SK Telecom to Debut 225 Mbps LTE-Advanced

SK Telecom plans to upgrade the speed of its LTE-Advanced service currently capable of offering up to 225 Mbps by aggregating 20 MHz bandwidth in the 1.8 GHz band and 10 MHz of bandwidth in the 800 MHz band, to create a single bonded channel, boosting speed beyond the 150 Mbps limit of LTE in 20 MHz channels.

SK Telecom initially commercialized its LTE-Advanced service, using 10 MHz of bandwidth in 1.8 GHz band and 10 MHz bandwidth in the 800 MHz band in 2013.

In August of 2013, SK Telecom gained authorization to operate using 35 MHz of bandwidth in the  1.8 GHz band..

SK Telecom expects to launch the “20MHz+10MHz” LTE-Advanced service nationwide in the second half of 2014.

LTE can only offer up to 150 Mbps of speeds using a maximum of 20 MHz of continuous spectrum in one band, while LTE-Advanced can support speeds over 150 Mbps by combining different bands using carrier aggregation.

SK Telecom further plans to bond 10 MHz more bandwidth in an additional channel, enabling service at speeds up to 300 Mbps.

Once SK Telecom commercializes the upgraded LTE-Advanced service, customers will be able to download an 800MB movie in 28 seconds, compared to 43 seconds for the current LTE-Advanced version.

One might argue that mobile broadband is not a substitute for fixed broadband, with some justification. In most parts of the world, for most users, that will be a functionally truthful statement, though.

By 2019, perhaps eight billion mobile broadband accounts will be in service, compared to perhaps 500 million fixed network connections. In fact, there will likely be as many mobile router accounts in service (connections to tablets, mobile routers and PCs) as there are total fixed broadband connections.

So while some might reasonably argue LTE and mobile broadband are not functional substitutes for fixed broadband access, for most people mobile broadband will be "broadband."

Softbank in Direct Talks With Deutsche Telekom on T-Mobile US Acquisition

SoftBank reportedly is holding direct talks with Deutsche Telekom about acquiring T-Mobile US.

Some observers think a combination of SoftBank-owned Sprint and T-Mobile US, which would create a new mobile company just a little smaller than Verizon Wireless and AT&T, would improve the new company's ability to compete, and might "save" the U.S. mobile market from a ruinous competitive war.

A combined Sprint and T-Mobile US would have about 30 percent market share, compared to Verizon Wireless at 30 percent and AT&T Mobility at 33 percent.

But reduction of the number of providers from four to three is likely to be among the key concerns of antitrust regulators. 

Sprint might have to prove to regulators that a Sprint acquisition of T-Mobile US would not eliminate the disruptive offers T-Mobile US is making.

Merger approvals often therefore contain requirements that current prices be maintained or lowered for a period of time. But temporary assurances might not be enough, in this case.

SoftBank will argue that the combination will create operating efficiencies, improving market competition.

Antitrust authorities and regulators also will want some assurances that new providers will be able to enter the market and compete, Dish Network likely being a case in point.

The line of argument will be tricky. SoftBank has to convince regulators that both Sprint and T-Mobile will fail to keep up with AT&T and Verizon, if they remain separate.

On the other hand, SoftBank will have to convince antitrust authorities that the disruptive T-Mobile US stance will continue, even for the merged company.

Those are huge challenges, but SoftBank seems to have concluded the effort is worthwhile, and that it eventually can offer concessions to alleviate the inevitable concerns.

The other complication is that Deutsche Telekom wants to exit the U.S. market. Antitrust authorities therefore face the situation of a competitor that simply wants to leave the market. A sale to a company other than SoftBank might be much more palatable, but it is not clear any such buyer will emerge.

Concerns about the impact of any such merger on competition would seem well founded, in some ways, even if the argument about long-term viability of T-Mobile US and Sprint also is reasonable.

To be sure, reasonable observers might conclude that Verizon Wireless and AT&T Mobility have not shown too much willingness to disrupt the market. 

