TE aT Th lE TEn IS Co d no M To vE Wo Ta M Rl l BE d R

BUSInES S analySIS foR TElECoMS PRofES SIonalS

SEPTEmbEr 2011

lEadER

ConTEnTS
news in brief

SPECTRUM SPATS
The battle for scarce spectrum is intensifying as regulators gear up for auctions and operators eye up valuable assets
pectrum is at the top of the agenda right now for regulators and operators as service providers look to the next generation of mobile broadband services and at how to ease network congestion. Across the globe timetables are being set for spectrum auctions; in many countries the process is already underway. throughout europe, for example, regulators are in the process of auctioning off spectrum that can be used for lte services (timeline p.5). And there is another reason why this is a critical time for spectrum allocation: many of the original mobile licences that were awarded some 1020 years ago are soon due

5 Timeline
A round-up of some of the major stories reported in our daily news service www.totaltele.com
technology trends

Ian Kemp Editor Total Telecom+

There is simply not enough spectrum to go round

to expire and are up for renewal, points out coleago consulting. Many argue that there is simply not enough spectrum to go round, although governments are taking steps to free up capacity. this month Uk regulator ofcom followed the lead of the Us in approving the use of white space spectrumunused airwaves in bands reserved for broadcast tV signalsfor services such as broadband and M2M communications. Just how precious spectrum has

become is reflected in some emerging confrontations. there are fears that Uk auctions, due in the first half of 2012, could be delayed due to potential legal action by some operators which argue they are not getting a fair crack at the whip in broadband/lte spectrum auctions (see network strategies p.12). And in the Us, At&t is finding to its cost that too much in the way of frequency assets and coverage can make the competition watchers twitchy. now that the department of Justice has moved to block its acquisition of t-Mobile UsA, At&t could face a break-up fee of up to $6 billion that would include losing valuable spectrum. if the deal is to succeed, At&t could still be forced to divest a large chunk of t-Mobiles subscribers and spectrum. but others are making good use of their gains. operators which have been successful in lte auctions are giving iP multimedia subsystem (iMs) a new lease of life as they turn to the technology to deliver voice services and protect precious revenue streams (technology trends p.12). in future they plan to use the platform to deliver a whole host of new converged services. And reminding us that it isnt all about ownership of assets, overthe-top content service providers are enticing operators into new partnership deals (p.16). with spectrum scarce, there could be a whole lot more sharing in future. n

8 IP multimedia subsystem (IMS)

iMs is finding favour among mobile operators moving to lte that want to protect voice revenues as well as introduce new converged services. but they face technology and process challenges, as well as competition from free applications.
network strAtegies

12 Operator LTE business models

spectrum will have a big impact on the lte business models of mobile operators, and some say they are not getting a fair crack at the whip in upcoming auctions.
content strAtegies

16 Over-the-top content strategies

operators are starting to embrace over-the-top content as a way to expand services and reach out to new audiences, developing new business models.
stAtistics

20 Prime numbers
worldwide mobile device sales in Q2, mobile operator capex and opex trends, and enterprise voice equipment revenues.

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TIMElInE

A roundup of the major stories in telecoms in the past month, as reported in our daily news service www.totaltele.com

BuSiNESS
Google buys Motorola unit
google agreed to acquire Motorola Mobility for around Us$12.5 billion in a deal it hopes will bolster its Android strategy. the purchase is expected to be completed by early next year.

Us. later clearwires biggest shareholder, sprint nextel, began talks with cable companies that could lead to the acquisition of the wiMAX wholesaler.

Sprint-Lightsquared deal
sprint nextel agreed a deal to deploy and operate lightsquareds planned nationwide wholesale lte network in the Us. lightsquared will pay about Us$9 billion over 11 years.

E100 million to roll out fibre to 100,000 homes and businesses by mid-2012, in phase 1 of a multi-year operation. eircom will launch iPtV services on the infrastructure which will ultimately reach 1 million premises in ireland.

policy changes, including a limit to the maximum amount of frequencies a mobile operator can hold and the introduction of a uniform licence fee across all telecoms service areas.

Vodafone set for Wind Hellas

Vodafone began talks to merge its mobile business in greece with rival wind hellas. A merger would unite the countrys secondand third-largest operators to challenge market leader cosmote.

America Movil to buy Telmex

wireless operator America Movil plans to buy the 40% of Mexican fixed-line operator telmex that it doesnt already own, for around Us$6.5 billion.

Telefonica restructures
spains telefonica announced a significant restructuring of its organisation to focus on digital services, including the creation of a new unit, telefonica digital, to be headquartered in london. the unit will become one of three principal business divisions alongside europe and latin America, with its home market operations rolled into europe.

France Telecom to sell assets

france telecom plans to sell its assets in switzerland, Portugal and Austria. it has a 20% stake in fixed-line operator sonaecom in Portugal, a 35% stake in orange Austria, the countrys thirdlargest mobile operator, and last year was prevented by the regulator from merging whollyowned orange switzerland with tdcs sunrise.

Skype gets group messaging Vodafone sells India stake

Vodafone agreed to sell a 5.5% stake in its indian operation essar to medical services provider Piramal healthcare for 400 million, reducing its holding to 69.8% and paving the way for a possible iPo. the threshold for foreign investment in a company in india is 74%. skype bought group messaging application company groupMe for an estimated Us$85 million.

US cable acquisition
time warner cable signed a deal to buy rival cable company insight communications for Us$3 billion.

US blocks AT&T/T-Mobile deal

the Us Justice department began a lawsuit to block At&ts proposed Us$39 billion takeover of t-Mobile UsA. if the deal does not go through At&t could be liable to a break-up fee of $6 billion in cash and spectrum.

India policy changes Eircom invests in fibre

irish operator eircom will invest indias telecom commission, reached decisions on some major

NETWORKS
Spectrum auctions
telefonica, Vodafone and france telecom were among operators to win spectrum in the 800-Mhz, 900-Mhz and 2.6-ghz bands in an auction in spain, for a total of E1.65 billion. Another auction is expected in the autumn which could raise a further E2 billion. telecom italia Mobile, Vodafone italy, wind, 3 italia and wiMAX operator linkem are taking part in auctions of lte spectrum in italy to be completed in september. And in south korea lg U+ won 20 Mhz of spectrum in the 2.1-ghz band, sk telecom acquired 20 Mhz of 1.8-ghz spectrum and kt corp picked up 10 Mhz of 800-Mhz frequencies.
5

HP exits hardware market

hewlett-Packard announced it will stop making computers and mobile products, closing its webos devices unit in the process. the restructuring plans will see h-P focus on software and services, and the company also announced the acquisition of database search company Autonomy for Us$10.2 billion.

Developing countries drive mobile growth

1,000 revenue (US$ billions) 800 600 400 200 0 595 2007 616 2008 631 2009 646 2010
Source: Wireless Intelligence

n Developed n Developing 960 885

1,013

1,057

290

344

382

410

Clearwire confirms LTE plans

wiMAX operator clearwire confirmed it will roll out lte in densely populated areas of the
September 2011 www.totaltele.com

revenues from mobile operators worldwide will reach US$1.1 trillion in 2012, with developing markets the primary engine of growth and contributing over 40% of the total, according to a new study by Wireless Intelligence. mobile operators in the brIC countriesbrazil, russia, India and Chinaare set to exceed US$200 billion in revenues, overtaking the US in terms of market size by 2012. Global operator revenues reached US$1.057 trillion in 2010.

