Voice over Wi-Fi and the Implications for MNOs

As Apple unveils the iPhone 6 featuring Wi-Fi calling and texting and T-Mobile US immediately puts it into practice, changes are on the horizon for MNOs. A recent analysis of data traffic in the US has shown that over 50% of mobile communications are now carried over a Wi-Fi connection, whilst the rest travel over a cellular network. Whereas indoor Wi-Fi networks were once predominantly confined to homes and offices, they are today becoming increasingly commonplace in public spaces such as retail centres, transport networks and even city centres.

As we go about our day-to-day lives currently, we switch between Wi-Fi and cellular networks when we move from one location to another – perhaps meaning that we are out of Wi-Fi coverage for fewer than 30 minutes a day. If voice over Wi-Fi becomes mainstream, it poses the question of whether many users would want to incur the cost of mobile subscription when they will be able to make calls in numerous Wi-Fi hotspots.

The increased use of indoor Wi-Fi networks has reduced the attraction for MNOs to roll out radio networks in buildings, and seems to have already killed the unborn market of picocells for home coverage. Most of the Wi-Fi -covered venues also have a cellular infrastructure to assure the transport of legacy voice and SMS traffic. With the development of Wi-Fi infrastructure using the latest 802.11 ac wireless networking standard and delivering up to 433 Mbits, mobile operators are now postponing their decision to roll out small LTE cells in the same venues and are increasingly thinking of offloading the cellular traffic to the Wi-Fi network.

This decision by operators not to invest in indoor LTE infrastructure might then prove unwise. A shift to Wi-Fi as a means of carrying data traffic could well result in revenue loss, and may force them to make drastic changes to their business models which are, in essence, made up of investments in a network that is then sold in pieces to subscribers. If this model is to be challenged and potentially overtaken by the introduction of a wide range of mobile communication services over Wi-Fi, MNOs will need to take steps in order to protect their position.

By Philippe Berard, Consultant at Coleago Consulting

New LTE Bands in European Version of iPhone 5S?

When back in September 2012, Apple launched the iPhone5, I commented on the fact that the Region 1 version (Europe and Africa) only included the 1800MHz band for LTE whereas Samsung and HTC already had triple band LTE models in the market with the 800MHz, 1800MHz and 2.6GHz bands.

This week came the announcement that Vodafone UK delayed its LTE launch to coincide with the launch of the iPhone 5S. This seems to indicate that that the new version of the iPhone will include three main Region 1 LTE bands.

It was reported that Vodafone’s Group CEO Vittorio Colao commented on the delayed launch: “End of the summer means when there’s going to be a good commercial moment for launching 4G … EE had a little bit of an advantage because of the iPhone at 1800MHz. To be honest that will go away as soon as we launch our 4G.”

The fact that Vodafone UK organised its launch date around a handset speaks volumes of the marketing power of Apple.  Many consumers make handset choices first and network choices second.  Mobile network operators would gain a lot from promoting Android and Windows phones to counteract the marketing power of Apple. 

Written by Stefan Zehle, CEO Coleago Consulting

EU approves refarming of 2.1GHz 3G band to LTE – what does this mean for mobile technology harmonisation?

On the 5th of November the European Commission decided to open the current 3G 2.1GHz band (IMT Band 1) for 4G. This follows the liberalisation of the 1800MHz and 900MHz bands for GSM. In its press release the EU states: “The decision enforces the harmonised liberalisation of the 2GHz band (1920-1980 MHz paired with 2110-2170 MHz) in all member states, avoiding internal market fragmentation in the future use of this band.” However, an unavoidable consequence is that in the short term this will lead to less harmony in the industry.

While member states are now obliged to allow operators to introduce LTE in the 2.1GHz band, the timing of this will depend on a) the ramp down of 3G/HSPA traffic in the network of individual operators and b) the availability of LTE band combinations in handsets, tablets and other devices. In a previous blog, I commented on the unfortunate choice of LTE band combinations in the European version of the iPhone5 which incorporates only one of three LTE bands deployed in the Europe. The issue is not trivial because iPhones, which generate vast amounts of data traffic, account for around 20% of smartphone sales in the EU but can only make use of LTE in the 1800MHz band.

Twenty years ago the EU’s efforts in respect of harmonisation was the cornerstone of the success of GSM which laid the foundation for the global growth in mobile telecoms. Harmonisation is an essential ingredient to drive economies of scale, avoid technology barriers to competition within markets, and enables international roaming. However, the introduction of LTE and the multiplication of mobile (IMT) bands will lead to less harmonisation.

Chipset vendors such as Qualcomm as well as device manufacturers have to decide which technologies and band combinations to incorporate in chipsets and handsets. In the short term this results in uncomfortable compromises because only a limited number of LTE bands can be accommodated in handsets.

