Premise CommunicationsEricsson Network Technologies AB, Sweden Aldo Bolza, Session Chairman Now, I...

Premise Communications: Bandwidth Driving Technologies – Johan Bevin – page 164

Premise CommunicationsBandwidth Driving Technologies

Johan BevinGeneral Manager, Strategy & Portfolio Management

Ericsson Network Technologies AB, Sweden

Aldo Bolza, Session ChairmanNow, I would like to introduce our second speaker, who under theheading of “Premise Communications” will talk to us about bandwidth driving technologies. He is Johan Bevin from Sweden. He is an engineer. He worked initially for the Swedish company Skaltek in the field of automatic cable packaging equipment. Later he worked for Ericsson Cables, where he spent some time in R&D and in Network Engineering and Network Design. So we can say, he is an honorarycable man. Unfortunately, he then went to Radio, where he had product management responsibility. Eventually in 2006, he joinedEricsson Network Technologies AB, where he is currently General Manager for Strategy & Portfolio Management. Please Johan take the floor.Johan Bevin:Good morning!I have divided up my presentation into three sections:• The new Mediacom world – Industry outlook• Market and industry trends – The user and business perspective• Technologies to capture bandwidth growth – Fixed and mobile


Growth in main economies

Sustainability: Challenge for the world - Opportunity for ICT

Nominal GDP

Source: EIU

2007 2020

0 5 10 15 20 25 30

China

France

GermanyIndiaJapan

UK

US

‘000 bil US$

Let us start by looking at the Mediacom world and first by looking at the growth in the main economies of the world. The growth of thenominal gross domestic product (GDP) is shown from 2000 to 2020.For the period 2007 to 2020 this is only a prediction. As you can see, the United States is the driver, of course. But what is really interesting is that China and India will gain a much greater impact on the world economy. These countries have a big population which will use the opportunities for new information & communication technologies (ICT), that will become available. But there are also challenges in the world to cope with, e.g. sustainability and scarcity of resources, that are shaping the agendas in the world. Looking at the situation of the operators, we have more operatorconsolidation and more cross-industrial collaboration. We also see new innovations and technologies being launched and developed, coming from these emerging markets. New technologies will require new means of delivery. We see a growing independence from the connectivity provider. All of this is an opportunity for the information and communication industry.


Toughening world economy

FOR SALE

Contingency plans needed

Copper PriceDevelopmentUS Home Price IndexWorld Crude Oil

Prices

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150

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250

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Index

-19% YoY-19% YoY

Aug 07 Aug 08 60708090

100110120130140

2000

8000150160

$77$77

$115$115

00 02 04 06 08

At the same time we cannot ignore the crisis situation and the turmoil we have in the world financial markets right now. Looking at this from a short term perspective, we know, if consumer spending goes down that affects communications and the consumption of communicationdevices. It will also create problems for the operators to raise funding for their investments. For the coming years we predict a rather flat growth rate, but it is quite hard to say what impact this may have in the long run. When you look at the development of the multimedia industry, you have to consider all of these aspects in today’s world.


2007 2008 2009 2010 2011 2012 2013

LTE

HSPA

WCDMA

GSM/GPRS/EDGE

Mobile WiMAX

CDMA

Other

2007_2

3.3 Bn

6.5 Bn

2007 2008 2009 2010 2011 2012 2013

LTE

HSPA

WCDMA

GSM/GPRS/EDGE

Mobile WiMAX

CDMA

Other

2007_2

3.3 Bn

6.5 Bn

The all communicating world

Potential upside in m2m communication

Mobile subscriptions worldwide

LTE

HSPA

WCDMA

GSM/GPRS/EDGE

Mobile WiMAX

CDMA

OTHER

forecast 2007

Now let’s look at the need for communication in the world. Communication is a result of the wonderful need of humanity to talk with his fellow friend or neighbor. At Ericsson, we predict these figures every year. Usually we have underestimated the growth rate of communication. Here you see the mobile subscription in the world, where we had some 3.3 billion subscribers in 2007. The estimate for 2013 is 6.5 billion, which means it will almost double in a 5 years period. The dark blue area represents the more traditional service, which is voice. There you see a weakening growth. What is interesting is the light blue part on the top, where we find data communication, which largely represents new services. There is definitely an upside when it comes to man-to-man communication.So, we see changes in the global economy. We have a potential for new users. Looking only at Asia we have 1 billion consumers who will very rapidly enter the market. They are very eager to use these new servicers, but we have to take into account the financial situation in the world right now.


Power of usersChanging behavior with time, place and device shifts

66 billiononline searches conducted worldwide in December 2007.Google about 2/3.