TIMElInE

Virgin wins MBNL contract

Virgin Media business won an eight-year contract worth in excess of 100 million to upgrade the backhaul infrastructure for Mbnl, the network joint venture of mobile operators everything everywhere and 3Uk.

Network sharing in Poland

Polish operators Ptcowned by t-Mobileand tPsAowned by orangesigned a deal to share their radio access networks.

New Zealand CEO to leave

telecom new Zealand ceo, Paul reynolds, will leave after the company undergoes structural separation next year.

Zain upgrades in Saudi Arabia

Zain has selected Alcatel-lucent to implement a new iP/MPlsbased mobile backhaul solution in saudi Arabia.

FT appoints Europe head

france telecom appointed benoit scheen as its vice president of europe excluding france. scheen was ceo of Mobistar in belgium.

BSNL upgrades broadband

bsnl signed a deal for Zte to deploy Adsl2+ and Vdsl2+ equipment in 15 telecoms circles in india.

JoBS STEPS doWn

3G launch in Kenya
orange-owned telkom kenya launched 3g services in nairobi, Mombasa and kisumu.

Tellabs job cuts

tellabs will cut about 330 jobs, or 10% of its workforce, by the end of the second quarter of 2012.

China Telecom eyes Europe

china telecom is planning its first mobile operations in europe, aiming to launch an MVno in the Uk early next year and then in other european countries.

Power company targets telcos

state-owned hungarian power wholesaler MVM plans to enter the telecoms market.

Clearwires new head

clearwire promoted erik Prusch to president and chief executive, with interim ceo John stanton now board executive chairman.

Dish plans LTE network

Us satellite tV company dish filed plans with the Us regulator to build a hybrid satellite and lte mobile network. dish plans to use the 20-Mhz frequencies in the 2-ghz spectrum band it acquired when it bought terrestar in July.

PEOPLE
New Verizon CEO
lowell McAdam is the new ceo of Verizon communications, replacing ivan seidenberg who retired in August.

Deutsche Telekom cuts

deutsche telekom reportedly will cut around 400 jobs a year, up to 1,600 in total, at its bonn headquarters through to 2015.

Huawei appoints UK head RIM job cuts as COO retires

riM is planning to cut 2,000 jobs across its global workforce. don Morrison, its coo, is also set to retire after 10 years working for the blackberry maker. chinese vendor huawei appointed simon culmer in the newly-created role of vice president of enterprise in the Uk and ireland.

LTE launches in Spain

telefonica and Vodafone are set to launch lte services in spain this month. the former selected Alcatel-lucent to deploy two lte networks in Madrid and barcelona later this year.

Batelco replaces CEO Yahoo changes leadership

yahoo dismissed ceo carol bartz and appointed cfo timothy Morse as its interim head while it searches for a permanent replacement. bartz had led the company since January 2009. bahrain-based operator batelco replaced long-time group ceo Peter kaliaropoulos with deputy chairman of the board, shaikh Mohamed bin isa Al khalifa.

Telstra sets separation plan

Australian regulators raised concerns over the details of telstras plans to undergo structural separation and migrate services to the new national broadband network by July 2018.

NSN job cuts

nokia siemens networks will cut about 1,500 jobs related to the former Motorola solutions unit it acquired this year.

UK operator shakeup
olaf swantee, who took over from tom Alexander as ceo of everything everywhere in the Uk at the start of september, announced a shakeup of the senior management team. six executives will leave the company including richard Moat, the current cfo and deputy ceo.

Pakistan, Albania 3G licences

Pakistan plans to issue the countrys first 3g licences in october, hoping to raise up to Us$1 billion. And AMc won the second 3g licence in Albania; Vodafone launched services in the country in January.
6

New head for GSMA

the gsM Association appointed orange executive Anne bouverot as director general, taking over from ceo rob conway who resigned in June.

Steve Jobs in August announced that he would step down from his role as CEO of Apple and will be replaced by chief operating officer Tim Cook. In a letter to the board, Jobs admitted that he can no longer fulfil the duties and expectations required of the CEO role, but he will continue to serve the company as chairman of the board. Apple co-founder Jobs was diagnosed with pancreatic cancer some eight years ago and in 2009 underwent a liver transplant during a lengthy leave of absence from work, during which time Cook fulfilled his duties. In August Apple became the worlds largest company by market capitalisation. The previous month it reported record financial results, with revenues for its 2011 third quarter increasing 82% year-on-year to US$28.57 billion and profit up 125% to US$7.31 billion. Apple sold 20.34 million iPhones in the quarter. Jobs co-founded Apple with Steve Wozniak in 1976, but was ousted from the firm following a board power struggle in 1984. His return in 1997 prompted Apples revival and a series of ground-breaking products: imac (1999), iPod (2001) and iPhone (2007). I believe Apples brightest and most innovative days are ahead of it. And I look forward to watching and contributing to its success in a new role, Jobs said in his resignation letter. Cook, in his role as COO, has been responsible for Apples worldwide sales and operations, including supply chain, sales, service and support management. He also headed up the companys macintosh computers division.
www.totaltele.com July/August 2011

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TEChnology TREndS

MUlTI TASKING
confluence of events surrounding the deployment of long term evolution (lte) wireless technology is finally placing iP Multimedia subsystem (iMs) at the core of the network. iMs will add voice and multimedia telephony services to lte using Voice over lte (Volte), helping mobile operators to ward off competition for their core revenue-generating services. but mobile operators also face a dilemma: while they implement iMs and Volte, the communications providers whose services run over their networks will benefit from lte broadband without the challenges associated with iMs deployment. Mobile operators adopting iMs-based Volte will need to ensure that the resulting services match the quality of circuit-switched voice, and while they take time to do this over-thetop providers can advance their offerings, says dan warren, senior director of technology at the gsM Association (gsMA). the challenge is that the length of time it takes to generate sufficient inter-operator interconnect and roaming, as well as the handsets, is time during which the likes of skype, google, Viber and fring are developing new things. these internet players move quickly because they dont

I P M U LT I M E D I A S U B S Y S T E M S

IMS is finding favour among mobile operators moving to LTE that want to protect voice revenues, but there are technical and process challenges ahead. By Roy Rubenstein

have to worry about fallback to the circuitswitched domain or interconnect to other players, he says. All of that stuff will be taking place while mobile operators are getting onto the Volte page. iMs was envisaged a decade ago as an over-arching core signalling and control architecture upon which new services would be developed and delivered across various access networks. in reality, operators reacted cautiously to the technology. the general problem was that iMs required a significant reworking of the network, says dimitris Mavrakis, senior analyst, networks, at informa telecoms & Media. it involved replacing or refreshing services that generated revenues. operators had no reason to replace infrastructure that was working well and generating revenues even if iMs promised greater efficiencies. And while operators grappled with how to make money from services such as instant messaging and video telephony, internet-based services came along to deliver such services cost-effectively or even for free. some mobile operators such as Japans ntt docoMo and koreas sk telecom (see box p.10) have continually developed enhanced multimedia services using iMs,

