[Special report]korean 4th mno is a distant dream lte tdd_20120828

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This report provides strategic suggestions in relation to the 4th mobile service based on following three questions and answers.  What network technology the new mobile carrier (4th mobile carrier) must consider for strategic reasons? - As of now, major mobile operators in the global market are migrating from 3G to 4G rapidly. The 3G market is divided into various network technologies which are CDMA EVDO, WCDMA and WiMAX. But, in terms of 4G, LTE is the dominant technology. For the success of the 4th mobile carrier, it is required to offer not 3G but 4G service with reasonable prices.  What could be the methods to deliver new and reasonably-priced 4G services? -3GPP defined that LTE encompasses FDD (Frequency Division Duplex) and TDD (Time Division Duplex). Among them, TDD (LTE-TDD) in unpaired spectrum just like WiBro has a high chance to be in line with the mainstream trend in the global mobile market.  What economic ripple effects are expected when the 4th mobile carrier conducts LTE-TDD? - The 4th mobile carrier is required to analyze possible economic ripple effects if it provides mobile service (including handsets) based on LTE-TDD in accordance with the definition of 3GPP.

Text of [Special report]korean 4th mno is a distant dream lte tdd_20120828

  • 1. Executive Summary Is introduction of a 4th mobile carrier a distant dream? -Economic ripple effects of a new mobile service based on LTE-TDD Release Date: 2012. 8. xxx Gyeong-hyeon LEE (Senior Consultant, khlee@roaconsulting.co.kr) Jinyeong Kim (CEO, Head Consultant, david@roaconsulting.co.kr)
  • 2. < Table of Contents >Part I. What challenges a 4th mobile carrier has?------------------- 1Part II. History and problems with the policy -------------- 4 1. History --------------------------------------------------- 4 2. Problems with the policy ------------------------------------- 4Part III. WiBro(WiMAX) vs LTE-TDD, which is the mainstream?--8 1. WiBro(WiMAX) market is suffering ---------------------------8 2. LTE-TDD operators will account for 37% of LTE in 2015 ----------- 10Part IV. Economic ripple effects of a 4th mobile carrier----------- 16 1. Method --------------------------------------------------------------- 16 2. Industry inducement coefficient-------------------------------------- 16 3. Market demand----------------------------------------------------- 17 A. Market demand of WiBro------------------------------------ 17 B. Market demand of LTE-TDD--------------------------------- 18 4. Analysis of economic ripple effects ---------------------------------- 20Part V. Strategic suggestions: in pursuit of realistic alternatives-- 24< Bibliography > ---------------------------------------------------- 25
  • 3. Part I. What challenges a 4th mobile carrier has?In 2011, one of the hottest issues in the Koreas mobile market was the policy of the KoreaCommunications Commission (KCC hereafter) to allocate a fourth mobile license. KCC cameup with the plan to introduce price-competitive services compared to current mobile carriers,which are SKT, KT and LG U+, with a view to promoting market competition based onreasonably-priced and high-quality services catered to mobiles users. Up until now, theKoreas market has witnessed excessive subsidiaries and marketing activities.However, the policy has yet to be implemented because all bidders failed to meet therequired standards. In particular, the Korea Mobile Internet (KMI hereafter), which submittedthe first application in November 2010, was rejected by KCC for three times in total. InDecember 2011, both KMI and Internet Space Time (IST hereafter), the other bidder for theservice, failed in achieving the license.As concern is rising in the market, KCC tried to provide a breakthrough by revising theapplication process and qualification standards for the bidders in May 30, 2012. The revisionis focused on financing capacity of the bidders and lowered the standards (or minimumevaluation point) of quantitative evaluation1 from 60 to 40 points. In addition, evaluation onthe application and that on the bidders qualification will be extended from 2 months to 120days and from less than 1 month to 60 days, respectively. It seems that KCC is dedicated toidentifying the best candidates by lengthening examination period, considering financingcapacity as top priority, and lowering other standards because they are newcomers in themarket. KMI and IST are expected to submit the application in the late half of this year anda 4th mobile carrier is likely to be announced within this year.The Korean government has been pursuing the policy for following two goals: first, toencourage market competition by introducing differentiated and low-priced mobilecommunications services compared to current ones and second, to promote WiBro which isa type of WiMax technologies developed by Korea. The government was poised to achieve1 Profitability (pre-tax return in assets), Stability (ratio of liabilities to assets), Future Growth(Increases in revenue), Credit rating 1
