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Seamless mobility

Seamless mobility. Stockholm Sept 15 th 2001. Infrastructure evolution – the machines behind seamless mobility WLAN and others attacking the Mobile Operators, scenarios for the Wireless Landscape Jonas Lind, Stockholm School of Economics. What is 4G mobile ? Technological drivers

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Seamless mobility

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  1. Seamless mobility Stockholm Sept 15th 2001 Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  2. Infrastructure evolution – the machines behind seamless mobilityWLAN and others attacking the Mobile Operators, scenarios for the Wireless Landscape Jonas Lind, Stockholm School of Economics Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  3. What is 4G mobile ? • Technological drivers • Base scenario 2002–2008, the failure of 3G • 2002-2008, telling the story Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  4. What is 4G mobile ? A number of possible definitions have been suggested: • Standard set by ITU in 2010 ? • WLANs + GPRS ? • Everything not 3G ? • Some new radio interface (e.g. UWB) ? • The next winning de facto standard ? • Seamless mobility ? telco & regulator focus datacom & tech focus 3G bashing focus tech focus market strategy focus user focus Pick your choice Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  5. We talk about 4G today because the future is open • The term 3G was coined at academic conferences around 1990. Then 3G meant everything beyond GSM • One (dropped) 3G vision was mobility by wireless, + personal phone-numbers, following the individual globally at closest fixed line • Later the ”1G”, ”2G”, ”3G” terminology was captured by equipment vendors in the mid 90s for selling UMTS to the market and regulators Anybody remember the hype around 4G and 5G programming languages in the 80s ? Will anybody talk about ”4G ” in 2010? I’m sceptical Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  6. An example: Ericsson roadmap to 4G Ericsson defines 4G very broadly as seamless mobility for the user + all possible new infrastructure technologies Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  7. What is 4G mobile ? • Technological drivers • Base scenario 2002–2008, the failure of 3G • 2002-2008, telling the story Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  8. Trade-off between bandwidth and geographical reach & mobility is a core feature in the industry Bandwidth • Mobility & Reach a function of: • handset size • battery time • usage in fast moving vehicles • geographical coverage Mobility & Reach In the Hot-spots Cities Suburbs, Country- Developing Entire office (airports, hotels, bus. distr.) central towns side countries planet Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  9. Primary technological drivers in the wireless industry are Moore's Law, batteries and spectral efficiency • Technological drivers: • Microprocessor performance increase (Moore's law) • Battery performance increase (a much slower exponential curve • than Moore's Law) (batteries are the big bottleneck) • Air interfaces with increasingly better spectral efficiency* • Better processor performance/power consumption ratio • Handset display power consumption efficiency • * Better processor performance makes new more computationally intensive air interfaces viable. Shannons Law puts an upper limit on spectral efficiency as we understand it today and we are gradually getting closer to this limit but innovations as smart antennas will push spectral efficiency further Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  10. These technological drivers sum to a continuous performance increase in wireless Performance Exponential growth (slower or faster) is the normal case and shows up in all technologies and industries logaritmic scale time Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  11. Better performance makes it possible to move upwards on the trade-off curve “bandwidth-mobility” Bandwidth t2 Technology moves the tradeoff line upwards t1 Mobility & Reach In the Hot-spots Cities Suburbs Country- Developing Entire office (airports, hotels, bus. distr.) central towns side countries planet Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  12. Larger investments in base-stations can also move the curve upwards • At fixed performance level, moving the trade-off curve upwards can also be achieved by: • Larger investments in physical infrastructure (more base-stations) • Higher transmitter power (causing higher radiation) Bandwidth $ $ Mobility & Reach In the Hot-spots Cities Suburbs Country- Developing Entire office (airports, hotels, bus. distr.) central towns side countries planet Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  13. Economics of Scale + the experience curve gives falling equipment prices price The global user base today in the 100s of millions New handsets and infrastructures will quickly move down the learning & volume curve and hence give low prices As electronic equipment becomes very cheap, maintainance, service