LTE - Strategies for MNOs

• Publication date: December 2011

This report provides an overview of the latest trends in the fast growing LTE market and the reasons driving MNOs' migration to LTE. It also analyses operators' roll-out strategies, LTE networks, technical hurdles, the regulatory environment and LTE spectrum issues, in addition to spotlighting the key players' different strategies and what will change with LTE. Key questions • LTE ecosystem is growing fast - TD-LTE is now a...

This report provides an overview of the latest trends in the fast growing LTE market and the reasons driving MNOs' migration to LTE. It also analyses operators' roll-out strategies, LTE networks, technical hurdles, the regulatory environment and LTE spectrum issues, in addition to spotlighting the key players' different strategies and what will change with LTE.

Key questions

• LTE ecosystem is growing fast - TD-LTE is now available commercially. Will it complement LTE FDD? LTE Advanced will arrive sooner than expected - what impact will this have on MNOs' strategies?
• More than 14 frequency bands are already in use for LTE around the World. How will operators manage LTE spectrum?
• What mobile CAPEX and strategies can we expect the different operators?
• How are MNOs making the switch to LTE and how will their LTE strategies differ?
• Who are the main LTE wholesalers model and how will they position themselves?
>This report is an extension of IDATE\'s LTE Watch Service including:
- A database covering 40+ countries, 100+ operators and their current deployments and future plans
- Monthly Insights providing analyses of key LTE events and issues
- Direct access to lead LTE analysts