Looking only at retail pricing for mobile Internet access plans, one might note the similarity between Verizon and AT&T pricing, and the lower price plans, across the board, typical of Sprint and T-Mobile US plans, assuming the Sprint and T-Mobile US plans feature "unlimited usage."

Pessimism is Unwarranted: Gigabit Networks are Coming

Blair Levin, currently a fellow at the Aspen Institute, is a thoughtful analyst, and wrote the 2010 National Broadband Plan, which was preceded by a thorough and thoughtful analysis of the actual cost to upgrade U.S. access networks for higher speeds.

Also Executive Director of Gig.U, Levin tries to practice what he preaches.

So I was struck by the irony of two adjacent statements in a recent Levin article, the first that the authors of the U.S. broadband plan concluded that "current market forces were unlikely to produce gigabit networks within any reasonable future."

At that time I agreed with the assessment. But Levin says in the very next sentence that "that analysis, and our subsequent discussions with various parties, helped pave the way for the Google Fiber project, which itself has spawned other gigabit projects."

In other words, paradoxically, gigabit networks both were unlikely to develop, and then did develop. Levin believes the plan, and other evangelism, has made a difference. Some of us would agree.

But that perhaps is where practitioners and analysts alike have been too pessimistic, when history might have suggested optimism was warranted.

To be sure, human beings and organizations must act. Human agency is vital. But history itself, in face of what might have appeared to be stubborn agency resistance, would have suggested that, in the face of all obstacles, huge progress would be made.

For all of the apparently sluggish movement towards higher speeds, even in the U.S. market, where complaints abound, the history of speed increases shows a minimum doubling about every five years, and an order of magnitude increase in speeds (up to two orders or magnitude) about every decade.

That suggests gigabit speeds by 2020 would simply  be in keeping with past speed increases. Sounds crazy. I wouldn't have believed it myself. But the data on the trend is there.

The math is clear enough: when you double the quantity of anything often enough, fantastically large numbers result very quickly.

Levin's sentiments are understandable enough. He knows the cost of networks and the practical chores associated with getting them funded and built. But even Levin acknowledges that what might have seemed impossible suddenly erupted.

I think that is the point. Somehow, against the odds, human agency keeps bumping us along an access speed adoption curve that seems "impossible."

Observers long have noted that Moore's Law does not apply to many physical processes and products. Paradoxically, even in the "you have to dig trenches and hang cable," physical world of construction, it seems Moore's Law is a fairly good predictor of access speed improvements.

It is unexpected. Logic suggest it should not happen. And yet, despite all logic, Moore's Law has been a rather good predictor of access speed improvements.

Even Relatively Balanced Net Neutrality Commentaries Miss the Point

It appears that much of the hysterical reaction to a U.S. Appeals Court ruling in Verizon v. FCC willfully or inadvertently confuses two very different principles: actual blocking of lawful content by an Internet access provider, and quality of service mechanisms. 

They aren't by any means exclusive, anti-consumer or damaging to application provider ability to innovate, though they create business advantages, as do content delivery networks.   

But you haven't heard anybody at all argue that CDNs should be outlawed because they lead to "blocking" of end user access to lawful applications. Content delivery networks improve end user quality of experience. 

And, yes, unless a content provider or application provider creates or pays for CDN services, that quality of packet delivery feature is not available. But it is a choice.

Some app providers use CDNs, but probably most do not. CDNs have not destroyed the openness of the Internet. CDNs are not "blocking."

Everybody agrees, from the Federal Communications Commission to the smallest U.S. ISP, that lawful applications cannot be blocked. The FCC has, as part of its Open Internet Principles, stated in plain language that lawful applications cannot be blocked, period.

In the one or two instances where actual blocking ever has occurred, the Commission worked quickly to intervene. So the FCC already has shown its lawful authority to prevent content or application blocking. 

"Blocking" is not the issue. Quality of service is the issue, as CDNs are about quality of service as well. 

Many of us would argue that application and content providers have the right of freedom of speech. They should not be interfered with simply because a government or private entity is irritated by what they say or the lawful services they provide.

