Published on March 6, 2014
Aupa, Barça! Key Takeaways from the 2014 Mobile World Congress Ronald Gruia Director - Emerging Telecoms March 5th 2014 © 2014 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
Today’s Presenter Ronald Gruia, Director - Emerging Telecoms Frost & Sullivan Functional / Industry Expertise: •17 years of telecom industry expertise accumulated at Frost & Sullivan (13 years) and Nortel Networks (4 years). Particular expertise in: -NGN Transition: LTE (4G), IP Multimedia (IMS), Software Defined Networking (SDN), services and standards -Telco 2.0: business models, next-gen VAS (Value Added Services), RCS, service brokering -The Enterprise of the Future: IP Telephony, WLANs, UC, Speech, FMC, and VoIP apps • Strong experience base covering telecom and power systems industry: • U.S. Patent holder: principal inventor of an algorithm optimizing a multimedia application • 100+ speaking engagements at telecom conferences and industry shows • Featured columnist at TheStreet.com, IMS/NGN Magazine, Processor Magazine and TMC.net • Quoted on Business Week, Financial Times, Forbes, Wired, API, Reuters, MarketWatch, etc. • Appearances on CNBC (US), Business News Network (BNN), RoB TV and TechTV (Canada), Decision TV (Brazil), TeleSemana (Latin America), and Telecom TV (UK, live from Spain) 2
Aupa, Barça! Key Takeaways from the 2014 Mobile World Congress 3
Aupa, Barça! – MWC2014 Roundup Agenda • MWC 2014: Upbeat Mood Continues… • It’s an LTE World • Ongoing LTE Evolution (VoLTE, LTE-A) • “Small Cells” Emerging as a Hot New Area • The Advent of 5G • SDN & NFV: Key Show Themes • The Rise of Internet of Things (IoT) • Handset Launches • Where Can One Find Innovation? • Conclusions 4
MWC 2014: Upbeat Mood Continues… • • • • MWC’14 continued the record breaking pace of the show, with over 85,000 people (up from 72k in ’13) representing 1,800 companies (up from 1,700 in ‘13) attending the event at the newer Fira Gran Via. This year’s edition showcased NFC (Near Field Communications) capabilities, offering a range of services for attendees owning compatible devices, such as venue access with the NFC badge, catering and networking. 10,000 people used the NFC badge and about 51,000 NFC transactions were carried out at the show. Expanding reach: MWC is now the venue where the entire mobile ecosystem comes together, with an increasing number of industries participating at the event (e.g. Ford launched a car at MWC vs. Geneva Motor Show as it regards the car to be a mobile device). Oral-B Bluetooth connected toothbrush is another IoT (Internet of Things) example, advising the user on how to be more effective. The prevalent mood was an optimistic one, albeit still half-throttle. 5
It’s an LTE World LTE is the fastest developing mobile system technology ever 400 Commercially Launched LTE Networks (Cumulative Total) 350 300 263 350 Forecast YE 2014 274 As of Feb 17,2014 250 200 148 150 100 46 50 0 16 2 2009 2010 2011 2012 2013 2014 Source: GSA, Feb. 2014 • 274 LTE networks commercially launched in 101 countries (Feb.’14) • 53 pre-commitment trials in 9 more countries • 471 operator commitments in 143 countries (as of Feb. 2014) 6
Ongoing LTE Evolution: VoLTE • • • • • North American telcos seem more poised to roll VoLTE (and possibly RCS) services sooner versus their European counterparts this calendar year. At MWC, Mavenir discussed a recent carrier survey in which operator commitment for VoLTE was around the 90% range, while for RCS it hovered in the 50% range. Verizon (IP-based voice networking use cases) and AT&T (RCS services) are prospects. Carrier SBC vendors such as Oracle (Acme Packet), Genband, Metaswitch, Sonus and Mavenir will also benefit from increased VoLTE rollouts. So will NEVs offering RCS/IMS: ALU, Ericsson, Huawei, and NSN, among others. BroadSoft is another potential beneficiary as attested by its recent Sprint VoLTE win (est. deal size: $12.8m based on ~$4/VoLTE sub). Key differentiators: technology, price/performance factor, IMS control plane setup, RCS solutions. 7
