Planning for 3G : Future-proofing your

business model and architecture

1
Introduction to the Whitepaper

3G technology has come a long way from its much-hyped beginning

in the early 2000s. Increased proliferation of smartphones, wider
availability of faster networks, attractive pricing and a rich ecosystem
of applications and content have accelerated 3G adoption
significantly in the last eighteen months. As many operators in India,
Thailand, Vietnam and Pakistan , get ready to bid for 3G licenses, it is
critical that they assimilate the key success factors to create a future-
ready business model. This white paper provides the background to
help operators navigate the following
Learnings from 3G Evolution
Strategy for the Indian market
Network rollout implications

Section 1: 3G Evolution and Key Trends

3G strategies of operators have changed significantly from the early

phase of disillusionment that marked the early 2000s. Today we are
witnessing a combination of supply side and demand side factors that
provide robust opportunities for service providers.

The key drivers are as follows

3G Adoption witnessed robust acceleration in 2008 and is likely to

reach the maturity sweet spot of 25 to 30% by 2010 globally

Globally there are now over 125 mn HSPA subscribers and over 240
commercial deployments. HSPA+ has already premiered in many
regions boasting peak download speeds of 21Mbps with 42Mbps
networks expected by the end of 2009. Within Asia at the end of 2008
3G devices accounted for more than 10% of the regions massive
mobile base of 1.9bn subcribers and we expect more than 564m users
in the region by 2013. Asias most developed markets Japan and
South Korea now have the vast majority of their mobile subscribers
using 3G devices, while other mature markets like Australia, Hong
Kong, Singapore and Taiwan are all approaching the 40% threshold.
Even the most emerging markets like Indonesia, Malaysia and the
Philippines are seeing healthy uptake in emerging markets, and are all
approaching the 10% threshold.

Going forward we believe that the sweet spot for 3G will be in 2010
where developed countries would have adoption rates similar to
Japan and South Korea. As illustrated in Exhibit 1.1, globally 3G
penetration would improve to 30% by 2011.

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 Exhibit 1.1: Global 3G penetration 2007-2012

Region 2007 2008 2009 2010 2011 2012

W Europe 17% 31% 49% 67% 80% 88%

North 21% 30% 39% 47% 56% 64%
America
Asia/ 5% 6% 8% 13% 18% 25%
Pacific ex
Japan
Eastern 2% 4% 8% 13% 21% 31%
Europe
Latin 1% 2% 5% 8% 15% 24%
America
Overall 8% 12% 17% 23% 30% 37%

3G is witnessing a combination of aggressive conversion and usage

stimulation. This phase is unlike the early hype phase of early 2000s.

If we draw a parallel to the adoption of fixed broadband market , this

stage is similar to the experience curve of the fixed broadband
marketin the early 2000s that witnessed a rapid conversion from
narrowband to broadband due to greater investments in bandwidth
by incumbents, flat rate packages that spurred usage and newer
applications like consumer generated video and web 2.0 services.

Exhibit 1.2: 3G Adoption and Evolution compared to fixed broadband

Aggressive Conversion Usage Stimulation Web 2.0

Phase : Always on services, and Rise of video
broadband connections
with attractive pricing 58%
Network 53%
Improvement Phase
45%
: ADSL ++
Early Hype 35%
Phase : Internet 30%
boom 26%
20% 17%
12% 10%
8% 5%
4% 2%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
3G Mobile Penetration Broadband Household Penetration

Early Hype Phase :
Pricey Licenses ,
USA figures
Aggressive Conversion
: Smartphones + Pricing
Network + Richer Services
Improvement Phase :
UMTS/ W-CDMA to
HSPA

3
3G Adoption as an alternative to fixed broadband is encouraging
even in lesser developed markets like Malaysia and Philippines.