Furthermore, the refarming of existing spectrum to LTE and the simultaneous introduction of new LTE bands poses a challenge to operators because of the difficulty in forecasting capacity utilisation by band and technology. The roll-off of 3G in band 1 illustrates this problem. The band consists of 2x60MHz. In markets with four operators, each may have 2x15MHz. Deploying LTE in less than 2x10MMz does not make much sense and hence operators may wait to refarm band 1 from HSPA to LTE until the residual HSPA traffic can be squeezed into 2x5MHz. Of course some operators have deployed HSPA in the 900MHz band, but this offers only a total of 2x35MHz. Some operators may also worry that fitting HSPA into 2x5MHz means the end of dual carrier HSPA. However, by the time this issue arises all serious data users will have moved on to LTE and therefore this is unlikely to be an issue.

Coleago has already been confronted with LTE eco-system issues while valuing spectrum for operators who participate in spectrum auctions where billions of Euros or Dollars are at stake. The evolution of the LTE device eco-system, the diffusion of devices with different band combinations, and the LTE deployment in different bands follows an un-even and at times unpredictable path. Combined the uncertainties surrounding inter-band aggregation to produce higher headline speeds creates increased complexity into the spectrum valuation problem.

These problems are unavoidable on the road toward networks that only use LTE / LTE advanced. What matters is how these problems are managed.

And there are not only problems for network operators but also for policy makers in maintaining a harmonised EU-wide service, for example access to emergency services particularly in rural areas. In order to mitigate the problem some EU wide measures may be necessary. Should each country designate one mobile operator to keep GSM alive until a final sun-set date and similarly should the same be the case in respect of HSPA? The cost of this could be borne jointly by the industry so that an individual operator is not disadvantaged. A universal service obligation (USO) mechanism could be put in place to allow operators to bid for the role of the legacy network provider with the bidder who asks for the lowest subsidy winning the USO contract. Such measures may accelerate refarming to LTE, thus maximising spectral efficiency while maintaining an EU wide legacy service for an appropriate time.

Written by Stefan Zehle, CEO, Coleago Consulting

The new iPad illustrates the importance of mobile broadband spectrum and the device eco-system

The New iPad was launched early March 2012 in many markets world-wide. It appears to be a highly desirable device.  Among its many features Apple touts 4G connectivity. However, a closer look reveals that only the American region 4G bands, namely 700MHz and 2100MHz have been included in the radio chip set.  Of course the device also includes 3G connectivity and here it is compatible with European 3G/HSPA in the 2100MHz band and also in the 900MHz band.

It is likely that  Apple will launch a European iPad version with LTE at 800MHz and 2.6GHz, but in the meantime there is a problem. In Europe, not many operators have refarmed the 900MHz spectrum to 3G HSPA and some operators do not hold any 900MHz spectrum.  This means in Europe mobile broadband access for the iPad is restricted to more densely populated areas where 3G is available in the 2.1GHz band.

This gives T-Mobile and Vodafone in Germany a marketing advantage. The most ardent iPad fans are probably also high voice spenders and can be locked in with a 24 months contract. Even if a European device becomes available in 6 or 12 months, in the meantime O2 and E-Plus are disadvantaged.  For O2 this is all the more annoying because they spend €1.15 billion to acquire 800MHz spectrum in May 2010.  Of course E-Plus who does not have any 800MHz spectrum will remain disadvantaged for the foreseeable future.This matters, because the new iPad is a desirable device and customers making device choices will also have to make mobile operator choices.  Take Germany as an example.  Vodafone, T-Mobile and O2 each purchased 2x10MHz of the digital dividend 800MHz spectrum in the May 2012 auction and deployed LTE and, under the terms of the licence, rolled out the network first in rural areas.  Vodafone and T-Mobile hold 2×12.5MHz of 900MHz spectrum whereas E-Plus and O2 only hold 2x5MHz.  This means Vodafone and T-Mobile are in a position to refarm 2×5 MHz of the 900MHz spectrum to WCDMA whereas the two other operators will find it near impossible.

The lesson here is that spectrum matters, as device manufacturers have to make chipset choice.  The multiplication of bands and technologies introduces technology barriers to competition and switching. This is a very different situation compared to the relatively harmonised GSM world of the past.

From an operator’s perspective, spectrum diversity provides the best device eco-system insurance. However, in Europe where only 2x30MHz of 800MHz spectrum is available, markets with more than three network operators are facing a problem if regulators are keen on packaging the spectrum in a minimum block size of 2×10 MHz.  There are of course benefits of deploying LTE in a channel wider than 10MHz, but the benefits are overstated. Spectral efficiency in terms of bits per MHz only increases marginally when moving for 5 to 10 or even 20 MHz wide channels.  While headline speeds are higher, the user experience is governed by other factors such as the number of concurrent users in a cell, distance to the cell edge, or the position within a building. In contrast the negative impact on competition resulting from different spectrum allocations, particularly in the lower band is very real.

