Q3 2013 Mobile Market Update

The mobile infrastructure market continues to be a bright spot for the telecom industry. According to the industry statistics (GSA), 109 LTE networks have launched commercially in the past 12 months for a total of 222 commercial networks in 83 countries. The GSA expects 260 commercial networks by the end of 2013. Additionally, 474 operators in 138 countries are investing in LTE, of which 421 have made commitments to deploy.

Additionally, mobile broadband is living up to growth expectations: subscriptions are now over two billion, and the number is expected to grow to 9.3 billion by 2019. Of these, there are currently 100M LTE subscribers, and this expected to grow to two billion in five years. This approximate 4X growth in subscribers will drive a 10X growth in network traffic.

Mobile infrastructure spending remained strong in Q3 2013, up 3% annually to $1.2B. This growth is because of the continued strength in LTE globally, although North America is starting to peak, but other geographies are starting their ramp. The Chinese wireless carriers are just beginning their deployments, and we should see extensive growth in the coming quarters. EMEA is awakening from its slumber is starting to show signs of life.

Mobile IP Backbone grew 4.3% Y-Y. Mobile IP Backhaul continued its robust growth at 21.7% Y-Y as additional backhaul capacity is needed to deal with the increase in data handled at existing base stations as well as for new small cell sites. The Mobile Packet Core segment was down double digits Y-Y, primarily because of delays in North America.

Small cells have been one of the major hubs of innovation in the past few years and did not disappoint this quarter: it grew 42% Y-Y, with growth across all segments. Femtocells increased 57% Y-Y; picocells increase 34% Y-Y; and micro/metrocells increased 31% Y-Y. SP WiFi remained strong at 40% Y-Y increase and IP backhaul grew 22% Y-Y.

Small cell adoption has not been a smooth curve as some carriers misjudged consumers’ price sensitivity early in the adoption cycle and the demand did not meet initial expectations for femtocells. ACG sees the most interest in unlicensed spectrum/WiFi offload because of the lower costs and increased flexibility. Other issues that will impact adoption rate are LTE transitions/hetnet operations, hotpsot 2.0, new backhaul technologies such as millimeter wave and free space optics (FSO), and power.

The capacity enabled by LTE is rapidly changing the face of information technology and enabling the always-on/connected society. The next wave will enable high-quality video entertainment, video communications, gaming, location services and commerce, not just voice calls and texting. The race to  provide these services and be more than dumb pipes is paramount to MNOs. This pressure is propelling technology vendors to develop the solutions to enable and control this complex environment.

For more information about ACG's mobility services, contact sales@acgresearch.net.

David Dines
ddines@acgresearch.net
www.acgresearch.net

MWC 2013: New Venue, New Industry Spirit from Barcelona

Mobile World Congress 2013 has given the industry a boost of revitalization, focused on creating change and driving technology innovation to improve how we connect.

Mobile World Congress 2013 wrapped up last week in Barcelona at a new venue, the magnificent Fira Grand Via, with record attendance. Although this attendance created too much traffic and congestion, it did not dissuade industry delegates from collaborating and demonstrating a new industry spirit focused on innovation and human advancement in the area of mobile technologies.

Even without notable industry leaders such as Apple, Google, Microsoft, and Facebook, which declined to participate so that they could maximize their own events for major announcements, LG, Huawei, and ZTE took main stage with audiences and industry press. Samsung clearly established position with sizable show investment in the areas of mobile devices and consumer focused messaging, though it also decided to strategically shift its flagship “Galaxy S4” launch to New York in two weeks.

MWC 2013 showcased new themes; most notably it spotlighted Software Defined Networking (SDN) by vendors. In the mobile IP infrastructure segment, Juniper focused on the release of a virtualized platform for SGSN/MME functions. ACG expects other vendors to update road maps and further make announcements in 2013 in this area.

Machine to Machine (M2M) was another major theme with presentations and discussions on standards-based industry adoption. M2M industry has been fragmented, but mobile SPs see significant opportunity in developing services and ecosystems. ACG expects M2M data traffic to consume 20 percent of global mobile data demand in five years.

Small Cells segment saw a plethora of announcements: silicon leaders such as Broadcom and Texas Instrument released new product families to support multigeneration technologies such as 3G and LTE within a single System on a Chip (SoC). 

Mobile SPs also announced initiatives, such as cloud-based services to support third-party (HTML5 compliant) platforms from Jolla, Mozilla (Firefox OS), and Ubuntu (Linux).

Although much of the discussion was focused on the OTT industry segment and how to work together, ACG believes mobile SP business models will need to further evolve to adopt the range of innovation offered by companies such as Viber.