Even though 3G uptake is weaker as a whole in emerging markets, the

technology is making an impact in a big way in markets where 3G
services have been introduced aggressively. In Malaysia as Exhibit 1.3
demonstrates since HSPA premiered in 2007 3G wireless broadband
subscribers have made up 43% of the countrys new broadband
subscribers and an impressive 46% of net broadband additions in 2008.
This is a scenario that is happening all over the region in markets like
the Philippines, Indonesia and Sri Lanka, and quite likely to happen in
the regions pre-3G markets like India, Pakistan, Vietnam and Thailand.

Exhibit 1.3: ADSL vs. HSPA Quarterly Net Additions in Malaysia,

2007-2008

180
Quarterly Net Additions (000s)

160
140
120
100
80
60
40
20
0
Q207 Q307 Q407 Q108 Q208 Q308 Q408

ADSL HSPA

The success of the smartphone as a consumer device has

fundamentally improved the ease of use in access and discovery of
3G services. In 2008, more smartphones were sold compared to
notebooks and by 2010, smartphones will overtake PCs thus providing
unprecedented scale.

Smartphones made significant headway across the globe in 2008, and

are also a key component of any 3G portfolio play. The iPhone is still
in the limelight as most operators in markets where it has been
launched and continues to post impressive statistics on subsequent
ARPU and data-usage for its users. Exhibit 1.4 provides an overview of
some of the effects smartphones have had in various markets across
the world. For example, in the United States the first operator in the
world to launch the iPhone AT&T Wireless reports that its iPhone users
generate an ARPU of US$90, 60% higher than its normal contract ARPU
of US$52. In Singapore the iPhone ARPU is 1.5 times that of its normal
contract ARPU, while in Australia 55% of Optus iPhone users were new
to the carrier. The Blackberry Storm is attracting 3 out of four users to
Research In Motion (and more importantly push-email service) and
the heralded G1 device from Google is now accounting for 20% of T-
Mobile USAs new contract additions. Clearly smartphones are
changing consumer behavior like never before by enabling
consumers to acess the Internet via mobile devices.

4
Exhibit 1.4: Selected Global Smartphone Impact Metrics

Device Market Operator Result

100,000 subscribers who
use 30% to 40% more data
iPhone Netherlands T-Mobile
than average and a 20% to
23% higher ARPU
Users have double the
iPhone Finland TeliaSonera
ARPU or normal users
AT&T ARPU is US$90 compared
iPhone USA
Wireless to US$52 for non-users
55% of users were new to
iPhone Australia Optus
the operator
30% of users were new to
the operator, ARPU is 1.5
iPhone Singapore SingTel
times the normal postpaid
ARPU

Exhibit 1.5: Impact of iPhone on mobile content consumption

Emergence of third party application stores that provide greater

revenue share to developers and enable consumers access a greater
variety of applications is a crucial tipping point.

Exhibit 1.6: Rapid progress in application stores

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Within 8 months of launch Apple was able to source 25,000
applications across twenty categories and generate close to 800
million downloads. As other vendors like Nokia, RIM and Microsoft
expand their app stores , many operators like T-Mobile, O2, and AT&T
and Vodafone are also creating SDKs for their telco based app stores.
The ease of accessing these applications through the phone has
removed one of the critical hinderances in 3G aroption.

Applications like Mobile TV, social networking on mobile and VOIP are
also showing increased traction

One notable example of a successful 3G play is Australian incumbent

Telstra, who has launched 3G streaming TV services over its 7.2 Mbps
Next G HSPA network. The operator already had over 100,000
recurring monthly customers in 2008, and 21% of the operators
installed base has tried mobile TV each month. Telstras mobile TV
users watch an average of 54 minutes of 3G TV per month, usually in
short bursts of under 2 minutes. Moreover, Telstras mobile TV
customers generate an additional A$11 per month towards the ARPU
(Australias current mobile ARPU is roughly A$46).

