Mobile broadband demand remains at an all-time high, with some operators reporting a doubling of data traffic in each of the last five years. Based on the most recent Ericsson Mobility Report (November 2012), total smartphone subscriptions will reach 1.1 billion by the end of 2012 and are expected to accelerate to 3.3 billion in 2018.
With adoption of sophisticated smartphones and tablets increasing rapidly as prices fall, more and more users are turning to mobile broadband as their primary means of Internet access, content, applications, communications and messaging. In particular, video and audio streaming, content downloading, gaming and other high-bandwidth, data-intensive multimedia applications are accelerating mobile data traffic growth. Overall, mobile data traffic is expected to grow at a 50% CAGR from 2012-2018.
Asia/Pacific is expected to increase its share of the global mobile data volume from around one third today to almost 40% in 2018. Existing mobile networks are reaching a saturation point as more smart devices are penetrating the market, enabling users to satisfy their hunger for advanced services and applications.
Mobile broadband technologies have evolved along the roadmap from 2G to 3G HSPA or EVDO to HSPA+ and now 4G LTE mobile broadband, providing increased data capacity at a lower cost per bit, while reducing latency and improving the customer experience. The swift rate of smartphone adoption, as well as subscriber demand for bandwidth-hungry applications, is placing enormous pressure on operators to deploy more efficient and cost-effective network technologies to both meet capacity demand and maintain profitability. The pace of LTE network deployment is accelerating as mobile operators are investing to keep pace with competition and the explosion of mobile broadband traffic.
The most recent report from the Global mobile Suppliers Association (GSA) indicates that 97 LTE networks were commercially launched during 2012; 145 operators have launched LTE services in 66 countries to date; and 234 new LTE networks will be commercially launched in 83 countries by the end of 2013. In many countries, competitive and market forces have combined to accelerate deployment, aggressive marketing and rapid adoption of 4G LTE.
The most recent Pyramid Research global mobile broadband subscriber forecast indicates that:
Ericsson has projected LTE will reach around 1.6 billion subscriptions by 2018. Leading operators in mature markets such as Japan, South Korea and the U.S. are being pressured by customer demand, competition and rapid data traffic growth to upgrade their networks with LTE. Once the first operator in these markets begins marketing 4G LTE services and devices, competitors are forced to launch an LTE network primarily to keep pace and avoid losing subscribers. For the leading operators in these countries, speed to market and efficient, rapid network rollout have emerged as the primary drivers of their LTE strategy, resulting in a race to nationwide LTE deployment, aggressive 4G service marketing and rapid growth in LTE subscriptions by the leading operators and their competitors.
- LTE subscriptions are growing a 65% CAGR, four times faster than the 16% CAGR of HSPA/UMTS
- LTE subscriptions worldwide will grow from 70 million at the end of 2012 to 864 million in 2017
- Top three LTE markets of U.S., Korea and Japan account for 40 million LTE subscriptions at the end of 2012
- Combined 4G/3G+ mobile broadband subscriptions worldwide will reach 4 billion by the end of 2017, with LTE comprising nearly 20% of the total
Heavy Reading recently hosted a webinar (view archived webinar) featuring two executives from Ericsson Southeast Asia & Oceania to examine the best practices that underpin the successful LTE launches by leading operators in these mature markets and how these experiences apply to mobile broadband markets in emerging Asia. Ericsson forecasts that LTE population coverage in Asia/Pacific will increase to 60% by 2017, surpassing the global average of 50% in the same year. By 2017, Asia/Pacific will account for around two thirds of the world's LTE population coverage.
Pyramid Research predicts that Asia/Pacific will become the world's largest LTE region, overtaking North America in 2015. The region will comprise 40% of all LTE subscribers worldwide by the end of 2016, driven by exponential increases in mobile data traffic across the most developed markets. Japan and South Korea are early adopters of LTE in Asia/Pacific: The extensive list of devoted LTE operators is led by NTT Docomo, KDDI and Softbank in Japan; SK Telecom, LG U+ and KT in South Korea. Each of these leading mobile operators is being driven by competition and customer demand to be a first mover, investing in a new 4G infrastructure to offer customers the best mobile broadband user experience.
South Korea is set to be the world's first major mobile market to migrate the majority of its subscribers to LTE, with 15.9 million LTE subscribers at the end of 2012 and more than half the country's users forecast to be using 4G LTE within two years. SK Telecom is leveraging the popularity of advanced smartphones to add 60,000 new LTE customers per day, and exceeded its goal of 7 million LTE subscribers by the end of 2012. As such, LTE currently makes up about 30% of SK Telecom's 26 million mobile subscriber base, and already accounts for almost 26% of its total revenue.