MWC 2013 did not disappoint. Attendees walked with innovative ideas and information, which will, no doubt, will be the foundation for creating more change and driving technology innovation in 2013.

For more information about ACG Research's mobility syndicated and consulting services, contact sales@acgresearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

LTE Acceleration and Mobile IP Backhaul Fuel 4Q 2012 Market Growth

4Q 2012 Mobile IP Infrastructure market grew 13.5% Y/Y, reflecting strong growth in Mobile IP Backhaul and LTE acceleration.

LTE spending in 2012 has surpassed industry expectations and will continue to grow at unprecedented levels in 2013. In 4Q 2012, GSMA confirms 32 new LTE networks were commercially launched, now totaling 134 LTE networks with subscribed customers running worldwide. Mobile data traffic doubled on global networks in 2012, and is expected to double again in 2013. The proliferation of Android and iOS is also pushing up monthly average mobile data usage; ACG estimates smartphone usage on mobile networks in 2013 will increase to an average 862MB/month, globally.

As mobile SPs undergo service development and differentiation for LTE networks, they are migrating 3G networks to serve as economy class networks for low- to mid-market segment service offerings, such as value plans, MVNO wholesale, and M2M communications. Compared to LTE investments, 3G vendors' revenues still represent the majority of total market spend but will continue to decline globally over next three years. 

4Q 2012  Worldwide  Mobile IP Infrastructure  Market Share
Vendor	Rank	Market Share
Cisco	1	36.3%
Ericsson	2	19.3%
Alcatel-Lucent	3	14.0%
NSN	4	9.7%
Huawei	5	6.5%

SON, SDN, and Virtualization: Impact on Mobile IP Network Infrastructure

ACG expects Self-Optimizing Networks (SON), Software Defined Networking (SDN), and Virtualization to have a high degree of impact to vendors providing SP Mobile IP Network Infrastructure. Many vendors have plans to announce revised product road maps and innovations at Mobile World Congress 2013.  Currently, Nokia Siemens is the only major packet core vendor shipping products using commercial off-the-shelf components using ACTA standard.

ACG expects the market to radically change and innovate with technology shifts and influences occurring in SON, SDN, and virtualization. These shifts will threaten vendors’ positions and value propositions, as network economics evolve and mobile SPs adopt distributed core architectures.

For more information about ACG Research's EPC syndicated and consulting services, contact sales@acgresearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

3G Technology Slowdown Prompts Vendors to Refocus

Diminishing revenues in 3G technology contributed to the Worldwide Mobile IP Infrastructure market decline of 4 percent in Q3 2012. Traditional mobile radio access network (RAN) vendors will see a massive reduction in macrocell CapEx spending by mobile SPs in the next 4–5 years. In 2012, this trend is emerging in the 3G RAN market, and its effects will continue globally in 2013, with some vendors seeing double-digit declines in 3G revenues.

Mobile service providers are struggling to maintain profitability against the data tsunami and network capability (in some cases data growth of 30% monthly), which is forcing these them to rethink CapEx and OpEx models. For mobile SPs faced with tough boardroom decisions, traditional mobile “network economics” and business plans do not work. Network performance, optimization, and small cell-based capacity planning is top of mind for these executives.

All Tier 1 vendors are now refocusing their engineering, marketing, and sales efforts on mobile IP backhaul, LTE, and small cells. Globally, the mobile IP backhaul segment has taken main stage with new product announcements by Alcatel-Lucent, Cisco, and Ericsson. The industry is also seeing strong growth and consolidation in this segment, traditionally represented by specialist vendors. 

Q3 2012 Worldwide  Mobile IP Infrastructure Market Share
Vendor	Rank	Market Share
Cisco	1	32.8%
Ericsson	2	19.7%
Alcatel-Lucent	3	18.5%
NSN	4	9.5%
Huawei	5	6.9%

Evolution of Mobile Industry and New “Network Economics”

ACG estimates small cells will carry 50% of data traffic to SPs’ networks by 2016. The impact of 50% macrocell offload has radical results in today’s $30B+ mobile RAN industry, already seeing downward trends in 3G RAN revenues. Deployment of small cell and its adoption in developed markets will radically shift CapEx spending starting in 2013, and cause tremendous shifts in vendors’ profitability, market shares, and engineering development in the next three years. While this market has been dominated by purpose-built femtocell products from a handful of niche-market vendors, all Tier 1 vendors are aggressively investing heavily.

Q4 2012 will mark significant milestones in small cells industry, with the maturity of next-generation silicon, vendor focus, and capital investment. Small cell represents a massive paradigm shift for the mobile industry; most vendors are offering or have announced next generation platforms ranging from 20mW to 5W licensed radio solutions, designed for indoor/outdoor requirements of mobile SPs. 

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