Over 8.6 millionarticles and over 5.7 million registered contributors on Wikipedia globally

45%of US and European workers are away from their desks more than 20% of their time -85% of digital natives never leave home without their mobile

Over 4 billion songs,125 million TV episodes and 7 million movies have been purchased and downloaded from iTunes. Video game sector is growing

Social and personal networking

More than 100 millionblogs –1.6 million new every day

More than 100 millionvideo views are generated on YouTube but also YouKu (China) every day

Now let’s look at the market and industry trends. We will start with the power of users. You, who are sitting here, are a part of a group which becomes more and more powerful with respect to the media industry. Traditionally we have had voice as the predominant communicationservice whereas now we have multimedia services, which are much more user-centric. This means that we as users have a greater possibility to influence the content of the services. The multimedia services become a more integrated part of our life. We expect that any service will be reachable at any time anywhere. Here you cansee some examples of this change in behavior. We are talking about huge amounts of data which have to be carried over the network.


Internet applications are taking over

DownloadSearch Share

Interactivity and HD need for capacity and network control

Everything becomes digital

We also have another trend. The internet applications are takingover. The fundamental base for this is that the amount of information is increasing almost with the speed of light. Therefore the use of personal computers (PCs) increases all the time. It is very muchdriven by the young generation. But there is something else that is happening. The internet applications are moving from stationary PCs to other devices, such as the mobile devices with our smart phones and large screens. Now we can access the same kind of services and information via our mobile devices as we can do with our stationary PCs.There is still another trend. We can now access the same kinds of information via high-definition (HD) flat screens in our homes. This is also an example of increased interactivity. This is driving the need for capacity in the networks as well as for network controls.


Strong growth in trafficFixed last mile access traffic

Need for more investments in networksNeed for more investments in networks

200400600800

Exa

byte

2006 2013

200400600800

Exa

byte

2006 2013IPTV

Internet0

0

630M

17”

140M

42”

Let’s look at some figures. What is the traffic growth on the fixed side? Consider the scale on the y-axis. The unit is Exabytes, which is 1 million Gigabytes, which is a 1 followed by 18 zeros. We are talking about huge amounts of information and data here. When welook at the fixed last mile access traffic going to premises, which we see that it includes internet traffic and internet protocol television (IPTV) or HD television traffic. Most of the subscribers can be found in the internet traffic area. But you can see that the growth in traffic is shared approximately 50 : 50 in absolute terms among the two medias. With internet, we started with about 40 Exabytes in 2006, we will see it grow to 750 Exabytes in 2013. Today we have some 300 plus million broadband subscribers and that number will double in the same time period.With IPTV we start with 40 Exabytes and will see it grow to about 800 Exabytes. The growth in the number of subscribers will be from about 50 million to about 140 million. This growth results in the need for more investments in the networks.


Strong growth in trafficMobile access traffic

0

2

4

6

8

10

Exa

byte

2006 2013Voice

15”””

2”

160 M

2.9 Bn

Data

6.5 Bn

Need for more investments in networks

How is the situation in mobile communication? First, look at the scale here. The volume of mobile access traffic is a fraction of the fixed access traffic. However, you can see we anticipate the same kind of growth. Here you find the big volumes of subscribers. At the bottom you see the voice traffic, now becoming more of a commodity. It will be a service with a rather modest growth compared to the other types of data. It will grow from 3.5 billion to 6.5 billion subscribers. If you look at data instead, you can divide it into data going into smart phones as well as to our movable PCs.Here we see the strongest growth and therefore we will also have a need for more investments in the networks. This growth in traffic may also result in the same kind of growth in operator revenues. So let’s have a look at that.


Operator revenues grow less than traffic

Cost efficient network solutions needed

1400 BUS$

1900 BUS$

2007 2008 2009 2010 2011 2012 2013

Mobilerevenues

Fixedrevenues

CAGR 6%

CAGR 8%

CAGR 2%

Operator revenues will definitely grow, but they will grow at a slower rate than the traffic. We anticipate operator revenues will see a capital growth (CAGR) of 6% on the average during this time period. We will have some higher revenues on the mobile side and some lower ones on the fixed side. Therefore, a cost-efficient network solution is needed here. Operators will put some pressure on thevendors to deliver solutions which are as competitive as possible to cope with this growth. Summarizing the second part of my presentation, we see that the multimedia services will become more user-centric. We become much more interactive. We see massive traffic growth, but we seethat operator revenues are not going to grow in the same way as the traffic grows.