  • 4. the goals with introduction of a 4th mobile communication service.2KMI and IST are known to submit their application later this year in line with the newstandards of KCC. According to media report, both of them are in preparation for 4G WiBroAdvanced, the upgraded version of WiBro.However, there is a growing concern that the 4th mobile carrier might fall short of customersexpectation for cheaper but better mobile handsets and services. It is safe to say that therehas been no competitive WiBro handset and service in the market although KT and SKTintroduced the business 7 years ago in 2005. On March 16, 2012, they made a failedattempt to revitalize the business with newly allocated spectrum.For that matter, the 4th mobile carrier is required to assess the business opportunity beforeit launches WiBro later this year.This report provides strategic suggestions in relation to the 4th mobile service based onfollowing three questions and answers. What network technology the new mobile carrier (4th mobile carrier) must consider for strategic reasons? - As of now, major mobile operators in the global market are migrating from 3G to 4G rapidly. The 3G market is divided into various network technologies which are CDMA EVDO, WCDMA and WiMAX. But, in terms of 4G, LTE is the dominant technology. For the success of the 4th mobile carrier, it is required to offer not 3G but 4G service with reasonable prices. What could be the methods to deliver new and reasonably-priced 4G services? -3GPP defined that LTE encompasses FDD (Frequency Division Duplex) and TDD (Time Division Duplex). Among them, TDD (LTE-TDD) in unpaired spectrum just like WiBro has a high chance to be in line with the mainstream trend in the global mobile market.2 This report does not distinguish between WiMAX and WiBro. But the term WiBro is mostly utilized in the context of Korean mobile market because it is the WiMax technology dedicated to the country. 2
  • 5. What economic ripple effects are expected when the 4th mobile carrier conducts LTE-TDD? - The 4th mobile carrier is required to analyze possible economic ripple effects if it provides mobile service (including handsets) based on LTE-TDD in accordance with the definition of 3GPP. About the terms, LTE-TDD and TD-LTE- 3GPP which announces global communications technology standards designated FDD and TDD for LTE specifications. FDD is often referred to as LTE-FDD and TDD is being called LTE-TDD. They have a lot in common as both are based on LTE technology, but there are some differences. The biggest difference lies in uplink and downlink transmission. FDD utilizes difference frequencies for transmission. As for TDD, uplink and downlink are on the same frequency but time separated.- Most mobile carriers in Korea are utilizing FDD, and LTE-TDD is emerging as the alternative to ease congestion on network or to make full use of bands allocated for WiBro. The terms, TD-LTE and LTE-TDD, are being utilized in the industry and have the same meaning. However, this report utilizes the term LTE-TDD, as 3GPP defines it as one of the standard LTE technologies. (The ROA Consulting used the term TD-LTE in its report current and future market of TD- LTE released in April 2012, but will use LTE-TDD in this and future report in line with the policy of 3GPP.) Analysis model for economic ripple effects- The report evaluates economic ripple effects of a new mobile service is provided based on LTE-TDD with Input-Output Analysis. Professor Choi Yong-je from Hankuk University of Foreign Studies provided consulting for the analysis model. 3
  • 6. Part II. History and problems with the policy1. HistoryThe governments effort to announce a WiBro service operator has yet to achieve asubstantial result because all bidders failed to meet required standards. In 2011, KMI and ISTconsortium was rejected by KCC by recording 65.790 and 63.926 point, respectively. Then,the mandatory limit was 70 point.Both the consortiums suggested WiBro as well as WiBro Advanced, which can be interpretedthat they would play an important role in promoting WiBro. However, WiBro business hasbeen stalled as all applications for the 4th mobile service were rejected and the gap betweenWiBro and LTE is widening.On May 30 this year, KCC revised the application process and qualification standards forbidders to provide a solution to the problems appeared up until now. The revision isdesigned to find out bidders with determination and actual capacity for the service. It isexpected to KMI and IST will submit their applications for the service and new mobilecarriers will be announced later this year.2. Problems with the policyThe latest academic paper about WiBro was written by the Korea Information SocietyDevelopment Institute researcher Kim Chang-hwan et al. in December 2012, with the title ofStudy on Methods to Vitalize WiBro in the Koreas Mobile Market. According to the study,WiBro is failing in the market with less than 0.8 million users as of end of 2011. Theypointed out t