Another key service that is gaining traction in the 3G market is the

prospect of mobile VoIP. Nokia is currently preloading Skype on its
N71 series in several European markets but the most famous example
is the Skype-branded phone which 3 launched in then UK in 2008.
Somewhat counter-intuitively Skype phone users in the UK have an
ARPU which is 20% higher than 3s average ARPU due to increased
data traffic and a stunning 79% of users are new to the operator. Of
course, a state-of-the-art 3G network is a prerequisite for mobile VoIP
and operators who have data-centric 3G networks will be best
positioned to capitalize on this emerging growth segment.

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Another popular service is the use of social networking sites like
Facebook on mobile. Facebook users who use their mobile phones
are 50% more likely to be active on their profiles. Out of Facebooks
140 mn active profiles, close to 15% of them are active on the mobile.

The ability to provide a richer portfolio of applications and services will

enable improvement in data ARPUs

Exhibit 1.7: Data ARPU trends

The long-term trend for 3G is robust but operators must ensure the
following

Take a portfolio approach to 3G services and expand the set

of applications and services
Exploit new trends that expand the addressable market and
ARPU potential
Adopt a clean-slate approach to avoid repeating the mistakes
of other developed market operators

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Section 2: 3G Market Scenario

Most operators in emerging markets are unsure of the demand

potential for advanced 3G services or tend to focus on 3G to gain
additional spectrum to carry voice. However, there are strong market
drivers that should prompt operators to look beyond this narrow
perspective and embrace a future-ready business model. The key
reasons for this are as follows

Extreme competition in the voice business would erode margins in the

light of weakening demand elasticity

In markets like India ; the country already has eleven mobile operators
and with three new entrants on the way the country will have more
mobile operators than any other country in the world. The spate of
new pricing wars that have reduced voice tariffs in several markets like
India, Indonesia, Bangladesh , will put further pressure on ARPUs.
Although there is still robust rural demand, the business case from
marginal rural consumers could deteriorate. The other possibility is that
MOUs could flatten out and there is no demand elasticity from lower
tariffs. This would mean that the bottomline would get impacted
directly going foward if the ARPUs continue to decline faster than than
the MOUs for the next few years. This coupled with high churn rates
and falling voice tariffs means that a wireless data strategy will be
essential for operators going forward.

Sizing the market: Indian example

With urban penetration likely to cross 80% this year, various methods of
analysis point to an addressable 3G market of atleast 60 mn
subscribers in the next three years

The urban mobile penetration in India would reach 90% by mid of 2010
when it represents close to 67% of the mobile subscriber base. If we
look closely at the Indian mobile market , the early adopter base
which adopted mobiles in the initial years of 2002-2005, forms an
attractive target base for 3G adoption. Initial estimates of this market
would be between 50-60 mn at an ARPU of Rs.500 p.m. This
addressable target base can also be estimated through other
methods like economic affordability and the current set of active
internet users in India who would have the desire to access the
internet .

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Exhibit 2.1: Estimation of 3G market potential in India

It is critical to envision the market scenario of 2010 to create the right

business model and leverage the virtuous cycle that is emerging

Our analysis of various market parameters indicate that the mobile

market could be more optimistic for 3G within a couple of years. By
2011, smartphone prices would come down significantly, close
enough to establish price points similar to music enabled phones that
are popular today. Handset manufacturers are already coming up
with budget smartphones around $200 targeted at the mass market.
Another example in point is the sub $ 100 Facebook phone that is
being developed by Hutchision . The phone, called INQ1, features a
'live contact book' that lets users see their contacts' Facebook profile
picture and online status. Users can receive live updates from
Facebook on the front screen of their handset and upload pictures
from the phone's camera to their profile.

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Exhibit 2.2 The difference during launch time versus current

Encouraging consumer demand for wireless broadband that can be

supplemented with a greater push through netbooks

Due to the low penetration of fixed broadband, wireless broadband

has tremendous potential due to its higher reach and larger
addressable market that extends beyond PCs to netbooks and
smartphones. Just like smartphones, netbooks are likely to gain
significant scale economies and would be available at significantly
price points lower than $ 500. This coupled with the fact that markets
like India, Vietnam, Thailand have one of the lowest broadband
penetration provides an important driver to reach the high targets set
by government agencies to improve infrastructure.