Worldwide IMS equipment revenues

$1.6 billion

$176 million

2008

2009

2010

2011

2012

2013

2014

2015

Source: Infonetics research

while the likes of Vodafone and A1 telekom Austria (formerly Mobilkom Austria) have launched enterprise services. but the main iMs deployments to date have been in the fixed network. what iMs has become is the nextgeneration VoiP platform, says diane Myers, directing analyst, VoiP and iMs, at infonetics research. in part that is because vendors have adopted iMs for their voice products. france telecom has used iMs for voice as part of its triple-play services, responding to competitive operators offerings, and now has several million VoiP subscribers. france telecom started to decommission its service-switched lines as subscribers began actively moving from their traditional phone line to their bundled service, says Myers. other operators are moving to VoiP using iMs switches to achieve operational savings as they replace their class 5 Pstn switches. chinas operators including china telecom have been mandated to do this, says Myers, as the chinese government looks to reduce the countrys power requirements. class 5 switches are large, monolithic boxes that consume a lot of power. you have to have them located in different points of presence; they cant be run off one central location, she says. yet operators do have the option of staying with a next-generation network (ngn) softswitch architecture, rather than adopting iMs, when delivering VoiP. there are operators where deploying iMs makes sense, but if your first step is VoiP, deploy ngn, and deploy iMs only when you need to offer multimedia services, says Ali kafel, product marketing & business development, sonus networks. colt technology services is one fixedline operator that has adopted sonus softswitch platform for VoiP, but it is also incorporating elements of iMs. what we do with iMs is slightly different to what others do with iMs, says nicolas
www.totaltele.com September 2011

TEChnology TREndS

Top drivers for moving to IMS (left); leading carrier VoIP and IMS vendors by revenues, Q2 2011 (right)

Legacy equipment obsolescence

Genband

Ability to offer converged services

Other

Huawei

LTE network deployment

AlcatelLucent Nokia Siemens Acme Packet

0%

20%

40%

60%

% of service providers rating definitely a driver

Combined worldwide trunk media gateway, softswitch, SBC, media server, VAS and CSCF server market share
Source: Infonetics research

fischbach, colts network strategy and architecture director. iMs deployments typically are subscriber-centric and require elements such as the home subscriber server (hss) for user authentication, but colt has used only the iMs elements needed to enable VoiP access services for its enterprise customers. the platform we chose is flexible, so you dont have to deploy all the components that make up an iMs architecture but [rather] start with a softswitch that also delivers siP and has whatever you need around it for business VoiP services, says fischbach. but while there is a place for interim strategies, full-blown iMs will be the long-term solution as operators replace their Pstn networks. from real [operator] feedback, the cost of operating an iMs network is now lower, from an operation and maintenance perspective, than managing the Pstn, says cassidy shield, global solutions marketing, content, cloud and communications, at Alcatel-lucent. Vendors say iMs has been simplified as it has matured. whereas before we had multiple platforms and multiple middleware, we have now consolidated the technology, says ed elkin, director, iMs solutions marketing at Alcatel-lucent. we can put two million subscribers into a single chassis. the result is a 95% reduction in power consumption and floor space compared to circuit-switched
September 2011 www.totaltele.com

solutions, he says. but Michael clever, head of voice and iP transformation at nokia siemens networks, says the motivation for iMs deployment goes beyond voice: it is being driven for voice services, but if it was just for VoiP no one would implement this. one example of other drivers is converged fixed-mobile enterprise services. the enterprise market is one that is relatively unexploited by telcos, says informas Mavrakis, who highlights Vodafone spains iMs-enabled oficina service. oficina provides users with a fixed number on their mobile handsets while delivering advanced capabilities on their fixed phones. Voice is only part of the package which includes Adsl and mobile broadband. the merits of the service include a single bill and phone number, and converged pricing plans. A1 telekom Austria launched its unified voice service in 2010, a converged mobile and fixed business service based on iMs that includes short number dialling and user presence. but according to franz fertl, director of service network at A1, implementing the service and interfacing it to the companys existing operations support system proved challenging. not only did it involve one iMs box but also several servers and software elements. that made it very complicated to implement a processto offer the service, giving customers the ability to order it

and enable it on several systems in the right way, says fertl. All these things are big challenges. but if the fixed network is where iMs has been successful, the biggest recent iMs development is the adoption of Volte, which uses a stripped down version of iMs to deliver voice and multimedia for lte. Mobile is where the stickiness is for iMs, says Mavrakis. And it is the mobile operators that are the cash cow for iMs vendors. According to infonetics research, global iMs equipment manufacturer revenue was up 87% in the second quarter compared to the same quarter last year. Asia Pacific accounted for 68% of all iMs equipment spending in the second quarter, driven primarily by activity in china, Japan and south korea. the research company says mobile iMs-based spending will be a strong contributor to market growth in the second half of this year, particularly in north America as operators increase lte deployments and prepare for Volte services in 2012. infonetics in a recent survey found that lte is now the main driver for nearly half (48%) of the 23 operators questioned that are implementing or have deployed iMs. this is a big jump from a year ago; lte is now a primary driver, says Myers. in a separate lte survey, the research company found that operators plans to deploy Volte are ahead of where they were a
9

TEChnology TREndS

IMS pioneer: how SK Telecom has blazed a trail

South Korean operator SK Telecom has been providing ImS-based multimedia services since 2005. Having started with a video call service, the operator has launched a steady stream of IMS services including mobile messaging, fixed Internet telephony, a converged fixed-mobile service, high-definition video calling and a social networking talk service. SK Telecom has also joined with Korean mobile carriers KT and LG U+ to enable subscribers to use the mobile messenger service across networks. The operator claims such interconnection of ImS services between operators remains the only example to date. It has resulted in the mobile messenger service being used by 14 million subscribers. One of the strengths of ImS is that it allows for experimentation and customisation, says Woo-Yong Choi, senior manager of the core network development team at SK Telecom. For example, the operator conducted a study and found that some users felt uncomfortable being seen on a video call. With SK Telecoms rCS-based HD video calling service, a user starts a circuit-switched voice call and can choose from a list of multimedia features such as real-time video, photos, a sketch book and location information. The user can also choose whether to just receive video or use two-way video sharing. For 3G circuit-switched video calls, voice and video traffic are transmitted at 64 kilobitsper-second (Kbps). SK Telecoms HD video calls use the 3G packet network and WiFi to transmit at 100-200 Kbps, resulting in a fourfold improvement in video resolution.