and physical infrastructures as masts, buildings and cables will become the dominant part of costs Logaritmic diagram gives a straight line for product price fall 100 10 1 0.1 0.01 Accumulated production volume Illustrative figures only 0.01 0.1 1 10 100 1000 Prices fall by increased production volume, this is yet another network effect giving de facto winning technologies additional advantage Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  14. Standardisation is freezing performance at a certain technological level Performance new standard is fixed  Performance jumps when new standard is fixed first standard is fixed  Example:Cd-Rom Example: DVD time Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  15. A number of technologies (apart from 3G) will have impact on wireless development this decade. Market winners here will become part of a 4G architecture OFDM WLAN Micro-fuel cells Smart antennas BLAST (Bell Lab Layered Space-Time) DVB-T (digital terrestrial TV) Software radio all-IP Bluetooth Optical Wireless UWB (Ultra Wide Band) WAP Satellites Ad-hoc networks TD-SCDMA Turbo-code MC-CDMA Multi-Carrier CDMA MDMA Multi-dimensional multiple access LAS-CDMA Large Area Synchronized CDMA Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  16. What is 4G mobile ? • Technological drivers • Base scenario 2002–2008, the failure of 3G • infrastructure case • user and market case • business and financial case • disclaimer – 3G advantages • 2002-2008, telling the story Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  17. 3G GPRS gives better geographical coverage than 3G Mbit/sec • GPRS will reach the market • before 3G • 3G will offer better bandwidth • but coverage will be more • important for the consumers • 3G networks not even close to • offering the coverage of GPRS • for at least seven years • GPRS, a software upgrade on • the GSM networks will probably • always offer better global • coverage than 3G 100 10 1 0.1 0.01 Band- width 3G EDGE GPRS GPRS Reach GSM In the Hot-spots Cities Suburbs, Country- Developing Entire office (airports, hotels, bus. distr.) central towns side countries planet Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  18. 3G WLANs will always offer better bandwidth than 3G Mbit/sec • WLANs are already here with a • large installed base on many • company lap-tops • WLAN base stations costs from • € 300 • It is possible to cover hot-spots • and city centers at low cost for • WLAN Service Providers • WLAN equipment market already • at $1.8 bils 100 10 1 0.1 0.01 Band- width WLAN Wireless LAN EDGE GPRS GPRS Reach GSM In the Hot-spots Cities Suburbs, Country- Developing Entire office (airports, hotels, bus. distr.) central towns side countries planet Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  19. 3G only adds performance in a small part of the trade-off diagram if compared to GPRS together with WLANs Mbit/sec 100 10 1 0.1 0.01 Band- width WLAN 3G added performance Wireless LAN EDGE GPRS GPRS Reach GSM In the Hot-spots Cities Suburbs, Country- Developing Entire office (airports, hotels, bus. distr.) central towns side countries planet Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  20. 3G Emerging dark-horse technologies are further undermining segments of the 3G market Mbit/sec 100 10 1 0.1 0.01 Band- width DVB-T +GPRS/3G Optical wireless (free air laser) Airships WLAN Satellites + GPRS/3G Wireless LAN EDGE GPRS GPRS Reach GSM In the Hot-spots Cities Suburbs, Country- Developing Entire office (airports, hotels, bus. distr.) central towns side countries planet Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  21. …. emerging dark horse technologies: some might become components in a future 4G world Airships and other HAP (High Altitude Platforms) over large cities working as platforms for broadband wireless Companies: Sky Station, SkyTower, Angel Technologies, Platform Wireless International + EU project HeliNet For most of these technologies GPRS /3G can (must) be used as a back-channel for interactivity In Digital Terrestrial TV (DVB-T), one channel set aside for data transfer gives a capacity of 38 Mbit. Very good coverage in countries adopting DVB-T. Can be used in fast moving cars. Few masts give low scalability Optical wireless is using lasers in free air to solve the last mile problem, very low mobility. Almost infinite bandwidth Companies: Terrabeam, Quantumbeam, Lucent Wavestar OpticAir Satellite projects for offering broadband internet access globally. Very high latency and low mobility. Huge costs and high risks, unlikely they will ever fly Companies: Teledesic (and others?) Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  22. Rule-of-thumb – new infrastructure must offer at least 10 times better performance to replace old large installed base Performance new standard is fixed  • 3G performance jump not large enough to justify infrastructure replacement: • only 3–4 times better spectral efficiency than 2.5G • 3G bandwidth only 2–10 times better than 2.5G GPRS first standard is fixed  GSM 3G time Note: This rule-of-thumb comes from Andrew Groove at Intel in his book “Only The Paranoid Survive” and has not been properly verified Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  23. What is 4G mobile ? • Technological drivers • Base scenario 2002–2008, the failure of 3G • infrastructure case • user and market case • business and financial case • disclaimer – 3G advantages • 2002-2008, telling the story Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  24. User choice User case: on arrival, 3G will be hidden from European users in a 2G/3G offer Cell-phone is your life-line, do not gamble with it Users: Already GSM customers (phone number, voice mail, trusted Brand etc.) High-end users already using GPRS Will expect the 151 country global coverage of GSM and at least national GPRS coverage On arrival, 3G will only offer service in cities Pure 3G will be seen as a step down from GSM 3G will be hidden from the users in a branded GSM/GPRS/3G combination offer Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  25. To offer 2G/3G service, pure 3G operators MUST strike VMNO deals for network access with 2G operators - or die • Handsets will be GSM/GPRS/3G (Hutchison order to Motorola) • Incumbent operators will target existing user base with 2G2.5G3G migration offers • Pure 3G operators MUST strike VMNO deals with 2G operators to offer geographical coverage. 3G operators unable to secure VMNO deals for access to the 2G networks will be dead meat • Pure 3G operators have: • No user base • No trusted Brand • No complete network for at least six years • Dependent on unfavorable VMNO deals with incumbent GSM operators Will pure 3G greenfield operators survive ? Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  26. User habits: two separate markets “mobile on the move” and “semi-mobile Net access” • ”Mobile on the move” (GPRS/3G) • Applications: Voice, SMS/E-mail, stock quotes, movie tickets, weather, time-tables, driving directions, bank accounts, yellow pages, delayed flights etc. • High mobility need, works on low bandwidth • (i-Mode operates on 9.6 Kbit) • ”Semi-mobile Net access” (WLAN) • Lap-Top or PDA download of e-mail and files. Voice • probably not included • Sitting still, low mobility, high bandwidth need Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  27. History lesson: Swedish generation shifts in analogue mobile • Analogue NMT 450  analogue NMT 900 • NMT 450 had full national coverage when NMT 900 arrived. NMT 900 was targeted at yuppies with urban coverage, pocket sized handsets and lower tariffs • Coverage was important, urban NMT 450 users resisted giving up a rural coverage they actually seldom used • NMT 900 had to invest in national coverage before take-off • Analogue NMT 900  Digital GSM • Coverage and quality was important. With NMT only operational in the Nordics, Pan-European was the selling point, GSM did not take off until a significant Swedish national coverage was reached Coverage is important for mobile services Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  28. What is 4G mobile ? • Technological drivers • Base scenario 2002–2008, the failure of 3G • infrastructure case • user and market case • business and financial case • disclaimer – 3G advantages • 2002-2008, telling the story Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  29. The “3G Business Case” – profitable only in best case scenarios • Financial analysis shows the 3G Business • case ROI very dependent on: • Very high 3G penetration (e.g. diagram) • Growth in ARPU • Operator market share • Population density • Being an incumbent If any of these 2010-2015 assumptions fails to deliver, 3G will be a loss investment 3G penetration forecast (Sweden) 2G • Three financial analysis of the 3G Business Case shows this: • Northstream Consultancy (two European model countries) • Eur. Inv. Bank, Gruber & Hoenicke (3G in Europe)* • Chalmers University of Technology (Swedish market case) 3G Source: BCG, Arthur Andersen, Chalmers (forthcoming) * “Third Generation Mobile: what are the challenges ahead” Communication & Strategies, 3rd Q 2000 Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  30. The € 260 billion 3G investment in Europe is extreme in size – and business risk. GPRS upgrades cost 5 % of 3G Physical 3G investments €140 bill in Europe + 120 billion Euros paid for 3G licences + handset subsidies and marketing costs A very large and high risk investment GPRS upgrade of 2G networks cost 5% of 3G investment. An alternative with less capacity than 3G but much lower business risk 3G network investment (cost/operator) 3 billion Euro GPRS upgrading of a GSM network (cost/operator) 0.1 billion Euro (source: Merrill Lynch-00, model European country) Upgrade Cost per Subscriber (US$) W-CDMA 300 GPRS 10 (source: Morgan Stanley Sep-00) Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  31. Extreme debts in the telco industry already threatens financial stability – who will finance another € 140 billion needed to build 3G networks ? High debt is a burden for the future by high interest payments The US Real Estate debt bubble in the 80s partly triggered the early 90s recession. US telecom debt shows a