That remains true whether or not any application owner chooses to use a CDN or not. No freedom is lost, either way, whether you believe the "right to freedom" protects the speaker, or the audience.

The "best effort" Internet exists side by side with the existence of quality of service mechanisms that ensure packet delivery in an expedited way. Today. Now. 

So long as the best effort Internet continues to exist, and all ISPs support that principle because the FCC says they must, freedom is maintained. 

But it is untruthful--simply untruthful--to argue that the best effort and expedited packet delivery access do not already coexist, today,  with no apparent ill effects.

Will Video Break Mobile ISP Economics and Business Model?

It is easy enough to explain why video entertainment consumption poses a huge--some would say nearly fatal--challenge to mobile operators: there if a fundamental mismatch between revenue and bandwidth required to deliver narrowband services (voice, messaging) and that required to support full-motion video.

Simply,  revenue per bit for messaging and voice can be as much as two or more orders of magnitude higher than for full-motion video or Internet apps.

The revenue per bit problem is easy to describe. Assume a fixed network ISP sells a triple-play package for a $130 a month retail price, where each component--voice, Internet access and entertainment video--is priced equally (an implied price of $43 for each component).

How much bandwidth is required to earn those $43 revenue components? Almost too little to measure in the case of voice; gigabytes for Internet content consumption and possibly scores of gigabytes for video.

By some estimates, where voice might earn 35 cents per megabyte, revenue per Internet app might generate a few cents per megabyte. At one level, a network engineer might argue that such fine distinctions do not matter. The network has to be sized to handle the expected load.

McKinsey analysts have argued in the past that a 3G network costs about one U.S. cent per megabyte. The problem, in many developing markets, is that revenue could drop to as little as 0.2 cents to 0.4 cents per megabyte, for any mobile Internet usage.

That implies a strategic need to reduce mobile Internet costs to as little as 0.1 cent per megabyte, or an order of magnitude. Tellabs similarly has warned about revenues per bit dipping below cost per megabyte, leading to an "end of profit" for the mobile business.

Of course, all of that analysis occurred under conditions where it was web browsing that largely represented Internet bandwidth demand. Streaming video is another order of magnitude or two orders of magnitude sort of problem, though, in part because it is so hugely bandwidth intensive and because it will represent as much as 70 percent of all Internet bandwidth consumption, in a few short years.

Consider the wide variance in revenue per bit represented by a few different potential mobile Internet use cases.

One use case is a $20 a month smartphone data plan and 2GB of usage, representing retail revenue of $10 per gigabyte.

A Netflix subscription generates no direct revenue but could represent network consumption of between a few gigabytes and  30GB of traffic, if usage approaches fixed network levels. Revenue arguably is zero dollars per gigabyte.

A work environment might represent $100 a month revenue and consumption of between 10 GB and 50GB. So revenue might range between $2 to $10 per gigabyte.

And that’s the problem with video: much of it does not actually represent revenue for the ISP. But even if it does, what is the revenue and cost per gigabyte? Even if one assume use of one hour of standard definition video, and that product is owned by the ISP, revenue might be $1 to $2 per gigabyte.

Some would argue the cost per gigabyte for a mobile ISP is higher than that. And it is almost nonsensical to think that a standard linear video service, representing perhaps $40 to $80 a month of revenue, will fare well if viewing habits in the mobile realm are what they are in the fixed network realm, where it might not be uncommon to have a single device receiving content for four to six hours a day, representing consumption of perhaps 4 GB to 6 GB per device.

And that assumes only one user, or one stream, is in use. In a multi-user household, demand could be two to three times that amount. In that case, hundreds of gigabytes would be the account load for a single month.

That will destroy revenue per bit metrics, unless you believe consumers really will pay $200 to $400 a month--or more--in mobile Internet access charges, to say nothing of the actual retail price of the content service.

Marketers might argue that revenue per account is what matters, for a multi-product business. That is true, up to a point. An ISP might fare okay if providing a mix of products with disparate revenue per bit values.