Benchmarking current MVAS/applications with an iPhone would

suggest a need to have a large number of specific applications and
services for the addressable 3G subscriber base.

There is no killer app for 3G services but operators need to invest in the
entire service portfolio. Piecemeal aproaches have not worked in the
past and there is need to shift from launch a service periodically to
build a portfolio and suitable platforms that support them. This
integrated approach provides as such the operators need to have a
sizeable service portfolio to enable revenue enhancement. As
illustrated in Exhibit 2.3, the 3G service portfolio should have a mix of
drivers and stickiness builders. This portfolio approach thus provides the
maximum probability of building customer experience and thus
enhancing ARPUs.

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Exhibit 2.3 Service Portfolio Strategy

Flat rate Community Mobile Mash up Niche apps Rich

access and entertainment services communications
networking and commerce

Mix of location Kids monitoring

All you can eat Broadcast TV, Video IVR
Service Integrated with and other Surveillance
mobile broadband On-demand Video chat
attributes SMS alerts integrated Security
access video, games Shopping
services
Business apps

Role of
service

Driver Platform leverager Stickiness builder

The business case for 3G is dependent on the subscriber base, the

levels of data ARPU and the network capex per subscriber

The business case for 3G becomes very important during a financial

crisis. Since the addressable market for 3G is typically in the top cities ,
the key influencer is the penetration of higher end devices and the
level of ARPU . The mix of voice and data traffic and the geographical
concentration of subscriber base determines the network capex
which determines the overall business case. In a lot of markets like
India where operators have less spectrum , operators look towards 3G
for additional spectrum to boost their capacity for voice traffic. Here
the key determinant becomes the cost of the license since there is no
strategic differentiator if its predominantly a voice play.

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Section 3: Network Rollout Implications

3.1 3G Network Evolution of various operators

The key challenge is to identify the relevant network path to migrate a

mobile architecture to cater to the future service portfolio. The
original version of WCDMA was based on R99 version , a pure TDM
based network. Later, 3GPP enhanced the standards and
specifications to include IP functionalities in the R4 and R5 networks.
The idea was to build a network based on IP protocols with minimum
changes to network elements and facilitate a rapid evolution to IP
centric, IMS and Intelligent Service Gateway network infrastructure.

The early 3G operators that deployed a R99 version had to spend a

significant amount of Capex to upgrade to R4 and R5, as it involved
incorporating new nodes in the core network, primarily MSC Server
and MGW; the idea of separating the control and user plane. The
early players connected the Packet Switched (PS) components of the
core nework with an IP cloud while leaving the rest to ATM/TDM based
switching. Later the 3G operators chose to deploy R4 based network
architecture, hence reducing the time to deploy an end-to-end IP CN
network while at the same time enjoying a significant cost saving
benefit.

Figure 3.1 provides the key decision choices for operators

Radio Access Network Core Backbone

TDM core -
TDM mobile ATM/FR 2G full TDM
2G Access legacy
backhaul backbone Network
switches

TDM core -
TDM mobile ATM and IP
2G Access legacy
backhaul backbone
switches
Complex Network
Hybrid TDM
TDM mobile core -legacy
3G Access IP backbone
backhaul and soft
switches

TDM mobile
IP Core - All IP Core, IP
3G Access backhaul but IP backbone
Soft switches ready backhaul
IP ready

Multi-radio IP mobile IP Core - Soft

IP backbone All IP Network
Access backhaul switches

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Many operators across the world have already started incorporating
IP in their networks either on a progressive basis or a reactive basis. The
movement towards IP transformation in the core and backhual
networks began in 2007. Exhibit 3.2 provides a snapshot of various
operators who have deployed IP in their network.