Ongoing LTE Evolution: LTE-A What to expect with LTE-A • Faster download speeds: average throughput should be 2x-3x that of vanilla LTE, so LTE-A could have average download speeds of ~14-21 Mbps (compared to ~7 Mbps for LTE) • Lower latency (delay): LTE-A will enhance the QoE via lower latency. We have seen big drops from 2G/3G (~70 ms) to LTE (~10-15 ms) already, but LTE-A promises latencies of ~5-7 ms (about ½ of that of LTE) • Spectrum-friendly technology: spectrum efficiency is the key to LTE-A’s success. LTE-A will allow operators to use different spectrum bands on their network service (carrier aggregation, so previously segregated spectrum is grouped together into broader bands – up to 5 carriers). • Supports spectrum diversity: LTE A will operate in the LTE operating bands as well as new, possible ITU IMT bands (450MHz-470MHz, 2.3GHz2.4GHz, 3.4GHz–4.2GHz, 4.4-4.99GHz) • Leverages MIMO: multiple data streams are setup, boosting throughput • LTE-A, a More Intelligent Network: adaptive to changing environments 8
Ongoing LTE Evolution: LTE-A (Cont’d) Sources: Qualcomm, Ericsson • • • Some early LTE-A adopters include: SKT, KT and LGU+ (South Korea), AT&T, Verizon and T-Mobile USA (US), MegaFon (Russia, via its Yota acquisition), EE (UK), and NTT DoCoMo (Japan). Net4Mobility (Sweden) and SingTel (Singapore) are good prospects for 1H 2014. Silicon vendors such as Broadcom, MediaTek, Nvidia, Qualcomm and Spreadtrum are all supporting LTE-A with chipsets released over the past two years. 9
“Small Cells” Emerging as a Hot New Area • • • NEVs suggested a more rational LTE RAN pricing environment, and also the need for densification of existing networks. Vendors such as Ericsson (Vodafone incumbent) announced a wide-reaching contract for Vodafone’s Project Spring by bundling RAN and professional services (we believe other major Euro carriers will follow VOD with their own capacity improvement projects). The initial focus within LTE capacity development still is mostly tilted towards the densification of macro cells, rather than small cells. Having said that we think small cells will play a more meaningful role starting in the 2H14 and in 2015. Ericsson announced a few trials for its Radio Dot small cell solution with operators such as Vodafone (UK), Softbank (Japan), Telstra (Australia), MTN (South Africa), Swisscom (Switzerland), and SingTel (Singapore) choosing the product to enhance indoor coverage and capacity expansion for their 3G/4G networks. 10
“Small Cells” Emerging as a Hot New Area (Cont’d) • • • Focusing on the indoor small cell segment in particular, we spoke to players such as Spider Cloud at MWC. As much as 70% of wireless traffic occurs indoors and the higher frequency bands in which LTE is being deployed in certain geographies (e.g. 2.5-2.6 GHz band in Russia) have poor indoor propagation characteristics. Spider Cloud’s secret sauce lies in a “self-organizing network” feature that dynamically lights up an enterprise with 4G coverage without interfering with the macro cell. The vendor won a tender for 80 buildings in the London area with Vodafone and believes there will be a $10B shift in the total wireless RAN TAM from macro cells towards indoor small cells in the next 4-5 years. Other players in this space include Ericsson (with its novel DOT solution), Huawei (LampSite solution deployed in operators such as Telenor and Vodafone UK), Cisco and ALU (which plans an enterprise solution via the Qualcomm JV with its own controller). 11
The Advent of 5G: Early R&D Initiatives • • • • While LTE still has to be meaningfully deployed in many markets, 5G has already started being approached at this year’s MWC. At the show, the EU alongside NEVs such as ALU, Ericsson, Huawei and NSN, operators such as Orange and academic institutions such as the University of Surrey (UK) have kicked off the 5G Infrastructure PPP (Public Private Partnership). Carriers such as NTT DoCoMo and SKTel are already working on experimental setups and simulations to enhance 5G performance. Huawei, which began investing in 5G in 2009, plans to spend another $600-million (U.S.) on its global 5G research by 2018. The company has spent $80m on R&D in Ottawa since 2010, and has slated the lab in that city to conduct some of the 5G research. Other vendors such as Ericsson and Samsung are also already conducting 5G research. Ericsson is making some key contributions to METIS (EU 5G initiative). 12