year ago. one year ago it was still circuitswitched fall-back, says Myersin other words, voice implemented not on lte but using the existing 2g/3g circuit-switched infrastructure. now operators are accelerating their plans, launching Volte much more quickly once lte is in place. but operators face significant challenges as they move to implement iMs for mobile. they will also need to ensure interoperability between their iMs-enabled core communications services. there are two approaches for adopting Volte. A minority of operators plan to have sufficient lte coverage such that a user can remain using Volte without needing to hand over to any other cellular voice technology. this is the strategy of two Us operators, Verizon wireless and MetroPcs, for example. other operators will need to keep the voice call active as a user moves from an lte cell to a 3g or 2g cell. this is technically tough, and it has exercised the minds of the operators, vendors, the 3gPP and the gsMA, says warren. the challenge is that two events must be supported simultaneously. As the radio interface is handed over, the nature of the voice bearer changes from iP to a circuitswitched one. this requires a handover from the iMs domain to the mobile switching centre server, says warren. one solution operators are investigating is to separate the two events by delaying the bearer handover, in this case moving from lte to a 3g hsPA
10

connection first. such a connection has sufficient bandwidth to support the iP bearer, allowing the handover to circuitswitched infrastructure to occur later. A1 is considering such issues. we think it is important to implement Volte, says furtl. And if you implement Volte, [is it necessary to have] a fallback solution for gsM or is it possible to start the call in lte and finish it in hsPA? sk telecom is still undecided about its plans to adopt Volte. but woo-yong choi, senior manager of the core network development team at sk telecom, believes the implementation would be straightforward. the Volte implementation will not be difficult as our company can use its existing iMs infrastructure and technology, he says. Magnus furustam, vice president, product area core & iMs at ericsson, says getting such coexistence to work between the circuit-switched and packet-switched cores will be challenging, but that it is less a technical problem than one of project planning. clever at nsn highlights another networking challenge operators face when moving to iMs. in time-division multiplexed networks a peak load might be three times the regular load; in iP networks the surge can be 100 times the load. the iMs core needs to be designed to tackle such unpredictable traffic, he says: it is a huge effort and does not come for free. what is of more concern for operators, says furustam, is how they protect their

most important business: voice and sMs services that still typically represent 75% of their revenues. operators must grapple with how to advance their services in a world where all sorts of communications applications can be downloaded in a second, says furustam: that is becoming more of a real, real concern. Another important component that builds on iMs and which will play its part alongside Volte is an enhanced version of the rich communication suite (rcse), defined by five european operators and which is being promoted by the gsMA. rcs-e will enable users to send instant messages, video and files, making use of the handsets address book. deutsche telekom, orange, telecom italia, telefonica and Vodafone announced at Mobile world congress earlier this year plans to launch rcs-e services by the end of this year or in early 2012. the things that have stopped rcs happening are the business case, and in some areas the complexity of the service itself, says warren at the gsMA. indeed, work is about to start to harmonize rcs-e with the latest version of rcs to create the functionality required using a reduced set of protocols. but for rcs/rcs-e enabled services to be used across operator boundaries in the same way as voice calls and sMs, it is essential for the operator community to develop around Volte and rcs, says warren. All the while, the internet players will be further developing their offerings. sk telecom highlights the threat posed by free smartphone applications that directly compete with iMs-based services provided by mobile carriers. this is the biggest challenge to iMs, says choi, who says that mobile operators future business models will be shaped on developments based on rcs. but choi implies that success will largely be down to the operators. the biggest strength of iMs is that after it is launched the development of additional services becomes very simple, he says. the return-on-investment will be high if one decides to adopt iMs and develop many additional services instead of stopping at just one or two. n
www.totaltele.com September 2011

World Communication Awards For global communications providers

7 November 2011 The London Hilton on Park Lane

2011

World Communication Awards 2011...

...The Shortlist
Best New Service: Consumer Banglalink Orange Roshan Turkcell Best New Service: Enterprise Orange SingTel Virtela Vodafone

Best Brand Campaign Idea Cellular Mobile TeleSystems Orange Business Services Orascom Telecom Bangladesh (Banglalink) TELUS Best Cloud Service Content Guru fonYou Telecom iPass Orange Business Services Telstra Enterprise & Government Virtela Best Content Service Hutchison Telecom Hong Kong Maxis Orange SingTel TE Data Turkcell Best Customer Care Bharti Airtel Limited Orange Business Services Tata Communications UPC Austria Best Global Operator BT Global Services Orange Business Services Verizon Business Virtela Best Mobile Operator Bharti Airtel France Telecom-Orange Verizon Wireless

The Alireza Mahmoodshahi Technology Foresight Award Movirtu PCCW Global Smart Communications The Green Award Colt Group Grameenphone Orange Business Services Smart Communications The New Shores Award BT Global Services China Telecom (Europe) Orange Business Services The Social Contribution Award Etisalat Roshan Turkcell Viettel CEO of the Year Gkhan Bozkurt: Trk Telecom Ibrahim Al-Omar: VIVA Bahrain Karim Khoja: Telecom Development Company Afghanistan Ltd. Mehboob Chowdhury: Pacific Bangladesh Telecom Mohammad Omran: Etisalat Rakesh Bhasin: Colt Technology Services Randall Stephenson: AT&T Stphane Richard: France Telecom-Orange Sunil Bharti Mittal: Bharti Airtel Group Zeinal Bava: Portugal Telecom

Best Operator in a Developing Market Axis CVT Group Orange Viettel Best Wholesale Carrier Colt Group Interoute Orange Tata Communications TeliaSonera International Carrier Project of the Year BT Group Maxis Orange Business Services Turkcell Zain Jordan Team of the Year CITIC Telecom International CPC Orange Business Services UPC Austria - Churn Busters UPC Austria - UPC Gold Cup

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nETWoRK STRaTEgIES

MIXEd SIGNALS
Spectrum allocation will have a big impact on mobile operators LTE business models, and some believe they are not getting a fair crack at the whip. By Ken Wieland
pectrum for high-speed mobile data services is in short supply, frustrating operators eager to roll out lte technology and enjoy better operational and spectral efficiencies on increasingly overloaded networks. national regulatory authorities (nrAs) are also concerned: A lack of spectrum could lead to congested networks that adversely impact broadband performance for businesses and consumers; and it could lead to digital divides, with rural areas in large part underserved by new lte broadband services. the upshot is that some operators are going head to head with nrAs over restrictions on the allocation of spectrum and how it could impact their lte business models, as well as over obligations being placed on how quickly and extensively services should be implemented. the problem is that when regulators start to tinker they have an impact on operators economic business models, and there is always the danger that regulators dont get the outcome they hoped for, says terry norman, a lead analyst at Analysys Mason. in europe, spectrum from the so-called digital dividendoccupying the 800-Mhz frequency band vacated by broadcasters switching from analogue to

LT E B U S I N E S S M O D E L S

digital televisionis of particular value to operators and regulators. the 800-Mhz band enables mobile network operators (Mnos) to cover suburban and rural areas more cost-effectively than higher frequencies which have shorter signal ranges. And for nrAs and governments aiming to extend access to broadband services nationwideoften placing obligations on spectrum winners as a result (see box p.13)the digital dividend makes that goal much more achievable. the european commission also sees the value in the switchover and has set a target of the end of 2012 for auctions. According to analyst company wireless intelligence, 11 countries within the eU27 have already switched off analogue broadcast services and 10 plan to do so between 2011-12 (see table p.14). but a further six will not do so until 2013-15 and will therefore miss the ec deadline. An added bonus of 800-Mhz spectrum is that it can provide better indoor coverage than higher frequency bands. 800 Mhz is an essential part of the lte success story, says walter goldenits, cto at A1 telekom Austria. but one snag with 800-Mhz spectrum is its relative scarcity. nrAs in europe, in discussions with broadcasters, typically are attempting to clear 60 Mhz (2x30

When regulators start to tinker they have an impact on operators economic business models
LTE connections forecast by region
2009 africa americas Asia Pacic Europe: Eastern Europe: Western Middle East US/Canada World 2,000 2,000 2010 5,561 4,907 58,225 126,163 194,856 2011 9,030 28,841 1,425,225 330,728 715,806 77,299 2,329,400 4,916,329 2012 128,220 141,560 2013 689,210 1,107,458 2014 2,073,505 4,482,432 7,491,129 8,798,932 2015 4,369,461 11,834,565 16,244,241 15,589,270

