The Smartphone Challenge (a European perspective)

The smartphone challenge (a European perspective).

High-Tech Forecasting & Planning Summit, San Francisco,15th April 2011.

Dr. Kim Kyllesbech Larsen, Technology Economics

Technology, Deutsche Telekom.

The smartphone … The “killer” device and its “killer” applications…

Kim Kyllesbech Larsen, High-Tech Planning & Forecasting Summit, April 15th, 2011, San Francisco. 2

The smartphone challenge… The killer device and its killer applications…


ILLUSTRATION

A bygone time … ca. 36 month ago … When 1 + 1 was close to 2.


... Bla …

Bla bla bla

Mobile Network

We talked (a lot)

We SMS’ed (even more)

Rarely did we use the (mobile) web.

1User

1Device

ILLUSTRATION

User & application initiated bandwidth demand.Device & application (IP addr, keep alive, …) driven signaling resources.

A new paradigm … 1 + 1 is no longer “just” 2 ... Applications have “taken over” the communications.

Many applications


Uncontrolled data growth ... Smartphone traffic tsunami.

Volume

Throughput

Smartphones

Data signaling

December 2008 to December 2010

×5

×4

×6

×7Smartphone indicators

Problems!

May – June 2010 (Netherlands).

“iPhone overload T-Mobile (NL) network” (Volkskrant, May 2010).

“T-Mobile (NL) gives compensation”. (2 month no data charge & iPhone users gets €30.)

“T-Mobile (NL) admits not able to handle data growth in its mobile network“ (Tweakers.net).


Uncontrolled data growth ... All you can eat … network indigestion..

June 2007 AT&T Inc. and Apple® today announced three simple, affordable service plans for iPhone™ which start at just $59.99 per month. All

three plans include unlimited

data.

June 2009 AT&T announces

unlimited data plans for all smartphones for $30 monthly charge.

June 2009 De La Vega (AT&T)

said that just three percent of

smartphone users are

eating up 40 percent of available capacity, and that most of it is thanks to high-bandwidth video streaming apps.

September 2009 “Customers Angered as

iphones Overload AT&T.”(The New York Times)


June 2010 AT&T Inc “will cut wireless data-plan prices for most

users next week and stop offering unlimited data plans to manage soaring demand for data-hungry devices like Apple Inc.’s iPhone.”(Bloomberg)

June 2010 “AT&T wireless chief Ralph de la Vega has said the carrier is

battling congestion in New York and San Francisco as a surge in

smartphone use has

clogged its network. “ (Bloomberg).

Uncontrolled data growth ... Apple iTune promotion in NL ... free downloads.

180 GB & 855 Mbps

Promotion day

Normal

9× increase in peak throughput.

More than twice the total volume.

30+ thsd downloads in the peak.


Growth drivers.Smartphones and apps driving all growth indicators.

Traffic prioritization and apps control essential for managing growth.Traffic prioritization and apps control essential for managing growth.

Average annual growth rates 2010 - 2015

Illustration

2%25%

130%180%

300%

200%

2010 – 2015 Worldwide estimates

10+ → 60+ Billion App downloads.

20+ → 30+ Apps per device.

Typical App size

iPhone App 12±16 MB (Wireless).

iPad App 80±125 MB (WiFi).


Your chatty smartphone.iPhone vs Android – same volume, twice the Signaling.

Apple

Android

Signaling msg per Device

Volume per Device

Ap

ple

iOS

An

dro

id

iOS

An

dro

id

Browsing

Volume Signaling

×3

×1.2

Illustration


Forecast and planning challenge ... How to deal with hyper-growth and the unknown.

MARKET MODEL INCLUDING• SITE ROLLOUT

• TECHNOLOGY CHOICES (HSPA+, LTE, RENEWAL. etc…)

TRAFFIC MODEL

NETWORK MODELSIZINGINPUT CONFIGURATION OF INSTALLED BASE.

FINANCIAL MODEL

REVENUE, OPEX & CAPEX

PROFIT & LOSS

Free Cash Flow

Re-invest in business

Optimize

Conceptual

view


Smartphone business challenge… Smartphone is not only a network challenge.

Total Revenue

Technology cost (ca. 15% – 20% of Opex)

Usage cost−

Market invest

−

= EBITDA

Personnel

Other cost

−

−

−

Network depreciation (ca. 10% to 20%)−

= Contribution Margin (after depreciation)

Spectrum amortization−

= EBIT

1 SRC = Subscriber Retention Cost.

Capex (ca. 7% to 15%)−

….

New revenue opportunities. Expand value chain. Better network monetization.

Increased demand, increased usage cost.

Subsidies of high cost smartphones.

Churn prevention (SRC1).

Network expansions. More sites and equipment. Higher backhaul costs.

Spectrum demand. Acquisition/auction cost.

Network expansions (i.e., capacity, sites, cell splits).

