, Lopsided M&A rules

Indian Telecom: Current Status

• Rs.1,48,792 – Cellular Mobile Industry• Rs.2,50,000 – Industry Debt• Regulatory costs including service tax, license fee,

graded spectrum usage charge and revised spectrum variable price equals nearly 40% of the customer tariff

• In 2012, Indian telecom sector’s EBITDA was 15%, comparing poorly with a 36.1% average for Asia’s telecom sector.

• High debt, coupled with regulatory and policy un-certainities have affected long term investments

• Average voice tariffs of roughly 35 paise/minute (arguably the world’s lowest) are responsible for this wide mismatch between 13% subscriptions and 2.3% share of the global revenue.

• Further, telecom tariffs, the industry points out, have dropped 30% in the last 4 years, even in the face of annual inflation of 7-8%.

Impact of Spectrum/Band on Network Costs

700MHz 1900MHz 2400MHz

Number of cells per unit area

1 4 10

Total Network Cost @ $150K/Cell

$1,50,000 $6,00,000 $15,00,000

Network Cost per Customer

$180 $725 $1820

No.of months for break even

9 months 36 months 91 months

Cell Radius (Ideal) 10kms 5.5kms 4.7kms

Cell Circle Coverage Area (Comparative)

1 .3 .22

Source: Aloha Partners

70% cheaper to provide MBB @ 800MHz than over 2100MHz

LTE Telco Opex

0

500

1,000

2,000

2,500

$9,000

EVDO Rev A ( 1

carrier )

2,02

5

506

26

EVDO Rev B ( 2

carrier )

2,52

6

632

32

HSPA

(10 codes )

4,35

6

1,08

9

44

HSPA

(15 codes )

5,15

9

1,29

0

52

LTE @ 2.3GHz

(20 MHz BW

)

8,64

9

2,16

2

86

Cost/ Sq Km

( $ )

10.8 6.0 8.3 7.4 3.8

Cost/Mb

(0.01 c/min )

Dense Urban Urban Rural

Key Assumptions•This is a theoretical exercise and represented as an ideal case•Utilization of BTS has been assumed to be 100%•For EVDO Rev A, # carriers on a BTS =2; EVDO Rev B = 3; costs have been

allocated proportionately• LTE throughput has been taken as 30 MbpsNot to scale

LTE Penetration

LTE expected to reach subscriber traction only by 2015 in developed countries, emerging economies to be in nascence

0

5

10

15

20%

2011 2012 2013 2014 2015

LTE Subscriber penetration (% of total mobile subsribers )

UK

Germany

France

Chile

Australia

Brazil

Spain

Indonesia

South Korea

Japan

China

USA

Dev

elo

ped

co

un

trie

s

Dev

elo

pin

gco

un

trie

s

“LTE will be deployed in developed markets first, with wide-scale deployments in emerging markets expected after costs for equipment & handsets begin to decrease. Although potential for LTE in emerging markets in the next 5 years is limited.”

Pyramid Research, July 2011

Countries with LTE roll out begun and commercial service available in some regions

Countries with LTE spectrum auctioned but LTE deployments not yet commercial

Countries with planned LTE commercial deployments but spectrum not yet auctioned

Countries with LTE trial systems (pre-commitment)

LTE & 3G: The US Case

What to expect from LTE?

0

20

40

60

80

100%

Share of

Subscriptions

(2015 )

LTE

WCDMA/HSPA

GSM

7B

Share of

data traffic

(2015 )

LTE

WCDMA/HSPA

GSM

3.3EB/month**

Share of key technologies* (Worldwide )

LTE TO HAVE 2.4X & 44X DATA USAGE PER USER COMPARED TO WCDMA AND GSM RESP.

OPERATORS EXPECT LTE TO HAVE SIGNIFICANT SHARE OF DATA TRAFFIC

“SK Telecom predicts that around 65% of its total data traffic will be handled by its LTE network by 2014, and it expects to have 10 million LTE users by 2015.”

Unwired Insight, Nov 2011

“The average smartphone user on their (Teliasonera) network consumed 375MB/month of data. The average broadband user on their network, largely 3G data cards, consumed 5 GB/month. But the average LTE consumer (essentially all data cards) used 14 GB – 15GB/month of data.”

Gigaom, Nov 2010

*GSM, WCDMA, HSPA & LTE together expected to comprise ~90% share of all technology subscriptions by 2015; **1 EB=10^18 bytesNote: GSM share of data traffic is low because a GSM subscriber would mainly utilize a basic phone for access and thus wouldnot exceed 60 MB data traffic per subscriber per month, even in 2015Source: Ovum, Jan 2011; Gartner, Jun 2011; Bain analysis; Lit. search

LTE in India: Limited Scope in near future

City Sub density Attractiveness

Mumbai 4505 Profitable

Delhi 5689 Profitable

Bangalore 2760 Profitable

Chennai 1825 Profitable

Hyderabad 2190 Profitable

Kolkata 1678 Profitable

Pune 1968 Profitable

Ahmadabad 1103 Profitable

Surat 1292 Unprofitable

Coimbatore 1962 Profitable

11-50 1111 17 out of 40 cities profitable

51 -150* 366 7 out of 74 cities profitable

Economics suggest that a rational roll out would be limited to select cities over next 3-5 yearsProfitability is function of subscriber density and data usage characteristics

LTE in India: Building Scale

HSPA

EVDO

LTE

WDS subscribers (M )