9,646,840 30,770,659 69,960,638 131,936,330 1,341,630 3,101,296 684,183 3,841,603 4,254,921 19,297,314 41,515,154 70,436,094 7,336,464 17,747,562 34,114,630 54,203,339 23,533,818 76,555,102 168,436,420 304,613,300
Source: Wireless Intelligence

Mhz) of digital dividend spectrum. it is a small amount compared with the 190 Mhz typically available in the 2.6-ghz band also suited to lte services. goldenits says contiguous 2x10 Mhz blocks are the minimum requirement to run efficient lte services. if so, nrAs will have a hard time slicing and dicing 2x30 Mhz if they want to attract more than three players to this frequency band and maintain effective national mobile broadband competition. in addition, wireless intelligence says 14 of the eU27 countries do not yet have targets to auction spectrum in the iMt-extension band2.5 ghz2.6 ghz. As a result the 900-Mhz and 1800-Mhz frequency bands, initially limited to 2g services, are being liberalised across europe for use for 3g and lte services so-called spectrum refarming. A growing number of Mnos can now use their 900-Mhz assets to provide 3g services, and the ec is calling on all nrAs in the european Union to free up the spectrum for 4g lte by the end of this year. given the similar signal propagation characteristics between 800-Mhz and 900-Mhz spectrum, and the growing prospect of allowing lte at 900 Mhz, nrAs increasingly are starting to see the two frequency bands in the same light. but that is causing some operators to show concern over the potential impact on their mobile broadband business models. consultancy dotecon published a benchmarking report in september 2010 on the possible value of 800-Mhz and 900-Mhz spectrum in ireland. one conclusion of the study, commissioned by irelands regulator comreg, was that there was no significant difference in the long-term worth of 800-Mhz and 900-Mhz spectrum. Meanwhile Uk regulator ofcom describes 800 Mhz and 900 Mhz as broadly equivalent. the concern for some operators that hold 900-Mhz spectrum is that they may be capped on the amount of digital dividend
www.totaltele.com September 2011

12

nETWoRK STRaTEgIES

Economic Headline balance: regulators impose obligations on LTE coverage

Regulators and governments increasingly are imposing LTE coverage obligations to prevent national digital divides emerging. Winners of spectrum in the 800-mHz spectrum auctions in Germany, for example, must roll out services in rural areas first and aim for nationwide coverage by 2013; and when Austria allocated 2.6-GHz spectrum in September 2010 the regulator ruled operators should provide 25% of the population with mobile broadband coverage by the end of 2013. many other countries are planning to set out similar obligations, particularly in the lower frequency bands (800 mHz and 900 mHz) which are more suited to wider coverage: Wireless Intelligence says Denmark, France and the Czech republic have already expressed their intentions to set coverage targets for rural and remote areas. In the UK the Communications Consumer Panelan independent group formed to provide advice to the regulatorin July called on Ofcom to enforce coverage obligations on operators taking part in next years LTE spectrum auction. The forthcoming auction presents an opportunity to address the fact that GSm coverage has largely stood still since the arrival of 3G, it said in response to Ofcoms consultation on the auction. most coverage not-spots ten years ago are still not-spots today. For the first time in over 25 years significant spectrum is about to be released that is lower frequency than any that is currently deployed800 mHz is a good solution for rural coverage and presents the opportunityto correct the adverse coverage position. Spectrum caps are also favoured by NrAs as a way to promote competition. UK regulator Ofcom favours spectrum floors for the auction of 800-MHz, 1800-MHz and 2.6-GHz spectrum next year. by setting minimum amounts of spectrum for bidders as well as imposing spectrum capsand taking into account mNOs existing spectrumOfcom says it is aiming for at least four credible national providers capable of delivering high-quality data services in the UK. One question regulators have to grapple with is whether or not it is socio-economically effective to hobble operators by forcing them to roll out networks into rural areas, says Norman at Analysys. It might be that the cost of rural rollout is passed on to the customer, which would have a negative socio-economic effect. Another unknown is how much of a positive socio-economic effect there is from rural broadband connectivity.

spectrum they can acquire. it is a worrying prospect for goldenits at A1, which holds 2x17 Mhz of 900-Mhz spectrum. Austria plans to auction digital dividend spectrum in the first quarter of 2012, and goldenits strongly opposes any links being made between 900 Mhz and 800 Mhz. we serve more than five million subscribers on our network, so we need the capacity based on existing frequencies to provide good quality services with national coverage including 2g, he says. 800 Mhz is new spectrum and lte is a new business. everyone should have the same right to apply for 800-Mhz frequencies. the stakes are high for A1 and other operators looking to develop their lte business models. goldenits suggests that if the operator does not acquire as much 800-Mhz spectrum as it needs to provide a high-performing and nationwide mobile broadband network, it may be necessary to pool spectrum resources through network-sharing. in such an event, A1s lte strategy to differentiate on network performance could be compromised. certainly, operators appear to be finding it hard to differentiate on tariffs
September 2011 www.totaltele.com

alone. lte provides operators with the opportunity to experiment with new and innovative pricing models, which allows them to find the best way of deriving revenues from the premium service. however, most operators have not grasped this opportunity, says nicole Mccormick, ovum senior analyst, in a new report LTE Tariff Comparison: Europe, Asia-Pacific and the US. the report also found that charging high premiums for lte is unsustainable in the long term due to competitive pressures in the industry. operators will need to be careful not to alienate high-end customers that have paid a premium for a fast, high-quality service by reducing lte tariffs too quickly or drastically, adds Mccormick. As well as 800-Mhz caps potentially weakening the lte business case, 900 Mhz-owning Mnos argue that lumping together 900-Mhz and 800-Mhz spectrum as sub-1ghz spectrum is a flawed notion. for one thing, 2g services will have to be maintained for some time at 900 Mhz, so that spectrum will not be immediately available for lte. neither is 900-Mhz spectrum necessarily split into contiguous 5-Mhz blocks, the minimum

that lte services require, they argue. there have been similar ructions in the Uk. nick blades, head of regulatory affairs at o2 Uk, argues that ofcoms conclusions about the true worth of 900-Mhz spectrum for the delivery of lte services has led to an unfair set of proposals for auctions set for next year. ofcom is treating 800 Mhz and 900 Mhz the same, with each bidder required to have a minimum amount of sub-1ghz spectrum to provide high-quality data services. According to ofcom, we and Vodafone Uk already pre-qualify as having enough spectrum holdings to provide a highspeed lte service, says blades. that means were not guaranteed any 800-Mhz spectrum, whereas 3Uk and everything everywhere would be if they placed reserve bids on each of the spectrum floors outlined by ofcom. o2 and Vodafone Uk each have 2x17.4 Mhz of 900-Mhz spectrum, which under ofcoms sub-1ghz cap of 2x27.5 Mhz means they would be restricted to acquiring 2x10 Mhz of 800-Mhz spectrum. everything everywhere and 3Uk, which dont have any 900-Mhz assets, would be able to bid for much more. ofcom says that if you have got 2x15 Mhz of 900-Mhz [spectrum] you can a run a high-speed lte service, says blades. the one rather large flaw in that argument is that lte 900 Mhz is only standardised for 10-Mhz carriers because there are so few 900-Mhz operators that have more than that. there isnt an ecosystem to support a high-speed service at 900 Mhz using 2x15 Mhz and there wont be. we cant understand why ofcom hasnt picked up on that important fact. by contrast, lte 800 Mhz is standardised for larger carriers2x15 Mhz and 2x20 Mhzwhich enable higher speeds than 2x10 Mhz. Moreover, o2 maintains that it needs 900 Mhz to support its 2g and 3g customers. we are not yet in a position to give a view on the relative merits of the different arguments, says graham louth, ofcoms spectrum policy director. the caps and conditions that nrAs impose on auctioned spectrum, as well as their judgement on the future use of
13