similar buildup in the 90s. And telecom debts in Europe are much larger (Merrill Lynch estimates global telco debt at $650 billions) Future 3G investments € 140 bilions US Telecom Debt 1 US Real Estate loans 2 Europe ( € 238 bils) US 90s telecom debt US 80s real estate loans Europe telecom debt 2000 Source: Barrons, US figures, FT Connectis, European figure (No time series data available for Europe) Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  32. Telco mindset: large long-term planned technology upgrades. If 3G is stopped, it will be the financial markets swinging the axe • Why telcos will continue with the 3G project: • Fits the telco mindset • Too much impetus in 3G • My prediction: • Telcos will invest in 3G as long as they have financial independence. In spite of a shaky business case • If (and when) telcos lose financial independce, the financial markets will eventually stop 3G Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  33. What is 4G mobile ? Technological drivers Base scenario 2002–2008, the failure of 3G infrastructure case user and market case business and financial case disclaimer – 3G advantages 2002-2008, telling the story Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  34. Memento: 3G not all bad – 3G has some advantages and WLANs some problems WLAN problems: Very small 2.4 GHz band, if more than 4-5 WLANs on the same place, interference will cause reduced bandwidth 2.4 GHz restricted use in France and UK Hiperlan2 on 5 GHz can use a 450 MHz wide band, but dual-band WLAN cards are needed High battery consumption Limited coverage, not even in cities will WLANs offer a complete coverage High operational costs installing and maintaining 1000s of base stations for WLAN SP (though each base station is very cheap) Health concerns about electrosmog can trigger legal restrictions on WLAN Pro 3G: Governments released chunks of new spectrum Better scalability in a market with very high data traffic, better than GPRS Better spectral efficiency than 2G – in particular for data Higher maximum data rate than GPRS with practial upper limit of 20–50 Kbit Potential to become a global universal infrastructure If a dramatic increase in mobile data traffic doubles total ARPU, 3G will be very profitable - + + - + - + - - + - + - Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  35. What is 4G mobile ? Technological drivers Base scenario 2002–2008, the failure of 3G 2002-2008, telling the story Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  36. One possible future - storyline of European Wireless marketplace GPRS unstable, no roaming 3G unstable Half of all 3G net- works cancelled 2002 2003 2004 2005 Financial crash: States & EU saves telcos: licence fees turned into stock WLAN spreading like wildfire. 1000s of local operators Most mobile apps. lean on bandwidth Seucrity holes in WLAN 2.4 GHz crowded by WLANs, QoS problems Short battery life in data-enabled handsets GPRS stable (with roaming) 3G stable Handhelds with WLAN WLAN roaming, Clearinghouses new business model GPRS spreading like wildfire Hiperlan 2, (5 GHz WLAN) less crowded + better security 3G coverage 25% of pop. Higher operational costs than expected for WLAN SP Mobile operators integrate WLAN in customer offer (billing etc.) Note: This time-line is (of course) just speculation. The choice of years for different events was mostly governed by lay-out needs on the two slides Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  37. … storyline continued WLAN with dual band 2.4 & 5 GHz Cell-phone shrinks to voice controlled earphone Price pressure on 3G and GPRS 2006 2007 2008 Seamless Mobility (Integrated by mobile operators) Only one 3G network/country Wireless VoIP: price pressure on mobile voice Skyrocketing data traffic, congestion in GPRS networks UWB New battery technology: micro-fuel cells 3G coverage 50% of pop. New radio Interface: radically better than OFDM Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

  38. Sum-up: the wireless landscape in 2008 • Several competing infrastructures: GPRS, WLANs, 3G + dark-horses • Both large WLAN operators and 1000s of local hot-spot operators. WLAN clearinghouses offer global roaming access. Built-in WLANs in all Laps and hand-helds • Mobile operators damaged by debts and extreme price pressure but still dominant in handling end user relation (billing, roaming, seamless mobility etc.) • Emerging new technologies with potential for breakthrough after 2015 • A continuous suite of terminals from voice-only ear-phones, wearables, handsets, • handhelds, goggles with screens, lap-tops to wireless cars etc. The Center for Information and Communication Research (CIC) at the Stockholm School of Economics pursues market and business focused research on the use of Communication & Information Technology. Web site: www.hhs.se/cic Jonas Lind CIC - Center for Information and Communications Research Stockholm School of Economics, Sweden jonas.lind@hhs.se Jonas Lind, Center for Information and Communications Research, Stockholm School of Economics, Sep. 2001

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