The revenue earned from text messaging is almost arbitrarily high, as SMS is a byproduct of using the signaling network. Voice revenue might be moderately high, if users can be coaxed or compelled into paying for access to the feature, rather than for usage.

Ericsson hs calculated the cost per bit for a mobile network at about one Euro per gigabyte. So total revenue per bit has to exceed that cost.

Heavy video consumption--especially of third party content-- is likely to exceed cost per bit under almost any scenario.

Deutsche Telekom Puts T-Mobile US Asset Where a Sale Would be More Advantageous

Deutsche Telekom has transferred its 67 percent stake in T-Mobile US into a different holding company offering tax advantages in the event of a sale of T-Mobile US. That doesn't mean any sale is imminent, but does suggest it is viewed as a reasonable development by Deutsche Telekom.

Soon, the attention will shift to which buyer emerges, and then whether U.S. regulators will allow the transaction to proceed. Deutsche Telekom has been there before, as the proposed AT&T acquisition was abandoned because of regulatory and antitrust opposition. 

It won't be especially easier this time around, either. 

To "Move the Needle" on Market Share, Mobile Carriers Must Win"Family" Plan Accounts

Over the past decade or so, a big change in retail mobile service plans has happened. In the business as a whole 68.5 percent of postpaid customers are on family plans. Just 26 percent of plans are “individual” plans.

About five percent of the market consists of business-paid accounts.

Verizon has 72 percent of its customers on family plans and seven percent on corporate plans.

Altogether, at least 73 percent of U.S. mobile consumers are on a group plan of some sort.

There are all sorts of practical implications. For starters, any disruptive attack on market share almost has to affect the family plans, since they represent about 69 percent of the customer base.

The other practical matter is that one would get a wrong result when comparing “individual plans” across countries, especially where most of the buyers are prepaid, not postpaid, and where most sales are of “individual” plans, not “family” plans.

Are U.S. Mobile Carriers Customer Bases Differentiated?

It is a commonplace observation that the largest four U.S. mobile service providers are differentiated on the dimensions of churn and average revenue per account. Basically, Verizon Wireless and AT&T Mobility customers churn at half the rate of Sprint and T-Mobile US customers. 

But there might also be a significant differentiation based on why customers choose their service providers. 

When Cowen and Company analysts asked customers why they chose their service provider, AT&T and Verizon chosen for "network coverage and quality," 

Sprint was chosen for "unlimited data plan and better price," while T-Mobile US likewise was chosen for "better price and unlimited data plan.

The distinctions are clear: customers who value coverage and quality tend to buy AT&T and Verizon. Customers who value unlimited data and price chose Sprint and T-Mobile US.

So the question, assuming you believe a big marketing war will escalate, is how big each of those customer segments are. For that might limit the gains either Sprint or T-Mobile US can gain and hold, over the long term. 

It will be easier for AT&T and Verizon to match price offers than for T-Mobile US and Sprint to dramatically expand their footprints. 

But all that assumes no major change in market structure. With the possibility that something happens with T-Mobile US (merger with another provider), and if Dish Network does enter the market, along with activation of assets from one or two of the mobile satellite firms that want to repurpose their mobile satellite spectrum, tomorrow's market could look different. 

But that will occur within a context where it appears customers fall into two broad camps: buyers who value coverage and quality, even at higher price; and customers who value unlimited usage and want lower price. 

Coverage might not matter for the latter, while lower price, while helpful, still is not why the former customers make their fundamental choices. 

How much the contestants can structure their operations to attract the "other" type of customer will become a bigger issue.

Spectrum Management Heading for a Historic Change

Spectrum not only is the foundation for all wireless and mobile services, it is a foundational matter for would-be service providers. And big changes are coming.

New spectrum formerly used for TV broadcasting is being reallocated to mobile communications. And at least some of that reallocation process will involve methods of adjusting the behavior of networks and devices dynamically, based on interference issues.

New thinking is happening about sharing existing spectrum as well. It simply is too expensive and time-consuming to conduct widespread "clear and auction" operations across much of the communications-capable spectrum below 3 GHz.