Internet Access, Isp Industry in Germany

Content

1 Executive Summary ...... 10
1.1 The LTE wholesale model: high-speed dumb-pipes? ..... 11
1.2 LTE spectrum: already too much fragmentation ...... 11
1.3 LTE network strategies and technical hurdles .. 12
1.4 Capex strategies ...... 13
1.5 Service strategies for LTE ..... 13
1.6 Conclusions on LTE strategies ..... 14
2 Methodology .... 16
3 Introduction ..... 18
4 The LTE wholesale model: high speed dumb-pipes? 20
4.1 LightSquared (USA) 20
4.2 Clearwire (USA) 23
4.2.1 The LTE-Advanced switch 23
4.2.2 Market development .. 23
4.3 Dish (USA) . 24
4.4 Yota (Russia) .... 25
4.5 Aero2 (Poland) . 25
4.6 Kenya . 25
4.7 Net4Mobility (Sweden) ... 26
4.8 NBN (Australia) . 26
4.9 Summary: Interest is growing in LTE wholesale model .. 27
5 LTE spectrum: too much fragmentation? ..... 29
5.1 LTE spectrum: fragmentation increasing worldwide 29
5.1.1 New mobile spectrum for LTE deployments.. 29
5.1.2 Availability dates for LTE spectrum . 31
5.1.3 Frequency bands for LTE: the fragmentation risk and consequences .... 32
5.2 Digital dividend: “golden spectrum” for LTE ...... 34
5.2.1 Europe .. 34
5.2.2 Digital dividend in rest of world 35
5.3 Refarming - Why is LTE 1800 attracting such strong interest? ..... 36
5.4 Various strategies regarding spectrum for LTE . 39
6 Network strategy and technical hurdles . 40
6.1 Technology aspects: towards more complementarity between LTE-FDD and TD-LTE
40
6.1.1 The rise of TD-LTE (FDD and TDD convergence) ...... 41
6.1.2 WiMAX to TD-LTE migration .... 42
6.2 LTE-Advanced: time table and early tests . 44
6.2.1 Tests and early selection by mobile operators ..... 44
6.2.2 LTE-Advanced: technical characteristics ...... 46
6.3 Interworking with 2G and 3G networks ...... 48
6.3.1 General options for operators launching LTE services ...... 48
6.3.2 3GPP specifies CS Fallback .... 48
6.4 Voice and SMS over LTE ...... 52
6.4.1 Technological enablers ..... 52
6.4.2 Roadmap for VoLTE .. 54
7 Capex strategies .... 56
7.1 The access revolution: small cells and femtocells ... 56
7.1.1 Small cells are seen as the inevitable complementary network infrastructures to macrocells
to meet the mobile broadband capacity crunch .. 56
7.1.2 Network equipment provider pushes small cells .. 56
7.1.3 The migration from macro-cells to small cells is under way ...... 57
7.1.4 Femtocells will be a critical part of LTE network deployments .. 58
7.1.5 Multi-RAN adoption .... 59
7.2 Investments by major players 60
7.2.1 Mobile capex slightly on the rise ..... 60
7.2.2 Several LTE investment approaches ..... 61
7.3 Network sharing, outsourcing and wholesale .... 65
7.3.1 Network outsourcing .. 65
7.3.2 Network sharing .. 67
7.4 Backhauling needs and implications - LTE is driving need to upgrade backhaul ..... 71
7.5 Migration costs . 72
7.6 LTE costs: Capex + opex per MB of data .. 74
7.6.1 LTE: lowering the cost of capacity .. 74
7.6.2 LTE unit cost per MB is declining over years 75
8 Service strategies .. 76
8.1 Traffic forecasts – When do MNOs need to implement LTE? 76
8.1.1 Mobile traffic growth: 4G usage close to DSL usage .. 76
8.1.2 IDATE traffic forecasts ...... 77
8.2 LTE pricing 78
8.3 North America ... 79
8.3.1 USA ...... 79
8.4 Asia ..... 82
8.4.1 Japan .... 82
8.4.2 South Korea . 84
8.4.3 Hong Kong ... 85
8.5 Europe 85
8.5.1 Germany ...... 85
8.5.2 Austria ... 86
8.5.3 Sweden . 86
8.5.4 Norway .. 87
8.5.5 Finland .. 88
8.5.6 Denmark ...... 88
8.6 LTE Service differentiation and strategies . 89
8.6.1 Rather data-only services at the beginning ... 89
8.6.2 Available devices determines the level of service 90
8.6.3 LTE as a tool against white spots in rural areas... 91
9 Cases studies .. 94
9.1 AT&T .. 94
9.1.1 Overall presentation ... 94
9.1.2 Investments .. 94
9.1.3 Spectrum...... 94
9.1.4 Devices and services . 94
9.2 DOCOMO .. 95
9.2.1 Overall presentation ... 95
9.2.2 Investments .. 95
9.2.3 Spectrum...... 96
9.2.4 Devices and services . 96
9.3 China Mobile ..... 97
9.3.1 Overall presentation ... 97
9.3.2 Investments .. 97
9.3.3 Spectrum...... 97
9.3.4 Devices and services . 97
9.4 Clearwire ... 97
9.4.1 Overall presentation ... 97
9.4.2 Investments .. 98
9.4.3 Spectrum...... 98
9.4.4 Devices and services . 98
9.5 LightSquared: a new comer with a wholesale model ...... 99
9.5.1 Overall presentation ... 99
9.5.2 Investments and agreements ... 99
9.5.3 Spectrum.... 100
9.5.4 Devices and services ...... 100
9.6 Orange ..... 100
9.6.1 Overall presentation . 100
9.7 Telefonica 100
9.7.1 Overall presentation . 100
9.7.2 Spectrum.... 100
9.7.3 Investments and deployments ...... 101
9.7.4 Devices and services ...... 101
9.8 TeliaSonera .... 101
9.8.1 Overall presentation . 101
9.8.2 Spectrum.... 101
9.8.3 Devices and services ...... 101
9.9 T-Mobile ... 103
9.9.1 Overall presentation . 103
9.9.2 Spectrum.... 103
9.9.3 Investments and deployments ...... 103
9.9.4 Devices and services ...... 104
9.10 Verizon Wireless .... 104
9.10.1 Overall presentation . 104
9.10.2 Spectrum.... 104
9.10.3 Investments and deployments ...... 104
9.10.4 Devices and services ...... 105
9.11 Vodafone . 106
9.11.1 Overall presentation . 106
9.11.2 Spectrum.... 106
9.11.3 Investments and deployments ...... 106
9.11.4 Devices and services ...... 106
9.12 Other players: Net4Mobility, MetroPCS ... 107
9.12.1 Net4Mobility ...... 107
9.12.2 MetroPCS .. 108
10 Conclusions for MNOs ...... 109
10.1 Total number of LTE subscriptions – 2011-2015 ... 109
10.1.1 North America ... 109
10.1.2 Asia ..... 109
10.1.3 Europe 110
10.1.4 Other regions .... 110
10.2 The LTE migration drivers ... 111
10.2.1 Costs reduction . 111
10.2.2 Gain additional capacity .. 112
10.2.3 Increasing ARPU and potential new revenue streams ..... 112
10.2.4 Provide higher data rates 112
10.2.5 Competitive pressure ...... 112
10.2.6 Change technology path . 113
10.2.7 LTE drivers for main LTE operators ..... 113
10.2.8 National strategies ... 115
10.3 Future trends .. 116
11 Glossary .. 117
12 Annex: LTE wholesale model .. 119
12.1 Presentation of LTE deployment model ... 119
12.2 What is the cost of LTE deployment? 120
12.2.1 Setting . 120
12.2.2 Base case results: EUR 5.9 billion Capex over the 2012-2022 period .. 122