Exhibit 3.2 IP Evolution in APAC operators

In markets such as Thailand, Indonesia and China, the incumbent

mobile operators are leading the transformation towards IP where as
in most other markets in Asia, the competitive mobile operators are
more aggressive in adopting IP technology in markets like Malaysia,
Singapore, Sri Lanka and Vietnam. The incumbent mobile operators
most often have an existing investment in legacy technology and
equipment and hence are usually late in adopting the IP technology.
However, competitive mobile operators are late market entrants and
usually have the option to go IP right from services launch. The
diagram above shows the progressive operators (mostly CMOs) that
have adopted an IP platform compared to reactive operators (mostly
IMOs) that were slower to respond to the new technology landscape.

The choice is not whether to build an IP based network or not but to

determine the degree of IP readiness for the network. The operator
can choose to build an IP ready network and upgrade later. Some
operators choose to build a hybrid IP network in which the packet
services run on an IP network while the QoS guaranteed network will
run on TDM/ATM architecture.

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3.2 3G Network options for developing new 3G market operators

New 3G operators will have three options to construct their 3G

network

Option 1: Site by site oriented network with IP functionality

The first option will be to roll-out an ATM network but with IP

functionalities ready. This choice will suit operators that have
significant investments in traditional ATM/TDM networks. Here the main
objectives are to look at cell sites and the RAN first and then think of
suitable backhaul options depending on the requirments of the
locality. Typical deployments would also groom traffic from various
TDM sites at an aggregation point and then go IP or Ethernet. This
architecture limits the ability of operators to undertake large scale
launches of new services since an end-to-end visibility does not exist
and inordinate delays in service launch can lead to loss in market
share to competition.

Option 2: Hybrid Network

The second option is to construct a hybrid IP network, where the

traditional voice and QoS guaranteed services will run on ATM
network while the data applications are transported an IP network.
This strategy is well suited for mobile operators that want to protect
their initial investments in ATM network and at the same time want to
offer premium content services. Once the investments in ATM become
a sunk cost and the IP network has reached a maturity stage, the
mobile operator can switch to an all IP network.

Option 3: Fully IP based network

The third option is to construct a full IP network right from start. This
path will best suit greenfield operators as they have no legacy
investments to protect. Such a strategy will prepare the operators
network to launch premium data services. The operator can position
itself favorably in the market by efficiently rolling out premium data
applications. There might not be much savings in terms of capex
between building an ATM network compared to IP network, but in
terms of opex there are significant cost savings.

A common assumption is that the Brownfield operators would have

already implemented an IP Core Network architecture. Should a
Brownfield operator choose to take the first two options, the move
towards IP RAN will depend on continuous monitoring of the network
traffic and bandwidth availability on a site-by-site (bottom-up)
approach. When confronted with a site-by-site approach, the
operator will assess the current bandwidth requirement on live network
traffic and decide the best course of action to implement IP RAN. If
the operator were to choose this path, the cost of upgrading the ATM
based network to IP at a later stage will be higher and the impact on
the network in terms of service interruption will be greater. Since, most
vendors currently support multiple access medium technology (e.g.
TDM/ATM/IP), the choice to implement ATM and later switch to IP will
not be cost efficient.
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The key benefits of moving towards option 2 and 3 network are as
follows.

Item Description
Reduced Transport Cost IP networks provide easy-to-acquire transport bearer resources and
allow low CAPEX. With header compression and packet
multiplexing technologies, the transport efficiency of IP-based E1 is
higher than that of ATM-based E1.
Abundant IP interfaces Abundant IP transport interfaces will meet the requirements of
meeting requirements of different RAN networks, suitable for future network evolution, and
different Ran networks and supporting quick network construction.
evolution
Faster launch of new IP transport can provide more bearer bandwidth for RAN traffic,
services which enables operators to launch new services easily, meeting
subscribers' demands and enhancing their competitiveness.
Savings on maintenance Compared to ATM transport, IP transport has distinct advantages in
and management cost base station maintenance, expansion and relocation
Full compliance with RAN will evolve and have an entirely flat architecture in the future.
evolution to an all IP IP transport is applicable in the flat network scenario, which meets
network the requirement of operators for investment protection.

