Korean Mobile Ultra Broadband

Transcription

1 Korean Mobile Ultra Broadband - KT s Strategies for the Era of Mobile Data Explosion Hee-Su Kim, Ph.D. Senior VP Economics & Management Research Lab KT

2 1. Data Explosion Status Mobile traffic in Korea is expected to grow by 103% each year, increasing 35-fold from 2010 to In 2010, the average monthly traffic among KT iphone users was 360MB, 5 times more than the average traffic of 75 MB among smartphone users worldwide. For KT, iphone traffic increased over two-fold, and call quality has decreased since the introduction of unlimited data plans. Before the plan: average traffic = 250MB (monthly increase = 8%) After the plan: average traffic = 630MB (monthly increase = 14%) Call success rate drops to 97.2% during data use (98.3% during voice calls only). * Source: KCC (04/2011) QoS: call success rate = 95% Korean Mobile Traffic Forecast (MB) KT iphone Users Monthly Data Usage Trend (PB/mon.) CAGR Increase by 8% per month Introduction of unlimited data plans Increase by 14% per month Global average of smartphone traffic in 2010 = 75 MB* *Cisco Global Mobile Data Traffic Forecast,

3 2. KT s 3W Network Strategy WCDMA+WiFi+WiBro Facing the Data Explosion, KT has implemented the 3W N/W strategy for offloading. Combination of WCDMA(3G), WiFi, WiBro(WiMax) Offloading smartphone traffic to WiFi and WiBro Relative ease of implementing 3W N/W due to the superiority of Korea s fixed high-speed internet network. 50,000 Hotspots(03/2011) + WiBro (82 Cities & Expressways) KT WiBro Network KT 3W Network WCDMA(3G) Upgrade to HSPA+ in Oct WiFi 50,000 Hotspots(2011.3) 100,000 Hotspots in 2011 WiBro Public Egg* Expanding WiBro coverage (82 Cities & Expressways) *WiBro(Wireless Broadband): Korean version of Mobile WiMAX *Portable WiBro+WiFi Router c 2

4 3. KT s 3G Strategy for D/E CCC(Cloud Communication Center) KT tried to manage the Data Explosion by increasing network capacity through the adoption of the CCC technology, but the outcome was limited. Separates the DU and the RU that were combined in the base stations. Centralizes the DU, installs the RU in service areas, and interconnects them through an optic cable. Allows for capacity expansion by splitting cells KT plans to establish CCC networks in 90% of the Seoul region (10/2011) Existing Network Structure CCC Network Structure * DU: Digital Unit, RU: Radio Unit 3

5 4. Securing 4G Frequency Bands LTE Spectrum Auction As a response to the D/E, KT participated in an LTE spectrum auction to secure frequency bands. Traffic is expected to exceed the maximum capacity of 3G and WiBro in LTE services exceeding 100 Mbps are unlikely in the near future due to the results of this auction. Continuous frequency spectrum of mobile operators for LTE usage is 2x10MHz, enabling a speed of 75Mbps at maximum. LTE services exceeding 150Mbps is unlikely until the commercialization of the LTE advanced technology sometime after Mobile Traffic to Exceed the capacity of 3G+WiBro LTE Spectrum Allocation in Korean Market 3G + WiBro Capacity Mobile Traffic KT SKT LGU+ 800MHz 10MHz 10MHz 20MHz 900MHz 20MHz 1800MHz 20MHz 20MHz 2100MHz 20MHz auction spectrum(paired) 4

6 5. Commercialization of LTE Services LTE Market SKT and LGU+ started their LTE services in the latter half of 2011, and KT will launch in 11/2011. SKT and LGU+ launched their LTE dongles in 07/2011 Released LTE smartphone payment plans in 10/2011. KT launched its 4G WiBro service in 03/2011 Plans to launch its LTE service in 11/2011. It will take time for LTE services to be fully activated. Potential obstacles include an end to unlimited data plans, low demand for pads, and limited coverage. LTE Service Plans by Mobile Operators Mobile 3G + WiBro 수용용량 4G Service Status Operators Mobile traffic 07/2011. Launched LTE services 09/2011. Launched LTE smartphone services SKT Plans to build LTE networks in 25 major cities LGU+ KT 07/2011. Launched LTE services 10/2011. Launched LTE smartphone services By the end of Plans to build LTE networks in 82 cities and towns 03/2011. Launched WiBro 4G services 11/2011. Plans to launch LTE services Plans SKT s LTE Price Plans Costs Monthly Allowances Voice(min.) SMS DATA LTE 34 $ MB LTE 42 $ MB LTE 52 $ GB LTE 62 $ GB LTE 72 $ GB LTE 85 $ GB LTE 100 $ 85 1,050 1, GB * Exchange rate: 1,179 won per dollar * Unlimited data plans are unavailable in LTE. 5