Tables

Table 1: Main LTE frequency bands by geographical area ... 12
Table 2: LTE commercial networks .... 18
Table 3: LightSquared and GPS frequency bands.. 20
Table 4: Pre-launch agreements reached by LightSquared .. 21
Table 5: Agreements reached by new Clearwire .... 24
Table 6: LTE wholesale and sharing agreements ... 27
Table 7: Main LTE frequency bands by geographical area ... 29
Table 8: Early LTE launches (September 2011) ..... 30
Table 9: Main characteristics of frequency bands for LTE .... 31
Table 10: Availability dates of LTE spectrum ..... 31
Table 11: Most likely bands for LTE international roaming ..... 32
Table 12: Use of frequency bands by LTE device type .... 33
Table 13: Digital dividend timetable in Europe ... 34
Table 14: Digital dividend timetable outside Europe . 35
Table 15: State of LTE 1800 deployments and trials (as of September 2011) .... 36
Table 16: Technical aspects associated to LTE 1800 ...... 38
Table 17: Main TDD and FDD bands ... 40
Table 18: TDD and FDD mode advantages and drawbacks ... 41
Table 19: TD-LTE adoption ... 42
Table 20: Mobile WiMAX to TD-LTE migration plans 43
Table 21: LTE-Advanced performances ..... 47
Table 22: LTE fallback schemes ... 49
Table 23: Base station shipments estimates ..... 57
Table 24: Potential gains and risks of network outsourcing .... 67
Table 25: Benefits and risks of passive mobile sharing ... 68
Table 26: Benefits and risks of active mobile sharing ...... 69
Table 27: Elements of potential savings to reduce network costs for a LTE network 73
Table 28: Network capacity units .. 77
Table 29: Verizon Wireless rates .. 79
Table 30: AT&T rates ...... 80
Table 31: Clear rates ...... 80
Table 32: Rover rates ..... 81
Table 33: Sprint 4G device portfolio ..... 81
Table 34: NTT DOCOMO Xi rates 82
Table 35: UQ Communications rates ... 83
Table 36: Current major data rates ...... 83
Table 37: LG U+ LTE plans ... 84
Table 38: SK Telecom LTE plans . 84
Table 39: CSL LTE data plans ..... 85
Table 40: Telia rates 87
Table 41: Telenor LTE rates .. 87
Table 42: Sonera rates – Finland.. 88
Table 43: TeliaSonera rates – Denmark ..... 88
Table 44: AT&T data-only rates .... 95
Table 45: AT&T smartphone data rates ...... 95
Table 46: NTT DOCOMO Xi rates 96
Table 47: Clear rates ...... 98
Table 48: Rover rates ..... 98
Table 49: Telia rates ..... 102
Table 50: Telenor LTE rates 102
Table 51: Sonera rates – Finland 103
Table 52: TeliaSonera rates – Denmark ... 103
Table 53: Verizon Wireless rates 105
Table 54: MetroPCS rates ... 108
Table 55: ‘National’ LTE drivers .. 115
Table 56: Area, population and density of base case scenario .... 120
Table 57: Sensitivity analysis ...... 125