One disturbing aspect about the European iPad launch is that even in Europe, Apple highlights the 4G capability, yet it is not compatible with the European 4G bands. Could Apple not have waited a couple more months and introduced also a European version with LTE 800, LTE 2600 and possible also LTE1800? Of course there is a little asterisk and a footnote “4G coverage is not available in all areas and varies by carrier”. Not all areas? That’s putting it mildly. Not anywhere in Europe would be a more appropriate statement.  Some disappointed buyers will take a dim view of Apple’s marketing tactics.

Written by Stefan Zehle, CEO, Coleago Consulting

How Nokia hopes the new Lumia will light up Asia

The launch of the latest Nokia Lumia smartphones could revive Nokia’s presence across Asia and China in particular, but will they come quickly enough? Both the Lumia 710 and 800 Windows phones are scheduled to be available in Hong Kong, Taiwan, Singapore and India before the end of 2011, and Nokia will no doubt be working hard to avoid the delays which plagued the launch of too many previous models. However, China will have to wait until “the first half of 2012” before it sees the much-admired fruits of Nokia’s partnership with Microsoft. In the meantime it seems likely that “unofficial” supplies could filter across to the mainland, which may help to sustain interest until the official launch, although only China Unicom’s network is compatible with the 3G technology currently used in these Lumia models.

It could be down to the diverse 3G standards used by China’s three mobile operators: W-CDMA (the technology used most widely throughout the world) is deployed by China Unicom, CDMA2000 (less widely used, but most notably in North America) is deployed by China Telecom and TD-SCDMA (a standard developed in and currently limited to China) is used by the largest operator, China Mobile. Back in August Colin Giles, Global Head of Sales at Nokia, and formerly Director of Marketing for Asia Pacific and Senior Vice President for Greater China, announced that Nokia will be launching TD-SCDMA compatible Windows Phone 7 handsets in China. So it seems likely the delay is to allow Nokia time to engineer versions of the Lumia phones which can operate on the CDMA2000 and TD-SCDMA standards, allowing Nokia to launch its new smartphones with all three of China’s mobile operators.

With Nokia struggling to maintain its market position in Asia and across the world, clearly an earlier launch in China would have been preferable. However, this strategy does give Nokia one potential advantage against the iPhone: Apple doesn’t have a TD-SCDMA version either and it looks unlikely it ever will. That hasn’t stopped China Mobile from selling the iPhone through a network of partners, acquiring around 10 million iPhone users so far. The iPhone can use China Mobile’s 2.5G network for voice calls and text messaging, but users are limited to wifi for high speed data services. To promote this growth in high value customers, China Mobile is offering rebates in the form of gift cards to customers who buy an iPhone through one of its partners and sign up to a 2g voice and wifi package. In an increasingly competitive market, this “subsidy” is unlikely to be an attractive long term solution for the operator to retain high value customers, and it’s not a good solution for customers who want to use their apps wherever they go. However, many customers prefer these limitations to the unreliable coverage of Apple’s official iPhone partner, China Unicom (although the operator is now working hard to improve its service). So if Nokia is able to offer versions of the Lumia smartphones that work on the 3G network of China’s largest operator, China Mobile, that could be a win-win for both Nokia and the operator. Nokia has been building TD-SCDMA feature phones for several years, so it has the expertise to solve the hardware problems. Hopefully its close relationship with Microsoft will ensure a smooth integration of these radios with the Windows software as well. Once again though, timing is critical: 2012 sees the end of Apple’s exclusive 3-year deal with China Unicom and is also likely to see the launch of the iPhone 5, which just might support the 4G technology (TD-LTE) that China Mobile is currently building, although recent reports suggest that Apple and China Mobile have failed to agree a deal, as the operator wants a cut of Apple’s app revenues as well. So Nokia needs to exploit this opportunity quickly whilst also lining up its 4G Windows Mobile phones for the next round in the battle. And that means also pushing Microsoft for better 4G LTE support in the Windows Phone 7 operating system.

And what of the other major competitor in Nokia’s smartphone war, Android? Nokia is being squeezed on all sides here, from both lower cost local brand phones and huge global players like Samsung and HTC. With Android smartphones available for as little as 1,000 Yuan (around USD160) in China, it seems likely the cheapest Lumia model will come in at around twice that price. However both Microsoft and Nokia expect that cost to fall as cheaper and more powerful processing chipsets and cheap WVGA (typically 800 x 480) screens reduce the cost of a phone capable of supporting the complexity and power of Windows Phone 7. Add to that Nokia’s excellence in hardware engineering and phone design, and the relatively straightforward integration of Windows Phone 7 with the Windows desktop which is particularly prevalent across Asia, and Nokia may be in with a chance of arresting its recent steep decline in the smartphone sector. These new Windows phones could do particularly well with customers who have yet to make the jump to a smartphone (ie they don’t already have an investment in apps, loyalty and learning how to use a particular smartphone OS effectively). Our guess is that Nokia is hoping the Chinese market for these premium smartphone products won’t accelerate too quickly, leaving it behind.

Written by Robert Filkins, Managing Consultant, Coleago Consulting