Right choice of radio access equipment and network design

In a site-by-site approach, the operator will assess the current

bandwidth requirement on live network traffic and decide the best
course of action to implement IP RAN. If the operator were to choose
this path, the cost of upgrading the ATM based network to IP at a later
stage will be higher and the impact on the network in terms of service
interruption will be greater. Since, most vendors currently support
multiple access medium technology (e.g. TDM/ATM/IP), the operator
can deploy equipment which has all the requisite interfaces.

Scalability, Flexibility and Modularity

The evolution of access technology and proliferation of data services

has led to an increase in the service rate on the air interface. If the site
is a pure 3G site, the E1 requirement is approximately 2E1. However,
should the operator choose to upgrade the site to cater to HSPA, an
addition of 2E1s might be required. This could create a bottle neck if
the operator is leasing backhaul capacity from other operators, and
dampen the roll-out of premium content services.

If the mobile operator chooses to implement IP architecture from

launch or to at least enable an IP ready network, the operator will
have the capability to turn on the IP network instantaneously. This will
reduce the anticipated cost and time to launch for new services that
require more backhaul capacity. This will provide the operator the
flexibility to manage its network maintenance cost at an acceptable
level, The idea of reduced transport cost and savings on maintenance
cost should be a prime factor to consider when rolling out new
applications.

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On the other hand, most vendors provide modular design capabilities.
The operator can upgrade accordingly based on backhaul
bandwidth requirements either on an IP architecture platform or
choose to launch a hybrid IP network for a start. The upgrade step for
IP is usually in the steps of 5 or 10Mbps; hence the operator is paying
less for more bandwidth in the long run compared to traditional E1
lines, while at the same time maximizing utilization with the types of
application that needs to be launched. It is of paramount importance
to prepare the network for future functionality enhancements and
technological innovations as IP will be the way to go based on current
trends within the standards body in 3GPP.

Decoupling Bandwidth from Cost

The cost of backhaul for any mobile operator constitutes

approximately 20-30% of Opex. Hence, the type of transport
technology chosen will determine the cost of maintaining the network
and eventually the type of data applications to offer to subscribers.
Owing to the fact that ARPU from traditional voice services are on the
decline and ARPU from data applications are facing intense
competition from broadband service providers, the operator has to
reduce the cost per bit. The cost pressure has compelled many of the
mobile operators to leverage on IP technology as the key enabler of
transport network.

A single E1 that is only capable of delivering a 2Mbps backhaul

capacity compared to 10Mbps for an IP/Ethernet transport medium
will eventually reduce the cost per bit of data transferred. A 10Mbps
will provide 5 times the capacity compared to an E1 line. Another
factor to consider will be the fact that IP/Ethernet is technologically
neutral to the transport medium since it can be used as a mode for
almost any connection available; ADSL, fiber, WiMAX, copper, etc.

Support, management and control for wide variety of applications

Even if the operator offers only broadband access as the primary

service, In order to increase bandwidth and at the same time prepare
the network for an explosive amount of data traffic once the price of
these applications flatten out in the long run, mobile operators need a
network with the right backhaul capacity . At the same time they
need the capabilities to tierize bandwidth by user and class of service
and have adequate control mechanisms to offer mash-ups which
need synchronization of various network and sofware elements..
Network nodes such as GGSN, SGSN, MGW and MSC Server which
traditionally run on ATM/TDM platform currently support IP
functionalities with much higher processing capabilites, usually in
multiple steps of 10Gbps. The higher processing capability is a
preliminary step to build an all IP core network. However, if the nodes
are fitted in with IP functionality, the true ability of IP platform will only
be realised once the transport network is also on IP.