Figures

Figure 1: LTE wholesale players .. 11
Figure 2: Mobile voice and data traffic 2010-2020 ... 13
Figure 3: LTE subscribers' forecasts ... 15
Figure 4: Main LTE commercial networks .. 19
Figure 5: LTE wholesale players .. 28
Figure 6: Timetable for LTE spectrum in Western Europe ..... 32
Figure 7: CSL spectrum holdings in Hong Kong ...... 37
Figure 8: The 1800 MHz frequency band ... 37
Figure 9: Site coverage in suburban areas 38
Figure 10: Selected operator spectrum strategies ..... 39
Figure 11: Migration paths to TD-LTE ... 43
Figure 12: LTE-Advanced experiment .. 45
Figure 13: New features in LTE-Advanced .. 47
Figure 14: LTE deployment scenario of NTT DOCOMO ... 50
Figure 15: Moving multimode User Equipment (UE) in the network 50
Figure 16: LG U+ core network evolution..... 51
Figure 17: CS Fallback architecture ...... 52
Figure 18: Voice over IMS ...... 53
Figure 19: The Alcatel-Lucent LightRadio .... 57
Figure 20: NTT DOCOMO RAN architecture evolution with Remote Radio Head ...... 57
Figure 21: Femtocells operator commitments and deployments ..... 58
Figure 22: Comparative power consumption of the NEC 3G and LTE base stations .. 59
Figure 23: Comparison of cost between SingleRAN and non SingleRAN ..... 60
Figure 24: MNOs capex in value and in growth rate, 2006-2010 .... 61
Figure 25: Hybrid Terrestrial /satellite wireless network .... 62
Figure 26: Capital expenditure phasing 63
Figure 27: Evolving trends in TeliaSonera capex 2006-2010 ... 64
Figure 28: NTT DOCOMO LTE capex plan, 2010-2015 ... 64
Figure 29: Verizon rapid national rollout ...... 65
Figure 30: Comparative network outsourcing scope .. 67
Figure 31: Passive sharing ..... 68
Figure 32: Active sharing . 69
Figure 33: Theoretical backhaul capacity and radio capacity requirements .. 71
Figure 34: LTE capex lower than current mobile capex .... 72
Figure 35: Potential costs savings for a typical MNO in developed markets (brownfield case) . 73
Figure 36: Comparison of performance and cost for today and LTE networks .... 74
Figure 37: LTE increases capacity while lowering cost per MB ...... 74
Figure 38: Capex and opex per MB, eurocents (EUR), 2010-2015 75
Figure 39: Mobile traffic usage is getting close to DSL ..... 76
Figure 40: Average mobile monthly traffic consumption per user observed in 2010 ... 77
Figure 41: Mobile voice and data traffic 2010-2020 ... 77
Figure 42: Mobile traffic enablers and rating trends ... 78
Figure 43: NTT DOCOMO Xi rates (commercial launch) .. 82
Figure 44: Number of bands used for each RAN technology in FDD mode .. 89
Figure 45: Comparison between LTE network deployments in frequency bands and
devices available ..... 90
Figure 46: LTE WLAN router and LTE modem for Vodafone LTE Zuhause service ... 91
Figure 47: My Ford Mobile App presented at the CTIA Wireless 2011 .. 92
Figure 48: SK Telecom plans for future LTE services 93
Figure 49: T-Mobile’s LTE devices ...... 104
Figure 50: Vodafone Germany LTE Zuhause devices .... 107
Figure 51: Net4mobility deployment plans . 107
Figure 52: MetroPCS initial LTE coverage . 108
Figure 53: LTE subscriber forecasts ... 111
Figure 54: LTE drivers for MNOs . 114
Figure 55: Selected operators strategic positioning . 114
Figure 56: Basic requirements for mass market adoption of LTE . 116
Figure 57: Network cost model calculation of RAN elements needed for LTE coverage . 119
Figure 58: Cumulated population and area in selected European countries ...... 120
Figure 59: Subscribers with LTE-enabled handset .. 121
Figure 60: LTE population coverage over time . 122
Figure 61: LTE CapEx for base case scenario . 123
Figure 62: LTE investment breakdown for base case scenario .... 123
Figure 63: Base case economics . 123
Figure 64 : Economics with 70% backhaul to RAN Capex ratio ..... 124
Figure 65: Economics with 50% RAN sharing .. 124

Internet Access, Isp in Germany

Germany Number Of Internet Users (`000)

• $ 250
• Industry data
• February 2013

Yearly, From 2003 To 2017
By Business Monitor International
Source: World Bank (International Telecommunications Union (ITU)), BMI research, mnetzA, Operators

• Industries : Internet Access, Isp
• Countries : Germany

Germany Number Of Internet Users/100 Inhabitants

• $ 250
• Industry data
• February 2013

Yearly, From 2003 To 2017
By Business Monitor International
Source: World Bank (International Telecommunications Union (ITU)), BMI research, mnetzA, Operators

• Industries : Internet Access, Isp
• Countries : Germany

Germany Number Of Internet Users, % Change Y-o-y

• $ 250
• Industry data
• February 2013

Yearly, From 2004 To 2017
By Business Monitor International
Source: World Bank (International Telecommunications Union (ITU)), BMI research, mnetzA, Operators

• Industries : Internet Access, Isp
• Countries : Germany

Germany Number Of Internet Users/100 Inhabitants, % Change Y-o-y

• $ 250
• Industry data
• February 2013

Yearly, From 2004 To 2017
By Business Monitor International
Source: World Bank (International Telecommunications Union (ITU)), BMI research, mnetzA, Operators

• Industries : Internet Access, Isp
• Countries : Germany