Forced technology migration


Smartphone profitability challenge... Will it lead to the End of Profitability?

Revenue

Free Cash Flow

Negative

Positive

Flat price plans and uncontrolled traffic growthwill accelerate the road to The End.

Flat price plans and uncontrolled traffic growthwill accelerate the road to The End.

Illustration

Traffic growth

12% CAGR

70% CAGR2010 2012 2014 2016 2018 2020 2022


Smartphone spectrum challenge ...Mobile data will accelerate spectrum shortage.

3G spectrum crunch!

3G capacity crunch.

Re-farming spectrum.

New spectrum demand.

Empty 2G roads - in time?

Re-farming GSM!

HSPA+ versus LTE ?

Technology timing!


Smartphone the network challenge...Network expansion as traffic “management” remedy.

Air/TRX/SiteSpectrum &Floor space

NodesProcessing

capacity

Backhaulbandwidth

Backbonebandwidth

CoreSwitching

WebApps servers

Bandwidth, CPU & Storage.

Off Loading(AP, Femto, …)

PacketCore

Web 2.0

+ Sectorization+ Additional spectral capacity (if available)

Node

LL → MW → Fiber → + Colors

+ Colors+ switching

capacity

+ CPU+ switching

capacity

+CE

+CPU (i.e., CE, etc.)(up-to system limit)

RNC GGSNSGSN

traffic pressure pointsdue to aggregation

RNC GGSNSGSN


100:1 2000:1

Illustration

Nodes per element 4000:1

Remedies for traffic management.FUP & Throttling … Fair and efficient?

Volume per User

FUP Limit

FUP flavors

Hard volume-limit throttling.

BH throttling.

Service based (dpi) throttling.

Traffic de-prioritization … etc…

FUP flavors

Hard volume-limit throttling.

BH throttling.

Service based (dpi) throttling.

Traffic de-prioritization … etc…

FUP implementations might not be very efficientas traffic management remedies.

FUP implementations might not be very efficientas traffic management remedies.

Re-active remedy.

Typically capture <10% of users.

Little structural network impact.

1 Mbps

2 GB

0 31

Subscription days per month

Throttling

64 kbps

Days of“normal” usage


Data traffic trend to be considered.Mobile data usage is very different from voice.

Current BH load

Maximum loadTraffic

Evening peak busiest hour.

ca. 16 traffic hours.

30% traffic in-fill possibility.

Evening peak busiest hour.

ca. 16 traffic hours.

30% traffic in-fill possibility.

traffic management, traffic shaping andnew business models.

traffic management, traffic shaping andnew business models.

voice

data


Data traffic trend to be considered.Most mobile data traffic is fixed based.

80% subs generates <20% traffic.

80% data traffic carried by 3 cells1.

Remaining 20% carried over 28 cells.

80% subs generates <20% traffic.

80% data traffic carried by 3 cells1.

Remaining 20% carried over 28 cells.

Traffic off-load & throttling policies andnew business models.

Traffic off-load & throttling policies andnew business models.

31

2 3 4 3 3 2 2 2 1 1 1 1

0

5

10

15

20

25

30

35100% traffic80%+ traffic

Number of sites utilized perusage category.

1 on a per user basis.

“20% mobility”


Smartphone & application trends.Plenty of opportunities to make money or loose them.Smartphone & application trends (far from exhaustive).Plenty of opportunities to make money

Social network application continue to grow and develop.Social network application continue to grow and develop.

Increased interactivity between Apps and Web (and users).Increased interactivity between Apps and Web (and users).

Security and threat issues will increase exponential.Security and threat issues will increase exponential.

Paperless society.Paperless society.

Increased integration of network functionality in Apps.Increased integration of network functionality in Apps.

Near-field communication and tethering.Near-field communication and tethering.

Augmented reality, 3D displays and interactive gaming.Augmented reality, 3D displays and interactive gaming.

Share everything anytime across all platforms.Share everything anytime across all platforms.

Data mining, intelligent profiling/layering and smart-apps, etc...Data mining, intelligent profiling/layering and smart-apps, etc...


Key challenges.What we need to be passionate about.

Smartphone is a business challenge with great opportunities.Smartphone is a business challenge with great opportunities.

Modeling & Forecasting smartphone usage and business impact.Modeling & Forecasting smartphone usage and business impact.

Intelligent traffic management of data growth → monetization.Intelligent traffic management of data growth → monetization.


Thank you for your interest!

Contact:[email protected]: +31 6 2409 5202http://nl.linkedin.com/in/kimklarsen

Acknowledgement: I am indebted to my great team for always being patient with my data requests, for their great suggestions and support. For this work I am in particular thankful to Veli-Pekka Kroger, Minoo Abedi and Xi Bin.

mailto:[email protected]

The Smartphone Challenge (a European perspective)

Technology

Transcript of The Smartphone Challenge (a European perspective)