nETWoRK STRaTEgIES

900-Mhz and 1800-Mhz spectrum, will all have a bearing on how Mnos value 800-Mhz and 2.6-ghz spectrum. in finland and the netherlands 2.6-ghz prices were extremely low, but that wont necessarily be repeated elsewhere as a limited number of bidders and high availability of 1800 Mhz for lte [in finland] and tight spectrum caps [in the netherlands] were big factors in those auctions, says iain Morris, technology editor at the economist intelligence Unit. but prices can increase drastically when demand exceeds supply. in hong kongs 850-Mhz and 900-Mhz spectrum auctions earlier this year the prices per megahertz per pop paid by smartone and hutchison were more than six times greater than the sums paid by hong kongs operators in the 2.6-ghz auction [in January 2009], says Morris. if rapid growth in mobile data traffic continues, and networks become congested, it may well start to drive spectrum prices up, even if regulators do impose some onerous bidding conditions. in ireland comreg intends to auction off 28 blocks of spectrum, each consisting of 25 Mhz of spectrum, in the 800-, 900- and 1800-Mhz bands. it plans to have a cap to ensure that no company can win more than ten blocks of spectrum. in dotecons benchmarking study the consultancy concluded that a 2x5-Mhz block of sub-1ghz spectrum was worth between 18 million and 26 million. A reserve price tag of 26 million would work out at 0.58/Mhz/Pop, close to the 0.7/Mhz/Pop finally paid for by operators in germany, which has a much stronger economy than ireland. setting high reserve prices would be a dangerous game for comreg to play, warns stefan Zehle, ceo of coleago consulting. Prices paid elsewhere are not an indication of how operators value the spectrum in ireland, he says. if the regulator sets high reserve prices, there may in effect not be much of an auction as the regulator is setting the price for spectrumthere are ample studies that show that high prices for spectrum are counterproductive in terms of overall economic gain. ireland is running that risk. n
14

Price per megahertz per pop (US$), selected auctions

0.0 Germany 800 mHz (may 2010) Sweden 800 mHz (mar 2011) Hong Kong 2.6 GHz (Jan 2009) Sweden 2.6 GHz (may 2008) Denmark 2.6 GHz (may 2010) Norway 2.6 GHz (Nov 2007) Austria 2.6 GHz (Sep 2010) Germany 2.6 GHz (may 2010) Estonia 2.6 GHz (Dec 2010) Finland 2.6 GHz (Nov 2009) Netherlands 2.6 GHz (Apr 2010)
Source: Economist Intelligence Unit

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

If rapid growth in mobile data traffic continues it may well start to drive spectrum prices up
EU27 implementation deadlines and auction timetable
digital switchover deadline Austria belgium bulgaria Cyprus Czech republic Denmark Estonia Germany Greece Finland France Hungary Ireland Italy Latvia Lithuania Luxembourg malta Netherlands Poland Portugal romania Spain Slovakia Slovenia Sweden United Kingdom Q3 2011 Q1 2010 Q1 2015 2011 Q4 2011 Q4 2009 Q3 2010 Q4 2008 2013 Q3 2007 Q3 2011 Q4 2014 Q4 2012 Q4 2011 Q2 2010 Q4 2012 Q2 2006 Q2 2011 2012 Q3 2013 Q2 2012 2013 2014 Q4 2010 Q4 2010 Q4 2007 Q2 2012 digital dividend auction Q1 2012 2012-13 Q2 2010 2012 Q2 2010 Q3 2011 Q1 2012 2012-13 2012-13 2012-13 Q3 2011 2011 2012 frequency (Mhz) 900 1800 900/1800 900/1800 900/1800 900/1800 900 900 900/1800 1800 900 900/1800 900 900/1800 900/1800 900 900/1800 900/1800 900/1800 900/1800 900/1800 900/1800 900/1800 900 900/1800 900/1800 Spectrum re-farming Timeframe Q4 2010 Q2 2011 Q4 2010 2012-13 Q2 2011 Q1 2014 Q4 2009 2013-14 Q4 2009 2010 Q3 2011 2013 Q4 2009 2011 2011 Q3 2010 Q3 2010 Q1 2010 Q1 2010 Q4 2011 2010 Q2 2010 Q1 2010 IMT extension auction Q3 2010 2012 2012-13 Q2 2010 Q4 2010 Q2 2010 Q4 2011 2013 Q2 2010 Q4 2011 2011 Q2 2008 2013

Source: Wireless Intelligence (June 2011)

www.totaltele.com September 2011

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ConTEnT STRaTEgIES

ToP SLICING
perators traditionally have viewed over-the-top (ott) content players as adversaries that hogged network and stole customers from their own paid-for services. but now we are starting to see an evolution in that relationship as ott companies and service providers look to bridge the gap between their two business models: huge audiences but limited revenues on the one hand; and ArPU-uplifting network subscriptions but threatening commoditisation on the other. two years ago most telcos delivering video were perceiving ott as a threat, but there has been a huge mindshift. now it is viewed as an added feature to the service offering, says steve Mccaffery, general manager and VP of home business, eMeA, at Motorola. he says the bbc iPlayerwhich in July finally made its debut as an international, paid-for productis the third most-watched channel on service provider Virgin Medias network in the Uk, for example. there is no doubt that ott

OVER-THE-TOP CONTENT

Operators are starting to embrace over-the-top content as a way to expand services and reach out to new audiences, developing new business models. By Ingrid lunden

servicesdefined as content and services delivered over networks not owned by content/services companies themselves still are encroaching on the iPtV offerings telcos are trying to grow to offset other declining areas of their business. Analysts at informa telecoms and Media forecast that by 2015 some 380 million people worldwide will be consuming ott contentmore than double the 163 million iPtV subscribers by that timewith growth driven by providers such as streaming service netflix (see pie chart) and the bbcs iPlayer. ott content will be accessed via connected tVs, games consoles and set-top boxes, as well as through Pcs, tablets and smartphones, says informa. ArPU for ott service providers currently is low compared to cable and iPtV customers. Ad little, for example, estimates that ArPU for netflix customers is around Us$12 per month while iMs research says ArPU for comcast video customers is about Us$133.yet the opportunity is growing: Us online video service