The third-largest Korean mobile operator, LG U+, launched its LTE services in July 2011, and quickly extended its LTE network to 86 cities, covering 99.9 percent of South Korea's population. Its goal was to reach 5 million LTE subscribers by year end 2012. Not to be outdone, KT launched its 4G LTE network in January 2012 and quickly crossed the 2 million subscriber mark for its "WARP" branded LTE service in five months, with a goal to secure 4 million customers for the new service by the end of 2012.
With LTE becoming a mainstream service, Korean mobile operators are now focused on developing and marketing differentiated services to deliver greater value and convenience for their subscribers. Both SK Telecom and LG U+ have launched voice over LTE (VoLTE) services to complement their existing circuit-switched fallback (CSFB) voice service. This value-added offering supports HD voice with superior sound quality as well as integrated voice and data messaging services over IP to conserve spectrum.
Japan is one of the leading markets for LTE network activity worldwide. NTT Docomo became Japan's LTE market leader by commercially launching its "Xi"-branded LTE service initially in Tokyo, Nagoya and Osaka in December 2010. Docomo has benefited from a first-mover advantage and its "network overlay" strategy, which allowed the Xi extra-high-speed LTE mobile service to reach 5 million subscribers less than a month after surpassing the 4 million mark in July 2012. This pace accelerated after Docomo introduced a lineup of a Xi-compatible smartphones that offer more variety to meet customer needs, and the LTE service surpassed 7.4 million subscribers in November 2012. NTT Docomo hopes to maintain its lead as its domestic rivals KDDI and Softbank Mobile also launched LTE networks in 2012.
Ericsson recognizes the focus of leading operators has shifted from acquiring new subscribers to increasing the data usage and ARPU of the existing subscriber base. Many of these leading mobile operators are starting to test various means to stimulate mobile broadband adoption, extend mobile broadband to more devices and family members, and introduce new services to increase customer revenue and ARPU.
But even as the Asia/Pacific region has become a hotbed of LTE activity, the leading operators are still seeing revenue grow less than half as fast as mobile data traffic, as they invest heavily in advanced infrastructure. Ericsson's vision is that 4G LTE offers mobile broadband capabilities that can unleash the economic power of high-speed mobile Internet access on the move, and unlock the great potential for leadership in the networked society, machine-to-machine communications and the "Internet of things." However, even the most advanced operators have yet to fully implement new business models that can properly monetize 4G LTE services to create new revenue streams.
Our webinar with Ericsson highlights six smart ways of driving value to mobile broadband business, helping to reshape the operator's mobile broadband business model. Following successful business models from other consumer-oriented industries, such as airlines, retail and financial services, these six smart ways can be used by mobile broadband operators to increase customer loyalty, encourage greater usage and target new user segments.
The transition to 4G LTE requires a marketing strategy optimized for rich multimedia content and applications, rather than traditional mobile voice and SMS services. Without new revenue streams and a new 4G business model, it is not clear how operators can make a sufficient return on their mobile broadband network investments. Ericsson examined the most promising ways to unlock the great potential of mobile broadband capabilities in emerging Asian markets such as Indonesia.
Rather than only imposing usage caps or "throttling," Ericsson suggests that operators can employ traffic management to offer boosters that can "turbo-charge" data speeds using Wi-Fi or 4G and top up plans for heavy prepaid mobile data users. Ericsson defines a "smart network" that is user-, device-, service- and content-aware, with policy control at its heart. This approach can lead to an improved user experience and optimized network resources, through DPI technology and content filtering.
The aforementioned Ericsson Mobility Report focuses on how operators can ride the smartphone growth wave by leveraging pre-paid smartphones, innovative service packages and compelling content partnerships to target specific customer segments. Ericsson recognizes that the first and possibly primary Internet experience for many customers in emerging Asian markets will be using a smartphone, rather than a PC.
To deliver differentiated services, operators must differentiate mobile data traffic generated by smartphones and other smart devices. Examples include low-cost, unlimited text-only access to Facebook, initially restricting photo and video downloads using an app on Java-based feature phones, with an affordable upgrade path to mobile broadband access to the Internet on smartphones.
Ultimately, 4G operators need to know how to make smart devices affordable and 4G services attractive so they can unleash mobile broadband's power to transform society and drive economic growth, without driving unbridled usage and traffic growth.
â€” Berge Ayvazian, Senior Consultant, Heavy Reading