• Staggered launch schedule across 33 cities will limit LTE share of data traffic in the next 2 years to within 5-10%

• LTE on 2300MHz will require high density of BTS to offer sufficient coverage

– LTE on 2300MHz has limited coverage with lower wall penetration

• Customers unlikely to perceive high value in LTE vs 3G

• Other LTE spectrum holders like Aircel, Infotel not likely to launch immediately

• BSNL may look to give away its spectrum slot

Economics of 2300Mhz could strain LTE business case in short-medium term

LTE in India: The Operational Challenge

• Economics of 2300Mhz could strain LTE business case in short-medium term

• LTE on 2300MHz will require high density of BTS to offer sufficient coverage– LTE on 2300MHz has limited coverage with lower wall penetration

• 2300MHz LTS solution – unlikely to benefit from a scale ecosystem as this will be among few 2300 MHz

• LTE coverage likely to be pocketed, with fallback on 3G– User Experience is limited because of nomadic coverage through mix of LTE/3G

LTE Deployments: India

• LTE deployments will in India will target heavy users and early adopters

• Pricing per MB basis for heavy users at parity to 3G or even lower

• To offset nomadic coverage, 4G solution will partly be an indoor fixed Wi-Fi type solution (via CPE equipment/ IBS)

• Focus target segments:– Enterprises– SMEs (SME dense clusters)– High-end/professional residential

areas• Will try to uptrade, switch heavy

users and early adopters cream the 3G/EVDO data market

Thanks!

manas.ganguly@gmail.com@manasganguly

(+91)9654465443

References• Data business: The India perspective - http://www.slideshare.net/Manas.Ganguly/data-business-the-indian-context• India data traffic: The broadband story

http://www.slideshare.net/Manas.Ganguly/india-data-traffic-the-broadband-story• LTE: The Operational & the deployment challenges

http://www.slideshare.net/Manas.Ganguly/lteoperational-challenges-deployment-conundrum• Data in Indian context: Networks & Traffic

http://www.slideshare.net/Manas.Ganguly/data-in-indian-context-networks-traffic• Digital Dividend

http://www.slideshare.net/Manas.Ganguly/digital-dividend-2451233• GSMA: The Mobile Economy India 2013

http://www.slideshare.net/Manas.Ganguly/gsma-mobile-economy-india-report-2013• Spectrum, Technology & Standards http://niviuk.free.fr/index.html• iGDP expected to hit $100 billion by 2015

http://ronnie05.wordpress.com/2013/12/31/indian-telecom-2013-the-year-that-was-and-the-way-forward/• No. of Mobile Internet Users

http://ronnie05.wordpress.com/2013/12/29/driven-by-a-narrowing-price-gap-smartphones-begin-to-penetrate-deep-into-indian-markets/

• Smartphone versus Mobile Phone shipments http://ronnie05.wordpress.com/2013/12/29/driven-by-a-narrowing-price-gap-smartphones-begin-to-penetrate-deep-into-indian-markets/

• LTE device Ecosystem http://www.gsacom.com/news/gsa_398.php

Glossary of Terms• GPRS: General Packet Radio Service• EDGE: Enhanced Data rates for GSM Evolution• 1xRTT: Single Radio Transmission technology• eGPRS: Enhanced GPRS• GSM: Global systems for mobile communication• CDMA: Code division multiple access• UMTS: Universal mobile telecommunication systems• WCDMA: WideBand CDMA• SCDMA: Synchronous CDMA• TD-SCDMA: Time division synchronous CDMA• HSPA: High speed packet access• HSDPA: High speed downlink packet access• HSUPA: High speed uplink packet access• HSPA+: Enhanced HSPA• WiMAX: Worldwide Interoperability for Microwave Access• TD LTE: Time Division LTE• FD LTE: Frequency Division LTE• Cognitive Radio: The cognitive engine is capable of configuring radio-system parameters. These parameters include "waveform,

protocol, operating frequency, and networking"

Glossary of Terms

• 3GPP: 3rd Generation Partnership Project• OFDM: Orthogonal frequency Division Multiplexing• WCDMA: Wideband CDMA• 802.11: Multi stream modulation techniques• AWS: Advanced Wireless Services• UTRAN: Universal Terrestrial Radio Access Network• S-Band: used by weather radar, surface ship radar, and some communications satellites, especially those used by NASA to communicate

with the Space Shuttle and the International Space Station.• Specialized Mobile Radio (SMR): Analog or digital trunked two-way radio system, operated by a service in the VHF, 220, UHF, 700, 800 or

900 MHz bands• L-Band: refers to four long different bands of the electromagnetic spectrum: 40 to 60 GHz (NATO), 1 to 2 GHz (IEEE), 1565 nm to 1625 nm

(optical), and around 3.5 micrometres (infrared astronomy).• APT: Segmentation of the 698–806 MHz band (usually referred to as the 700 MHz band) formalized by the Asia Pacific Telephony• de: Band or technology with origins in Germany• WCS: Wireless Communication Services usually in the 2300MHz Band• PCS: Personal Communication Services usually in the 1900MHz Band first launched in US, Mexico,Canada• DCS: Digital Cellular Service in US• TACS/ETACS: Total Access Communication System (TACS) and ETACS are mostly-obsolete variants of Advanced Mobile Phone System(AMPS)

which were initially developed by two companies separately, i.e. Vodafone and Cellnet. • PAMR: Public Access Mobile Radio mostly used in the former TV broadcasting spectrums