News Letter Value-added services (VAS) on LTE netw orks
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1 News Letter Value-added services (VAS) on LTE netw orks April, 2012 In 2012 Russia will launch the first commercial LTE networks, which to date provide the best characteristics of data transmission through mobile networks. Improved radio channel parameters and distribution of smartphones and tablet PCs create the preconditions for active market development of the value-added services (VAS) of new generation. According to the research "Value added services on LTE networks», conducted by J'son & Partners Consulting in March-April 2012, the global development of VAS in this segment is at a very early stage of development. The services of mobile TV and video are most widely used. This maintains a high potential use of technology for video telephony, high-definition video conferencing and mobile multiplayer online games, for a variety of vertical markets, including finance, healthcare, education, remote monitoring, M2M, etc. According to J son & Partners Consulting forecasts, data services over LTE networks will bring to Russian operators about $2 billion. The share of VAS services will be up to 15%, or about $300 million, about a third of revenues will come from the most prosperous segment of VAS market mobile TV. VAS market structure on LTE networks: prognoses up to 2016 * only revenue from the operator s data transmission services is considered Source: J son & Partners Consulting, April 2012
2 The pioneers of video services, including mobile TV, through LTE networks in the world are Verizon Wireless (USA), and NTT DoCoMo (Japan). In Russia, mobile TV is one of the fastest growing valueadded services. In 2011 the market size has almost doubled and exceeded $150 million. According to J'son & Partners Consulting, in the rapid growth of mobile TV and video in Russia will continue. In the longer term this trend will increase. The main drivers will be the development of LTE technology, providing a greater speed, and integration of video and multimedia content with social networks, the expansion of the model range of tablet PCs and smartphones. The potential of using LTE in mobile online gaming is high as well. However, a number of significant LTE shortcomings, identified during testing, may slow the spread of multiplayer online games in the mobile environment. This, in particular, concerns periodic short-term failures in the connection and the problems with NAT 1. In recent years cellular operators enhanced the activity in the sphere of mobile telemedicine (mhealth). The companies planning to enter the mobile phone market with a model of virtual operators (MVNO) are also interested in this area. For medical data transmitting through mobile networks it is necessary to provide high throughput for fast delivery, reliable communications, and data integrity and confidentiality. The third generation (3G) meets these requirements only partly. LTE technology, conditionally referred to the fourth generation networks (4G), has a better performance as compared to 3G, providing better opportunities. For example, it allows the use mhealth applications of higher quality such as videoconferencing between a doctor and a patient. Despite the fact that currently the services and applications that require high throughput, as a rule, are used relatively rarely in the banking and commercial sector, the prospects of mobile commerce on LTE networks are very favorable. This is caused by the possibility of introducing a new generation of services, such as mobile commerce, combined with location-based (LBS) services with elements of 3D and virtual reality. LTE technology advantages in comparison to existing technologies are not evident in the field Machineto-Machine communications (M2M), because most of M2M-applications do not require high bandwidth: typical application uses an average 30 bytes of data in one transaction. However, considering the large number of transactions in the foreseeable future, a huge number of M2M-based devices and continuous growth of data traffic on the existing networks, the new LTE network can be a reasonable solution. In mobile M2M market in Russia recorded a significant growth. According to J'son & Partners Consulting estimations in 2010, the number of M2M devices, connected to the mobile network operators, has increased by 465 thousand reaching 1.5 million. In 2011, the estimated figure was $ 2.7 million. And in the coming years the mobile M2M market will be on the rise. By 2015, it will increase in comparison with 2010 by 8.5 times - to 18.4 million devices, while the share of M2M-devices will reach 6% of total mobile subscribers. According to J'son & Partners Consulting forecasts, by 2015 the total M2M market will increase by 3.1 times as compared to 2010 and reach billion rubles. The cost of communication services will amount to 14.4 billion rubles, the share of LTE will make up about 10% of the income, i.e. about 1.4 billion rubles. Latency and other technological advantages will allow operators to deploy LTE mobile cloud services, on which, for example, the Japanese operator NTT DoCoMo is focused. One of these services is mobile video telephony with simultaneous translation, which will allow users from different countries to communicate with each other regardless of the language. Other "revolutionary" service can be a service 1 NAT (Network Address Translation) is a mechanism of TCP / IP networks, which translates IP-address of transit packets
3 based on Augmented Reality technology, virtual PBX services with options such as video telephony and video conferencing, multimedia ringtones, etc. The important drivers for VAS development on LTE networks are new smartphones and Tablet PCs supporting this technology. Value-added services are most widely spread on those markets in which there is a broad range of modern consumer LTE devices - smartphones, tablets, etc. The countries with the highest penetration of LTE smartphones include the United States, South Korea, Japan, and Canada, while others are far behind. The number of commercial LTE smartphone models Source: J son & Partners Consulting, April 2012
4 The introduction of LTE networks creates the preconditions for more active use of the model of virtual operators (MVNOs) for the joint networks construction and the use of infrastructure as well as for VAS promotion. MVNO model will allow LTE operators to significantly reduce their capital and operational costs and gain quicker the "critical mass" of users to reduce the networks payback period, and efficiently deploy valueadded services. According to J son & Partners Consulting, in Russia VAS services will develop with a lag of 2-3 years as compared to the North American and Japanese markets, and 1-2 compared to Western Europe. Development of additional services will initially take place in niche segments, including the most innovative companies in the corporate segment (mobile videoconferencing, unified video communications support technology of collaborative work, etc.), the most advanced users, consumers' of heavy content in mobile networks, not satisfied with quality in 3G networks.
5 Contents of the report «Value-added services (VAS) on LTE networks» 1. VAS definitions and classification as applied to LTE networks 1.1. What is VAS? 1.2. VAS and applications classification 2. VAS on LTE networks 2.1. Mobile TV and video In the world Potential of the market in Russia 2.2. Mobile games In the world Potential of the market in Russia 2.3. Mobile telemedicine In the world Potential of the market in Russia 2.4. Mobile commerce and mobile banking In the world Potential of the market in Russia 2.5. Machine-to-Machine communication (M2M) In the world Potential of the market in Russia 2.6. Other services 2.7. Potential of VAS market on LTE networks and target audience 3. MVNO part in the development of VAS on LTE networks 4. Analysis of existing LTE networks in the world 4.1. Commercial LTE networks in the world 4.2. Prospects and forecasts of LTE development in the world 4.3. Availability of subscriber devices 5. Prospects for LTE development in Russia 5.1. Main contenders 5.2. Problems and limits Lack of frequency band Legal restrictions Other problems: telephony 5.3. Forecasts of LTE development in Russia 6. Main manufacturers of equipment and their solutions 6.1.Chipset manufacturers 6.2.Basic equipment manufacturers 6.3.Subscriber devices manufacturers Conclusion and recommendations Appendix. Profiles of main VAS providers on LTE networks
6 This information bulletin has been prepared by J'son & Partners Consulting Co. We make every effort to ensure that information and forests contained in our market reviews are accurate and up-to-date. J'son & Partners Consulting reserves the right to revise the data following the publication of new official information by the companies. FOR ADDITIONAL INFORMATION PLEASE CONTACT: Pavel Ermolich Commercial Director
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