Telcos now view over-the-top content as an added feature to the service offering
25,000 20,000 15,000 10,000 5,000 0 Q12007 Q22007 Q32007 Q42007 Q12008 Q22008 Q32008 Q42008 Q12009 Q22009 Q32009 Q42009 Q12010 Q22010 Q32010 Q42010 Subscribers Net additions 3,500 3,000 2,500 2,000 1,500 1,000 500 0 -500 180 160 140 120 100 80 60 40 20 Jan 09 mar 09 may 09 Jul 09

hulu has forecast revenues of $500 million this year, having launched in 2008. telcos are also starting to accept that in order to target users who increasingly are watching content on different screens, they need to partner with those providers that have carved out new audiences. we see that the tV is no longer the only outlet. its becoming a more open ecosystem, says Paul-francois fournier, executive director, technocentre, at france telecom. the operator recently launched a new tV service for tablets currently only available on the iPadand has invested in frances most popular online video company, dailymotion. france telecom, which has its own branded tV content business, also has been positioning itself as an ott player of sorts. it has signed deals with lg and samsung to preload its orange portal on their connected tVs, including content from dailyMotion as well as Vod services and other orange tV content. the idea is to use it to drive new users to the service, as well as make it easier for existing customers to get extra content. the portal is available to everyone, but when you are an orange customer you get access to more servicesfor

Netix subscribers in thousands (left) and BBC iPlayer monthly requests in millions (right)
n Online, radio n Online, TV n Virgin Media TV

Sep 09

Nov 09

Jan 10

mar 10

may 10

Jul 10

Sep 10

Nov 10

Source: Arthur D Little / Exane BNP Paribas estimates

16

www.totaltele.com September 2011

Jan 11

ConTEnT STRaTEgIES

Peak Internet downstream traffic

Top applications by downstream bytes share, North America, xed access, peak period, March 2011
Hulu 1% SSL 2% Facebook 2% RTMP 3% iTunes 3% Flash video 5%

European Pay-TV penetration, primary and secondary services, by platform

100% Penetration of households (%) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Primary 2011 Primary 2016 Secondary 2011 Secondary 2016
Source: Analysys mason

n Analogue cable n Digital cable n IPTV n Pay DTT n Satellite n Over-the-top services

Other 15% Netix 30%

BitTorrent 10% YouTube 11%

HTTP 18%

Source: Sandvine

example, Vod billed directly to your bill, or catch-up tV, says fournier. in italy iPtV service provider fastweb in May launched a tV and video ott service called chili, having signed content agreements with companies including warner and Paramount. the service can

be accessed from any device connected to the internet including smartphones, tablets and tVs from lg and samsung. now operators are exploring ways to increase ArPU from such services in conjunction with their iPtV platforms. Mccaffery at Motorola says his company

has built a new ott service for turk telekom, which runs as a web tV offering. it went to a million subscribers in six months. now the plan is to put that on top of its iPtV offering, to pull through audience onto the higher-ArPU service. in the Us, comcast is also extending

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ConTEnT STRaTEgIES

Total IPTV and OTT bandwidth demand

250,000 france China US South Korea Japan germany UK Canada

Set-top box (STB) unit shipment share

100% Hybrid (OTT) STbs 75% IP STbs

200,000

mbps

150,000 50% 100,000 25% Cable STbs 0% Satellite STbs

50,000

0 2010

2011

2012

2013

2014

2015

2011

2015
Source: Infonetics research

Source: ImS research (July 2011)

the synergy between operator and ott player. the cable operator, which last year bought tV broadcaster and content producer nbc Universal, has launched its own Xfinity app to offer selected content on tablets and smartphones. now it is aiming to add some 10,000 hours of

new content to the accessible archive, courtesy of its nbc purchase, working in partnership with vendors elemental and thePlatform. comcast is in part reacting to competition from netflix and huluthe joint venture from Abc, fox and nbc offers

tV content as well as films on an ott basisas these services increasingly move to more platforms. Part of comcasts regulatory agreement to buy nbc Universal included the provision that it has no say in the operations of hulu, although it still owns a share. hulu last

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By the numbers: the value and impact of over-the-top content

IMS Research forecasts that paid-for OTT subscription services will generate a cumulative US$32 billion in revenues worldwide over the next five years, and will account for the majority of revenues when compared to pay-per-view video services. OTT service revenues will reach US$16.4 billion in 2016, it estimates in its new report Over-the-Top VideoService Delivery & Business Models (2011). Households viewing just free videos accounted for 77% share of the total OTT market at the end of 2010, but that will decline to 69% by the end of 2016. Internet-based OTT service providersbroadcasters offering content online, DVD rental companies that have expanded into streaming services, and retailers that offer online videowill continue to generate the largest proportion of OTT service revenues, although their share is forecast to decline from 90% of worldwide OTT video revenues in 2010 to 69% in 2016. ImS says the North American VOD market generated $1.98 billion in revenues in 2010, while the European VOD market totalled $1.11 billion. The two regions combined comprise 46.1 million pay-TV subscriber homes that are using VOD services. Another new report, from Analysys Mason, says while OTT services will not displace traditional pay-TV servicescable, IPTV, pay-DTT or satelliteas the main provider of video services to primary TV sets in Europe, there will be much stronger growth for OTT services as a complementary, or secondary service, mostly on additional TV sets. It forecasts 14.6 million households in Europe will be using over-the-top services as a secondary TV service by 2016. The report, Pay TV in Europe: forecasts and analysis 20112016, says only 2.58 million households will be using an OTT service as a primary service for their main TV set in Europe in 2016, representing 1.4% of the 185.2 million pay-TV households. Today, downstream traffic from Netflix accounts for some 30% of all peak Internet traffic in the US, according to network traffic solutions company Sandvine (see pie chart p.17). This month Netflix is expanding into 43 countries in Latin America and the Caribbean, and plans to launch in Europe starting in Spain next year. The company now claims over 24 million subscribers in the US making it the biggest pay-TV/video company surpassing Comcast. SNL Kagan analysts have estimated how much over-the-top substitution will erode multichannel subscriptions in the US, with 4.5 million households predicted to opt for Internet video instead of subscribing to a multichannel video package by the end of 2011. Strategy Analytics forecasts worldwide connnected TV device revenues will reach US$95 billion by 2015. It says connected TVs and other Internet-ready devicessuch as set-top boxes and DVrswill reach 2 billion units worldwide this year. And In-Stat says worldwide streaming media playeralso known as OTT set-top boxesunit shipments in 2011 will reach just over 3.6 million. Analysts at Gartner forecast that consumers worldwide will spend $2.1 trillion on all digital content, devices and services this year, rising to $2.8 trillion by 2015. OTT content will account for 10%, or $200 billion, of that $2.1 trillion total: Purchased, rented, streamed or downloaded video content, as well as pay-per-view and video-on-demand (VoD), and licensing fees from pay-TV services account for $100 billion; while PC and gaming software, digital music, digital books and mobile apps make up the other $100 billion. Gartner says that some 62%, or $1.2 trillion, will be spent by consumers on subscription-based services, which include fixed voice, mobile voice and data, broadband and pay-TV subscriptions. The remaining category, devices, accounts for 28% of consumer spend, or $600 billion.