So much attention now is focused on how existing licensed users can be persuaded to share their frequencies with new commercial users as well. Incentives will play a key role: existing licensees will have to see clear financial benefits for doing so, and since so much licensed spectrum below 3 GHz is licensed to government and military users, such incentives will be tricky.

And the ways mobile operators use mobile licensed spectrum, unlicensed spectrum and fixed network assets is changing. Already, even without formal business relationships, perhaps 60 percent to 80 percent of mobile device Internet access occurs on Wi-Fi connections.

Some would say that reveals a key strategic weakness for mobile operators, whose costs of providing Internet bandwidth are too high to survive massive adoption of mobile video consumption.

And though there is more attention paid to global standards, the U.S. market will in some ways remain a bit different.

In some ways, the continental-sized U.S. market has allowed the U.S. communications business to develop based at times on local standards not shared with most of the rest of the world. The primary past example is use of CDMA air interfaces alongside GSM, where in most of the rest of the world GSM was the sole standard.

Frequency plans within the United States will be the salient example of this in the next phase of the mobile business, as most of the rest of the world tries to create a common 700-MHz band for mobile communications across Europe, Africa, Asia and Latin America.

Once again, because of past spectrum allocation decisions, the U.S. will remain a market without full frequency harmonization with most of the rest of the world. How important that might be is not so clear, though.

Global frequency coordination is helpful for manufacturers, as it allows more scale when developing handsets. It is helpful for international travelers who then can roam almost at will when traveling (assuming they don’t mind the international tariffs).

But advances in radio agility are important. In principle, it is possible to equip a device for frequency agility that can compensate for different frequencies used in different countries. And since all mobile carriers have agreed on Long Term Evolution as the common air interface standard (even if there are differences in modulation), frequency might ultimately be less an issue.

The issue for European regulators and industry concerns is whether the 2012

World Radiocommunication Conference of 2012, which decided to open up the 700MHz band across the EMEA region for mobile communications, will be able to come up with enough consensus to allow a further decision at the 2015 WARC meeting.

Of course, that process will be contentious, as TV broadcasters will have to be induced to surrender their use of spectrum to mobile interests. That has not proven easy, wheneve it has had to happen.

But such decisions now are among the growing range of ways national regulators are playing a fundamental role in setting the stage for the next phase of mobile communications growth. Though observers might disagree on how much additional spectrum is required, nearly everybody believes more spectrum will be needed.

And much of the focus will be on ways to find new ways to use spectrum already licensed for some other purpose, to some other users, as very little of the spectrum most useful for communications actually is unclaimed. That means a historically new look at ways to enable sharing of licensed spectrum, more use of frequency-agile networks and devices, and a new business role for unlicensed spectrum.

Erosion of Subscription Video is About 1% a Year

The strategic problem faced by traditional video subscription services is not that massive customer desertion is happening now. In fact, attrition, though real, is rather low at the moment.

According to The Diffusion Group, nearly 88 percent of all adult broadband Internet access users in the United States subscribe to a cable, satellite, or telco-TV service.

“The notion that we’re on the edge of a ‘mass exodus’ from incumbent pay-TV services to online substitutes is not supported by the data,” says Michael Greeson, co-founder of TDG and director of research.

The longer term problem is that younger consumers do not seem to buy the product as heavily as older consumers. And unless that changes, trouble lies ahead.

For example, TV subscription rates among those 25 to 34 are 82 percent, and 85 percent among those 18 to 24.

Note that the TDG metric is adoption of subscription TV among “broadband households.”

Of course, since household adoption of broadband Internet access is itself a percentage of all occupied U.S. homes, the adoption of video entertainment services as a percentage of all occupied U.S. homes might be  lower than 88 percent.

U.S. broadband penetration is estimated at 78 percent of U.S. homes. If 88 percent of those homes buy a video service, then video penetration hypothetically (some homes buy video service but not broadband or dial-up access) could be as low as 69 percent.