NTT DoCoMo’s 5G Future Radio Access (FRA) FRA technical concept demonstrated at MWC consists of 4 key pillars: 1. Combined usage of lower and higher frequency bands: higher frequency bands become useful and beneficial. Existing cellular bands can be combined with higher frequency bands; this can provide high throughput using wider bandwidth and big offloading gain from existing cellular bands. 2. Phantom cell: split of C-plane and U-plane between macro and small cells in different bands; this is a newer concept that will be used in LTE-B and was pioneered by NTT DoCoMo 3. Massive MIMO - beamforming (BF) gain: massive MIMO in higher frequency bands offers compensation of increased path loss and improved spectrum efficiency (i.e., super dense small cells in higher frequencies). 4. Non-Orthogonal Multiple Access (NOMA): is a more efficient multiple access scheme. NOMA uses path loss difference for efficient user multiplexing and leverages the progress in device processing capabilities for interference cancellation (Moore’s Law) and exploits path loss difference among users. 13
NTT DoCoMo’s 5G Future Radio Access (FRA) – Cont’d Phantom cell and NOMA benefits Source: NTT DoCoMo 14
NTT DoCoMo’s FRA – Early Simulation Results Source: NTT DoCoMo Source: NTT DoCoMo A real-time simulation showed that: • 400 MHz BW @ 10 GHz -> 600 MHz BW @ 20 GHz with massive MIMO 15
SDN & NFV: Key Show Themes SDN Architecture Northbound APIs (no fully open protocol yet being standardized on) • Source: ONF Southbound API (OpenFlow, CLI, NetConf/YANG, RESTful, XMPP, XML- RPC) The control data plane interface (i.e. the “southbound API” provides the interworking between the controller and the physical or virtual network devices. The “northbound” set of APIs provide programming interfaces between application and controllers, w/ 2 flavors: one at the controller level (on top of which apps such as virtual load balancers or firewalls can be run), and one at the network virtualization level for applications like cloud orchestration. 16
SDN & NFV: Key Show Themes (Cont’d) Source: NEC 17
SDN & NFV: Key Show Themes (Cont’d) Open Innovation 3rd party apps ecosystem creation Control plane separation fosters quicker innovation Software Defined Networking (SDN) Source: Frost & Sullivan Network Function Virtualization (NFV) • • • • Lower CAPEX, OPEX reduction and enhanced agility SDN has two other pillars to stand on: openness and NFV NFV and SDN: very complementary, mutually beneficial but not inter-dependent; SDN can improve NFV performance (simplify compatibility, ease operations), NFV enhances SDN via virtualization, IT orchestration and management techniques ONF (Open Networking Foundation) handles SDN, ETSI/NFV Forum manage NFV IT value chain now has more experience under its belt with the “ITfication” of the telco industry and realizes that over-provisioned networks do not yield a winning model OpenFlow spec openness; standards driven by operators and vendors 18
SDN & NFV: Key Show Themes (Cont’d) • • • MWC’14 ushered in a change in vendor focus: away from the typical capacity and throughput increase on a centralized network (old modus operandi) towards a distributed architecture leading to a carrier-grade cloud delivery (i.e. one with low latency, redundancy). At the show, Cisco was optimistic about function virtualization opportunities, though presently, it admits that most carriers are only using single function virtualization in limited ways. The vendor boasts 25 customers globally that have implemented virtualized functions with it in some way. Other vendors such as ALU, Ericsson, HP, Huawei, IBM, NSN were also demonstrating NFV/SDN for various use cases such as virtualized IMS, virtual EPC and a virtual RAN, which could be thought of as “thin” base stations connected by optical gear. NFV can be seen as deflationary, since it aims to replace Edge routers with servers/software. But it also provides new sales opportunities. 19
SDN & NFV: Key Show Themes (Cont’d) • • • At MWC, AT&T announced its “user-defined network cloud” vision under its Domain 2.0 program and named its initial group of suppliers which included Ericsson, Tail-F Systems, Metaswitch Networks, and Affirmed Networks. These vendors will be working with AT&T on a virtualized EPC Although vendors such as ALU, Ciena, Cisco and Juniper were excluded from the initial list, the operator mentioned other selections will be taking place throughout 2014. We believe Ciena is almost certain to be announced in the future due to its “vendor of the year” status at AT&T and its recently announced channel partnership with Ericsson. AT&T noted that it is expanding its traditional “vendor selection” net more widely, including “non-traditional” network players such as smaller companies, open-source alternatives and universities as well. 20