month announced it will expand outside the Us, initially in Japan, and according to reports during the summer has been in talks with companies interested in purchasing the venture including google, yahoo, Amazon, Microsoft and broadcast satellite service provider dish network. All the while, operators are developing business models with the aim of tying together a mix of content and delivery media. dish network in April acquired dVd rental company blockbuster to add
September 2011 www.totaltele.com

to its 2007 purchase of sling Media which enables it to deliver online and mobile video to its subscribers. indeed, established ott services increasingly have started to appear on other platforms worldwide: the bbc iPlayer has expanded from a web-based service to pay-tV delivery including through bts iPtV offering Vision and Virgin Medias cable service. in some regions ott players are aiming to deliver broader offerings in

line with the services of iPtV and pay-tV players. in china, the video delivery specialist kit digital is working with the shenzhen Media group and 19 tV broadcasters and newspapers across the country on the china United television (cUtV) project. the companies say this will be a new media platform that will offer ott content on an iPtV-style basis to homes across the country. with just one click viewers can watch live tV programmes, video-on-demand or catch-up video on computers and mobile devices including Apple i-devices and Android handsets, claims kit digital in its promotional material. in return, video is not the only kind of content that telco service providers are eyeing up. in July 2010, orange invested in a minority stake in the music streaming service deezer which it plans to launch in the Uk this month; and in July this year, Virgin Media signed a deal with spotify to bundle that music streaming service with its triple-play subscriptions in the Uk. Although Virgin Media has not yet launched its service or pricing details, the operator says it hopes to deliver spotify at a discounted rate relative to current offerings. but some analysts believe service providers could be barking up the wrong tree. i think that operators should be investing in application-oriented ott plays, not content-oriented ott plays, says independent telecoms analyst dean bubley. i really dont know where oranges dailyMotion stake will take it, but i do know that it should have been an operator buying skype, not Microsoft. whats more, in future operators will face competition from other quarters including large retail companies. in April Uk retail giant tesco bought an 80% stake in internet tV service blinkbox, for single-digit millions. As well as being accessed through the internet, the service is available on Ps3 games consoles and in future on internet-ready tVs from companies including samsung and sony. iMs research forecasts that retailers will grow their share of the ott market, accounting for 13% of worldwide ott service revenues of Us$16.4 billion in 2016. n
19

PRIME nUMBERS

ConTaCTS

SMaRTPhonE SalES STIll RoCKETIng

Worldwide sales of mobile devices to end users totalled 428.7 million units in the second quarter, a 16.5% increase from the second quarter of 2010, says Gartner. Sales of smartphones were up 74% year-on-year and accounted for 25% of device sales, up from 17% in the second quarter of 2010. Nokia continued to lose market share but held onto its lead in the smartphone market, largely due to channel partners reducing the volume of Symbian-based smartphones in their inventories. The combined smartphone operating system share of iOS and Android doubled to nearly 62%, up from just over 31% in the second quarter of 2010. In a separate report Gartner forecasts there will be 5.6 billion mobile connections worldwide by the end of this year, up from 5 billion in 2010. MoBIlE dEvICE SalES (ThoUSandS of UnITS)
2Q11 2Q11 market 2Q10 2Q10 market share (%) share (%) nokia 97,869.3 22.8 111,473.7 30.3 Samsung 69,827.6 16.3 65,328.2 17.8 lg 24,420.8 5.7 29,366.7 8.0 apple 19,628,8 4.6 8,743.0 2.4 ZTE 13,070.2 3.0 6,730.6 1.8 Research In Motion 12,652.3 3.0 11,628.8 3.2 hTC 11,016.1 2.6 5,908.8 1.6 Motorola 10,221.4 2.4 9,109.4 2.5 huawei device 9,026.1 2.1 5,276.4 1.4 Sony Ericsson 7,266.5 1.7 11,008.5 3.0 others 153,662.1 35.8 103,412.6 28.1 global Total 428,661.2 100 367,986.7 100 vendor

1 billion

EdIToRIal

smartphones shipped annually by 2016, up from 302 million in 2010. (Juniper Research)

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WIMaX hITS 20 MIllIon

infonetics research says wiMAX subscribers passed 20 million worldwide at the end of the second quarter and are on track to exceed 25 million by the end of the year. the research company noted strong growth in the Us, the indian sub-continent and latin America. sales of wiMAX equipment worldwide reached $502.1 million in the first quarter, according to the wiMAX forum.

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CONTRIBUTING EDITORS Roy Rubenstein [email protected] Israel Ingrid lunden [email protected] London Joanne Taaffe [email protected] France Ken Wieland [email protected] London

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60 million

HEAD OFFICE, LONDON nick Carter Sales Director leonie holmes Sales manager

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media tablets to be shipped this year, up from 17.4 million in 2010. (IHS iSuppli)

UNITED STATES AND CANADA KCS International T +1 717 397 7100 F +1 717 397 7800 Karen C Smith-Kernc East [email protected] alan Kernc West & Canada [email protected] JAPAN hiroko Kujime Pacific Business +81-3-3661-6139

CaPEX REdUCTIonS

A new report from wireless intelligence shows that mobile operators reduced capital expenditure during the economic downturn in order to protect cash flows and maintain profits. the study forecasts operator capex will remain stable at 16% of total revenues in developed markets and 23% in developing markets in 2011-12, but shows that total global mobile capex peaked at Us$204 billion in 2008, accounting for 21% of total operator revenues, and fell to Us$197 billion (19% of revenues) in 2010. in developed mobile markets, operators reduced capex by 8% in 2008 and by 6% in 2009 but increased spend last year as they began investing in lte. between 2007 and 2008, operating expenditure as a percentage of revenues declined from 65% to 61%. As a result, ebitdA jumped from 35% to 39% of total revenues. opex has risen slightly to 62% over the past two years with ebitdA stabilising at 38% of revenues.
20

EnTERPRISE voICE EQUIPMEnT REvEnUES dEClInIng gloBally aS PoRTS RISE

TeleGeography says new data from partner Synergy Research Group shows that enterprise voice equipment vendor revenues declined 4% globally between Q2 2010 and Q2 2011, despite a 14% increase in port shipments. Revenues for the first half of this year declined 1% compared to the same period in 2010. Asia-Pacific was the only region that saw year-on-year growth in Q2, with enterprise voice revenues increasing 3%, while revenues in EMEA fell 9%. PBX/KTS (key telephone system) revenues experienced the greatest decline year-on-year, falling 9% from Q2 2010, while the voice gateway and IP telephony segments showed modest declines. In a separate report, Infonetics Research says revenues from global PBX/KTS phone systems alone declined 2.3% sequentially in 2Q11 to $2.02 billion, but rose 3.9% compared to the same quarter in 2010, continuing its path of slow and steady recovery on a year-over-year basis. EnTERPRISE voICE REvEnUES & PoRT ShIPMEnTS
3.0

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MaRKETIng

Tally Judge marketing manager Ruth Clark marketing Executive

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EvEnTS

Charles georgiou Project manager

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aleisha Bryant [email protected] Customer Services Executive +44 (0) 7608 7042 or subscribe free at: www.subscription.co.uk/totaltelecom mANAGEmENT Rob Chambers Publisher greg hitchen Chief Executive Officer

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ToTal TElECoM EvEnTS

Port shipments (millions)
World Communication awards www.worldcommsawards.com World vendor awards www.worldvendorawards.com Total Telecom World www.totaltele.com/world

revenues (US$ billions)

2.8 2.6 2.4 2.2 2.0

n revenue Port shipments

16 15 14 13 12 11

Total Telecom Plus is published by

Q310

Q109

Q309

Q409

Q210

Q410

Q110

Q111

Q209

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1.8

10

2011. All rights reserved. Terrapinn Holdings Ltd registered office: 4th Floor Welken House, 10-11 Charterhouse Square, London EC1M 6EH www.totaltele.com September 2011

Source: TeleGeography

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