Nobody believes video subscription rates are that low, estimating that more than 102 million U.S. homes actually buy a subscription. That compares to about 115.6 million TV households altogether, including homes that only watch over the air TV.

If there are about 130 million occupied homes, that implies video subsription penetration of about 78 percent, oddly enough the same penetration rate as broadband.

60% of Surveyed Rural Telcos Offer Mobile, Fixed Wireless Services

Some 60 percent of about 31 rural telcos surveyed by NTCA:The Rural Broadband Association report they are providing “wireless service” to their customers, including both mobile and fixed wireless services, using a mixture of owned spectrum and facilities as well as resale or agency agreements with mobile service providers.

Some 82 percent sell fixed broadband Internet access (29 percent say they also sell fixed voice using wireless), while 49 percent sell  mobile services.

Of the respondents not currently offering wireless or mobile service, some 30 percent are considering doing so.

About 60 percent of independent and smaller rural U.S. telcos surveyed by NTCA:The Rural Broadband Association report they own at least one wireless license in the frequency range

below 2.3 GHz, according to NTCA.

Some 70 percent of carriers owning a license below 2.3 GHz have a 700 MHz license, 47 percent have an AWS license, 47 percent a PCS license, 13 percent some other license

(such as microwave), 11 percent cellular, six percent paging, and two percent SMR. For the most part, those are “access” frequencies.

About 21 percent of the 31 reporting companies hold at least one license above 2.3 GHz. About half of service providers holding a license above 2.3 GHz have a BRS license, 25 percent an LMDS license, 17 percent a 3.65 GHz, 17 percent a license at 11 GHz, and 17 percent a microwave license. While BRS and LMDS are “access” frequencies, the others likely are used for trunking.

The average cumulative investment in wireless facilities, excluding spectrum, is

$6.2 million, while average cumulative investment in spectrum totaled $646 thousand.

About 46 percent of respondents are using unlicensed spectrum to provide some

wireless services.

About 28 percent of those respondents offering mobile service  resell another carrier’s service under their own brand, and 21 percent do so under a national brand. So 39 percent “resell” or have an agency agreement.

Sprint Can Get Financing for T-Mobile Bid

Sprint reportedly has gotten assurances from at least 

o banks about the feasibility of raising enough money to finance a takeover of T-Mobile US. 

The proposals envision a total enterprise value (value of outstanding equity and debt) of about $50 billion for the deal.

It might cost $31 billion to buy all T-Mobile US shares and then also raise about $20 billion to cover the cost of assuming existing T-Mobile debt. 

But financing is likely to be the least of concerns about any such combination. The bigger issues involve antitrust clearance and approval by the Federal Communications Commission, since the U.S. Department of Justice already has said it considers the U.S. mobile market too concentrated already. 

Sprint to Enable Free Wi-Fi Calling?

Sprint reportedly is going to enable " no incremental charge" calling when users of at least a couple of Sprint phones are in a Wi-Fi zone, without counting against a customer's voice usage cap.

As reported, a customer will simply need a compatible device (possibly Samsung S4 Mini or Galaxy Mega), enable the feature through a web interface and begin using it. 

No monthly charge will be assessed for turning on Wi-fi Calling, apparently. 

Offering such features ("free calling") often makes sense for a service provider when the risk of cannibalizing revenue is slight and when the network is lightly loaded enough that a significant increase in usage will not stress the network and when there are other business reasons for encouraging usage. 

In this instance, the happy set of circumstances seems to include the fact that the Sprint 3G network will start to see less demand as traffic shifts to 4G (apparently the Wi-Fi calling feature requires presence of a 3G signal). 

The Wi-Fi calls are domestic only, and of course all the leading national providers have found that voice usage keeps dropping anyhow, freeing up voice network capacity.

In this case the 3G network resource primarily used might only be the signaling network, as most of the time only the signaling network actually will be consuming network resources. Only in case of an emergency call being placed would actual bearer traffic be imposed on the 3G network.

The new feature also might create some distinctiveness for 3G network access, the supported handsets and Sprint's access services in general.