SDN & NFV: Key Show Themes (Cont’d) Relevance to Carriers: CAPEX / OPEX Savings Source: NEC SDN World 2013 Keynote • • “Based on today’s deployment, we are seeing reduction in CAPEX, but more in OPEX. I believe that having a common SDN controller has tremendous benefits in OPEX… We are seeing CAPEX savings of around 20-30% today, and we estimate that will rise to 50% by 2015. On the OPEX side, we are hoping for over 50% by the end of 2015.” Note: NTT Communications deployed NEC’s SDN solution as part of its Enterprise Cloud Service. 21
The Rise of Internet of Things (IoT) • • Tremendous market opportunity for the Internet of Things: $32T global industrial activity; 1-2% efficiency gain via IoT yields $320$640B in savings. Assuming a 30-50% share ratio w/ systems / software vendors yields a TAM of $50-160B for a player like Cisco. Use cases: initially enabling low level intelligence within machines (e.g. reporting problems, ordering consumables), eventually including analytics for predictive intelligence / process improvement. 22
Handset Launches • • • • • Differentiation is getting harder and harder (think the “blind tasting” challenge). More handsets are less differentiated from previous year’s versions and even less distinct from their own competition! This has been the impact that Android has had on the phone market; all of a sudden, Apple’s differentiation and ability to sustain its ecosystem value look that much more appealing. Only exception perhaps was in the new “wearables” category, with vendors such as Huawei, Samsung and Sony introducing new models. Special mention to Samsung’s GearFit, which got acclaim. Noteworthy smartphone introductions at MWC’14: Samsung Galaxy S5, LG G Pro2, Sony Xperia 2. Blackberry introduced new models. Some commoditization is happening at the high-end of the market but the low end is interesting (and where the next billion handset users will come from). The Mozilla $25 model (W-CDMA/Edge device) and the Ubuntu Touch smartphone concept model come to mind. 23
Where Can One Find Innovation? • • • • Innovation these days is mainly coming from startups. The days of an innovator / contributor going to a C-level at a large vendor and asking him for $X million and Y people for Z months (12<Z<18) in order to develop an innovative feature are over. These days, NEVs no longer build their capabilities organically (i.e. internally) but rather externally via M&A. A small new startup such as WhatsApp can not only deliver innovation, but also a lot of disruption, so why not partner with it to help solve a problem? There are many successful incubators that have generated some of these universities (e.g. TU Berlin / FOKUS), telcos (e.g. Telefonica’s Innovation 2.0) or both (various Portuguese universities and Portugal Telecom’s R&D arm – PT Inovações) A couple of my favorite “Jeff Pulver Purple Minute” companies in this list that I met with at MWC include: Solaiemes (Spanish ISV) focused on RCS, WebRTC – consummate “lean startup”, won GSMA awards and master of “mashups”. Focusing on the high-growth B2C and A2P segments of the VAS space. BroadForward (Dutch vendor) providing BB interfacing software for interworking, protocol conversion, aggregation, routing and enrichment functions for a wide range of protocols, such as Diameter, RADIUS, HTTP, SOAP, LDAP and SS7. 24
Conclusions • • • • • LTE entering the next stage with more greenfields worldwide and moving to VoLTE and LTE-A in the early adopter markets (e.g. South Korea, Japan and the US) SDN/NFV was the hottest topic du jour at MWC 2014, with many vendors showcasing solutions and pitching their ecosystems. We believe there will be more deployments happening, with an inflection point to be reached within 12-18 months. 5G research has already started with several NEVs (ALU, Ericsson, Huawei, NSN, etc.), operators (such as NTT DoCoMo), government involvement (EU’s 5G Infrastructure PPP, which was kicked off at this year’s MWC). The timeline for early adopter 5G service (by operators such as NTT DoCoMo) is mid 2020 (in time for the Tokyo Olympics). Internet of Things (IoT) will provide a wide array of opportunities for all participants in the wireless value chain over the next 5 years. Handset vendors continue to struggle to innovate and differentiate themselves versus the competition; despite the Android OS hegemony, fragmentation to continue to be an issue. 25
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