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3.3 Key determinants of the network decision

The key influencers of the network decision are as follows

Parameters Description

Service Portfolio at Lot of operators try to do the basic minimum set of services at
launch launch to prevent delays or risks. This leads to a myopic
network vision
Greenfield vs Greenfield operators in certain markets like 3 and E-mobile
Brownfield operators pursued an aggressive strategy that also reflects in an IP ready
network.
Operator heritage The network architecture of operators who have both fixed and
mobile and also a strong enterprise data services business
would envision a network that can maximize investments. For
instance an integrated operator can take a multiplatform NGN
based approach that integrates fixed, mobile and business
requirements
Owned vs leased Many operators depending on the regulatory scenario tend to
backhaul own fibre or lease it from wholesale providers. Ownership leads
to a better cost structure and the resultant gains of moving to
IP are maximized faster
Vendor Influence Operators typically for the first cut of their 3G business plan
are likely to go to a RAN based vendor since it represents 80%
of the costs. Although some RAN based vendors also have a
core solution , implicit tradeoffs assumed in this process stay in
the network for a long time and can impede the right
architecture in the plan

It is prudent to consider an IP based network vendor based on their

specialist skillsets and the ability to support multiple vendors at the
RAN.

IP network requires specialist skillsets

As the traffic demand for data applications rise and the

interconnection between fixed line/IP network become more
frequent, there are complex handovers between cells and between
MSCs in the network. As all systems on the mobile communications
network are moving to an all-IP structure , mobility in the IP layer and
handover have become major issues. The Internet Engineering Task
Force (IETF) has defined mobile IP to support host mobility, and is
working to implement standardization to enhance mobility through
the Mobile IP working group.

Due to the above, it might be important to implement the IP

component of the core and radio network separately compared to
the traditional network elements. The IP component requires a
specialised domain knowledge with very focused emphasis on
product development roadmap. This will entail significant investments
in R&D and separate IP vendors will be better suited to handle this
environment. The traditional network elements have been built to
cater to the increasing packet traffic by incorporating IP
functionalities in terms of hardware and software. However, the
transport network is a separate component and even if the mobile
operator chooses to intergrate that component with the rest of the
network requirements, the RAN vendor will most often outsource this
component to IP vendors.

17
 Multi-vendor RAN support

Most operators have multiple RAN vendors and this can vary by
geography. Hence, the mobile operator will need the ability to
manage different equipments from different vendors with the same
protocols for interconnectivity. Other supporting functionalities such as
traffic and user behaviour monitoring, optimization of network
resources and planning can be done independent of the RAN
equipment thus providing greater scalibility to the operator. Owing to
the fact that most traditional network infrastrcture vendors do not
have this capability, it will make commercial and technical sense to
plan the network rollout in an integrated manner.

Section 4: Choosing the right network strategy

The right transformation approach

To decide the right transformation approach, operators need to

outline their strategy in terms of their customer value proposition and
their operational strategy. This can lead to the following options as
illustrated in Exhibit 4.1

Developer
Developer NEW Market Creator
Market Creator

Makes new products and services available to large Delivers steady stream of value added products /
C u s to m e r P ro p o s itio n

customer base (usually once the need for these new services to customers, anticipating customer needs.
products / services starts to become more homogeneous / Often results in quantum leaps in customer value, for
mass market) which customers are often willing to pay a price premium
Seeks to expand market presence to gain scale and Tends to focus (product, customers / markets and / or
decrease prices. However focuses growth opportunities in geography)
areas where core capabilities can apply
Growth obtained from gaining market share or creating
Growth obtained from increased penetration and market new demand
expansion
ADAPTIVE
EFFICIENT Company Proposition
Optimizer
Optimizer Customizer
Customizer
Delivers broad range of established products /services to a Delivers superior service and highly segmented customer
large customer base (full service provider). propositions

Customer value proposition centers around steady price
improvement (leveraging economies of scale), reliability,
excellent but basic service, a trusted brand name and a
large coverage / range of applications
Growth obtained from fast follower
Provides either integrated solutions through packaging of
products / services or superior service to selected customer
segments
Growth obtained from cross-selling and ability to derive
price premium through customization / packaging

ESTABLISHED

The key options that exist are

1. Market Creator: The strategy of the market creator is to
stimulate the demand for new services by fostering innovation
and creating an adaptive mindset to achieve the same. The
market creator is likely to be the first to market with new
services and show superior consumer insight. A good example
of a market creator would be Apple through its iPhone launch
which resulted in a significant time to market advantage.