7 6. Characteristics of LTE 3G vs. LTE Being in the early stage of LTE services, mobile operators emphasize the fast speed of LTE in their advertisements and services. Mobile operators promote LTE by emphasizing its speed advantage, 5 times faster than 3G. Killer App will allow HD Video Calls, N-Screen Video Streaming Services, and Mobile Network Game. Differences between 3G and 4G Price Plan Comparison 3G 4G Plans (3G vs. LTE) Monthly Cost Data allowance 3G LTE 3G LTE Devices - Plans Speed Killer App. Unlimited data plan 28.8Mbps (HSPA+) Mobile Instant Messenger mvoip Bigger display size High performance CPU Unlimited data plan unavailable. Reduction in monthly prices (vs. 3G) 5 times faster, compared to 3G HD Video calls N-Screen HD Video Streaming Mobile Network Game Video Messenger All-in-one 34 vs. LTE 34 All-in-one 44 vs. LTE 42 All-in-one 54 vs. LTE 52 All-in-one 64 vs. LTE 62 $ 29 $ MB 350 MB $37 $ MB 700 MB $ 46 $ 44 unlimited 1.2GB 7 $ 54 $ 53 unlimited 3 GB * Exchange rate: 1,179 won per dollar * Comparison of 3G and LTE services with similar plans 6

8 7. LTE vs. Fixed Broadband Complementary or Substitution? MBB is expanding in some countries, including Sweden and Germany, by substituting for FBB. In Sweden, one person households and people under 30 are leading the replacement of FBB with MBB. In Germany, MBB is expanding in out-of-service areas with limited FBB infrastructure, and its price is at a competitive level. Germany s FBB data usage per user is 11GB/month, similar to MBB data usage. In Korea, mobile broadband (MBB) is still a complementary service to fixed broadband (FBB), but there is a high possibility that MBB could substitute for FBB. 100Mbps high speed and national coverage are distinctive conditions, not comparable with other countries. If the price gap between MBB and FBB is reduced, MBB could replace FBB. SKT eliminated its unlimited data plans in concern of LTE replacing the fixed high-speed internet. Current Status of Swedish BB Services (%) Comparison of Vodafone LTE vs. DSL in Germany [By age] Age DSL Cable LAN/ Fiber MBB 10s s s s s [By household size] HH size DSL Cable LAN/ Fiber MBB ( /mo) 60s or more *Source : EUI working paper survey results, n=2083, 2011 *Source : Vodafone, UniCredit Research (Mbps) 7

9 8. KT s 4G Network Strategy Premium 4G Networks Dual 4G Offer an optimum service environment through the harmonization of LTE and WiBro. WiBro Focus on high traffic devices, including notebooks, tablet PCs (Pad), and netbooks (Data use only) LTE + WCDMA Focus on smartphones (Voice+Data) WiBro + LTE Dual Network Composition City/Expressway Whole country Mobile WiFi service High traffic devices National service with WCDMA Smartphone devices 8

10 9. Government s Future Network Vision Ultra Broadband Roadmap Mobile operators establish network plans to prevent the dumb pipe phenomenon, while the government does the same in order to expand the infrastructure. Mobile operators plan to establish intelligence networks to boost their profits. The government aims to expand the infrastructure to boost investments in the Smart Era, rather than planning to expand profit of network providers. Plans to facilitate private sector investment of 38 trillion won to build a 1Gbps fixed-line network and a 100 Mbps wireless network by The government s role is limited, compared to its effort in the high speed internet during the 2000s. Has limited plans for securing frequency bands and devising demand/supply management policies. Amount of Private Investments for Fixed and Mobile Ultra Broadband(trillion won) (P) 2012(P) 2013(P) 2014(P) 2015(P) Fixed and Mobile Ultra Broadband Roadmap Network Establishment *Source : KCC(06/2011) Advancement of Fixed Broadband Network Advancement of Mobile Broadband Network Virtualization and Intelligence Network Efficient Content Distribution Open Platform and Integration ~1Tbps transmission links, 1Gbps network '12) 600Mbps WiFi, 3.9G(100Mbps) Establishment of Virtualization Research Network and Quality Assurance N/W Establishment of Overlay-based Content N/W Standardization of Open API, Establishment of Standard Platform 2013~ 2015 A dozen Tbps transmission links, 1Gbps network 1Gbps ~ WiFi, 4G (600Mbps) 2016~ 2020 Several dozen Tbps transmission links, 10 Gbps network Several dozen Gbps ~ Expansion of WiFi,, 4G, or B4G Introduction of Expansion of Virtualization, Virtualization, Establishment Establishment of Cognitive N/W of Custom N/W Introduction of Smartnode- based Content N/W Trial Application of Open API and standard platform *Source : KCC(06/2011) Expansion of smartnode-based Content N/W Expansion of Open API and standard platform 9

11 10. KT s Future Challenges The Data Explosion leads to an MBB demand increase, but not to an increase in operators profit. Rather, there is a loss of investment drives. 1 Oversaturation of mobile phone market 3 Collapse of Legacy BM 2 Lack of Killer Application 4 Diminishing ARPU Dominant Application: Nothing but Kakao Talk Lack of new Killer Application Oversaturation of customers Crisis of loss of investment drives Collapse of Legacy BM Mobile phone penetration rate in 08/2011 = 102.6% Fall in ARPU 4Q 09 ARPU $30.8 2Q 11 $29.1 Reasons: 1) Unlimited data plan - Move from high-end to lower-end plans - Use of Kakao Talk, instead of text/voice messages 2) Intensification of competition for combined product discounts 3) Pressure to lower rates by the government, congress, and NGOs Popularity of Kakao Talk is replacing SMS/voice messages. - 73% of Kakao Talk users reduce their use of SMS. - 41% of Kakao Talk users reduce their use of voice messages. Concern for the replacement of PSTN and VoIP from the expansion of mvoip 10