Operator challenges

Higher Average Revenue Per User (ARPU) can only be justified by consistently offering

content-rich applications

Now, let’s look at technologies, that are there, to make use of this bandwidth growth. Because voice is becoming a commodity, the average revenue per user (ARPU) is actually going down. So the challenge for the operators to increase or stay on the same level of ARPU is to enhance their services. On the mobile side it is possible to deliver more content by using mobile broadband services. In the pictures you see the challenge in increasing ARPU for the fixed and mobile services. The winner in the battle for traditional voice is the mobile service .The way to enhance higher revenues is to add more traditional broadband services, but even this may not be sufficient, therefore more content-rich applications have to be offered. This in itself will drive the need for more capacity.


Increase revenue

Deliver content-rich offerings and applications

Increase in revenue is very much connected to the need for content-rich offerings, going from the best internet surf with 5 Mbps to the new multimedia experiences where you may have at least 50 Mbps.


Location and device independent technologies needed

LAN LAN

Fixed broadband- Connects a port, not devices- Connects to a location

Wirelineaccess

Wirelessaccess

Mobile broadband- Serving individual devices/users

Wirelineaccess

Full service broadband- Location and device independence- Reach anything/anyone, any time and any place- Serving individuals and locations

Wirelessaccess

Seamless userexperience

Yet another aspect will definitely give a competitive edge to anoperator’s offerings. If you consider mobile and fixed broadband today, they live in entirely separate worlds. On the one hand you have the wireless LAN access, which connects to a port not to a device and which connects to a location, and on the other hand you look at mobile broadband which serves an individual device, not users. Our needs as human beings to communicate should not be limited by the means of technology. So a seamless user experience will contribute to this competitive edge that is needed. We at Ericsson promote full service broadband where we have location and deviceindependence, and where we can reach anyone, at any time and everywhere.


Mobile access technology deployment

Urban Suburban Rural Rural

Expand coverage

Hig

her S

peed

Tow

ards

Hig

h sp

eed

ever

ywhe

re

WCDMA / HSPATo all current sitesWCDMA / HSPA

To all current sites

LTELTE

HSPA evolutionHSPA evolution

HSPA capacity and carrier expansion HSPA capacity and carrier expansion

Add WCDMA/HSPA900/2100 MHz to GSM sites

Add WCDMA/HSPA900/2100 MHz to GSM sites

Hig

her C

apac

ity


What type of technologies do we have, which can support this trend in premise communications? Let us start with mobile access. I will not go through all the technologies in this picture. But I would like to highlight two:One is the evolution of high speed packet access (HSPA), the standard which is now enhancing radio networks with high capacity and which makes it possible to meet the end users demand for more service content. Interesting here is that the increase in capacity and speed will also put demands on increased fiber deployment in connecting the radio based stations with the rest of the network. Usually, when you think about mobile networks, you don’t think that much about the need for fiber deployment. The next step is the long term evolution (LTE) standard, which will further enhance speed and capacity. Here we talk about down-link peak rates of around 100 Mbps. The standard itself is specified for up to 200 Mbps.Here we have the possibility today to reach and serve both suburban and rural areas with this kind of much needed services.


Fixed access technology deployment

Urban Suburban Rural Rural

Expand coverage

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Cable/ADSL2+To all current sites

Cable/ADSL2+To all current sites

FTTH / FTTBFTTH / FTTB

VDSL2VDSL2

ADSL2+ADSL2+

Mobile AccessMobile Access

ADSL & Dial-upTo all current sitesADSL & Dial-up

To all current sites


With regard to fixed access technology deployment, I would like to highlight two technologies. We have the very high bit-rate digital subscriber line technology (VDSL2), where the operator can at least use part of the existing copper network, the last mile, to the end user and connect that to the fiber network to boost the demand for traffic. Of course, this is limited to around 100 Mbps. But more capacity is needed, as we saw on the previous slide. So there is a great need to enhance the network for broadband services to fixed access subscribers. Therefore fiber-to-the-home (FTTH) or fiber-to-the-building (FTTB) is really the way to go. With fiber we talk about a capacity range of 100 to 2500 Mbps. Certainly, the technologies are here and are being deployed to address this change in user behavior.


Deployment

Business

Premise communicationsBandwidth driving technologies

Conclusion>The all communicating world is here!>Traffic is driven by a combination of screen size and

number of subscribers>Tremendous traffic growth >Operator revenues growth less than traffic>Content rich applications = Higher revenues>Need for ultra-high bandwidth all the way to

the end-user premises>Technologies are available> Increased need for fiber deployment,

both for mobile and fixed access in the coming years

Trend

I would like to round up my presentation with the conclusions shown on this slide. I hope this has been an interesting insight into the telecom world. Thank you very much for your attention.

Premise CommunicationsEricsson Network Technologies AB, Sweden Aldo Bolza, Session Chairman Now, I...

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