18
 2. Developer: The strategy of the developer is to cater to all the
segments and maintain the scale and breadth of his current
operations. The developer strategy needs integration of
processes and high level of standardization across various
business units to achieve the goals of offering new customer
propositions in an efficient manner. A good example of a
developer is Nokia which tries to lead in all handset categories
ranging from the smartphone to sub $ 50 emerging market
phones.
3. Optimizer: The strategy of the optimizer is to defray the risk of
innovation and wait for the demand to ripen or mature. This
kind of a fast follower approach needs exhibition of a steep
learning curve and the organizational capability to maximize
penetration once the demand readiness has been
established. A good example of an optimizer could be the
Korean conglomerates approach to the consumer electronics
business.
4. Customizer: The strategy of the customizer would involve
choosing specific customer segments like the youth and
deliver a superior value proposition to them. A good example
of this is Blackberrys approach to dominate the corporate user
with a product tailored to their needs of staying in touch with
office mail. Although the customizer can succeed in a nascent
market initially, as the market matures an expansion beyond
this customer base would become crucial.

Based on the strategic option chosen by the operator, the network

strategy can be aligned accordingly.

For the developer, a pragmatic approach to IP by choosing a hybrid

option would be good whereas for the optimizer the migration to IP
would come at a later stage. The market creator would embrace an
IP-heavy approach to be future-ready and have significant flexibility
to launch the various services. The customizer is more likely to adopt IP
from a control and management perspective to ensure that the
services are well-matched to the consumption patterns of the key
segments.

Exhibity 4.2 Aligning the network strategy to competitive strategy

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 NEW
Developer
Developer Market Creator
Market Creator

C u s to m e r P ro p o s itio n
Would atleast be ready with a hybrid network with the
Pragmatic approach to IP ; atleast hybrid network in
option to rapidly deploy IP in case of subscriber
the metros and key areas
demand
Mainly TDM switching infrastructure, soft switches
Large service portfolio to necessitate IP in the core
deployed to fulfill requirements of extra capacity

ADAPTIVE
EFFICIENT Company Proposition
Optimizer
Optimizer
Customizer
Customizer

IP decision is largely a function of timing , although Best of breed solutions to ensure high QOS
once decided the movement can be swift to gain Deployment of platforms in the core to deliver
efficiencies converged services
Core switching done on both legacy switches and
soft switches

ESTABLISHED

The business case for IP based network

The main drivers of the business case for an IP based network are the
cost savings in the various parts of the network. We have divided these
cost savings potential into key buckets

Capex savings on a stepped basis (Scalability benefits)

Hardware footprint (space)
Power consumption
Backhaul efficiency
O&M expenses
Service rollouts ( savings in time and effort)

Just like there is no one size fits all, different networks can experience
different cost savings based on the mix of network elements, type of sites
and backhaul scenarios. The above cost drivers also have a differing
impact on the network. Hence there is need to use a two factor model ,
to take care of these multiple scenarios in terms of network architecture
and achievability of these savings as follows

An importance weight that determines the contribution of this

driver to the cost saving potential
A degree that is an indicator of the variance of the savings
due to difference in architectures

Frost and Sullivan believes that the above framework can help
operators understand the potential of cost savings that can be
realized by moving towards an IP-centric architecture. The
application of the framework would involve discussions with operators
to understand their network architecture and would be part of further
studies on this topic.

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Conclusions

Mobile operators in developing markets should look at the business

case of 3G and align themselves to some of the key trends shaping 3G
adoption globally. Based on that they need to design their
competitive strategy and the network rollout would mirror the
competitive strategy. The degree of IP readiness would vary by
operator but it remains a crucial decision point in the evolution of
mobile operators into offering a broader set of services that would
attract consumers and improve revenues.

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