Tremendous Packet Core Momentum Fuels 2Q Worldwide Mobile Infrastructure Market, Surpasses $1 Billion

LTE-Advanced deployment, Packet Core deployments, VoWiFi trials and the high interest in end-to-end VoLTE solutions are driving the mobility market

The Worldwide Mobile Infrastructure market grew revenue in Q2 quarter over quarter. The Q2 Total Worldwide Mobile Infrastructure market surpassed $1 billion in revenues. The APAC region, mainly China, led this growth during this quarter, followed by EMEA. Mobile broadband net sales were primarily driven by overall radio technologies, specifically LTE. In the North American region the market managed to stabilize, helping most vendors to maintain flat revenues. Although most operators have completed their LTE deployments, it is anticipated that the fast-rising data traffic will definitely require further upgrades of U.S. wireless networks to add more capacity and avoid congestion experiences such as those recently witnessed in New York and Chicago, and generate opportunities for vendors.

Global mobile infrastructure spending posted single digit growth with most carriers adopting a “wait and see” status for new deployments and services. However, Packet Core, specifically EPC, grew in double digits and it is expected this growth will continue in the next quarters as operators modernize the network with new services. We anticipate more spending into EPC but also into virtual solutions, vEPC, in the coming quarters as the trials will start scaling up into commercial accounts. Services virtualization continues to gain traction because of the savings and the short time to market service delivery. More VoLTE and VoWiFi deployments are expected in the next quarters as most operators understand that these services are complementary and offer different benefits for indoor and outdoor support.

“There are three interesting points to note this quarter. The focus of Mobile IP Infrastructure spending has shifted to the Asia-Pacific region, coming mainly from China; the Evolved Packet Core market is the fastest growing segment. This trend will maintain momentum in the next quarters, and it will gain traction even more in North America with significant LTE network expansions,” states Elias Aravantinos, principal analyst, ACG Wireless and Mobility.

“The second point relates to another interesting trend related to the previous trend, the large scale of virtual service trials that are becoming commercial because operators have realized the savings and the advantages when virtualizing certain parts of the network. The first commercial Virtual EPC projects are expected to massively scale by the end of 2015. Finally, there is special focus on Voice over WiFi service adaptation and spending on the Evolved Packet Data Gateway or ePDG, which is a native part of this new infrastructure and ensures the call connectivity between the WiFi and the cellular network. Operators have already understood that there is no competition between VoWiFi and VoLTE and that these services complement, helping them to face coverage, traffic offload and churn issues,” says Aravantinos.

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    Elias Aravantinos

    earavantinos@acgcc.com

    www.acgcc.com

1Q15 Worldwide Video Infrastructure Markets at Crossroads: Where to Invest

Video impact on both fixed and wireless networks key driver for new deployments

The Worldwide Video Infrastructure markets decreased revenue in Q1 and year over year because of a general slowdown in service providers’ capital expenses, uncertainty with mega-mergers and accelerated competition. The Q1 Total Worldwide Video Infrastructure market posted revenue of $3 billion. Set-Top Box Worldwide Market Shares, which includes IPTV STBs, Cable STBs, and DTAs, increased 3.3% quarter over quarter but decreased 12.0% year over year. Cable Set-Top Box Worldwide Market Shares, which includes SD, SD+DVR, HD, HD+DVR, and Hybrid STBs, increased 8.6% Q-Q but decreased 15.5% Y-Y.

U.S. capex was down 14 percent in 1Q and is projected to be down 10 percent in 2Q. The second half of 2015 is expected to be positive, with capex ranging from 2 to 6 percent, but overall for 2015, U.S. capex is projected to decline 4 percent. Europe is projected to increase approximately 5.8 percent, APAC will be up 6 percent and CALA, which was down 4 percent last year, will grow 2.2 percent.

Service providers are at inflection point as to what to do and where to invest and are debating about staying with current infrastructure solutions, adding incremental features and capacity to current installed base. “The realization that video is just packets, albeit a lot of packets, is impacting video specific investments,” states Greg Whelan, video analyst, ACG. “Service providers are driven by content acquisition as OTT momentum continues and access network upgrades to address real and imagined gigabit competition.”

TREND and DRIVER HIGHLIGHTS

• Service providers are reluctant to make major investments in current technologies as market uncertainties weigh heavily; this is illustrated in the CMTS market, down 15% q-q and y-y. New deployments are minimal with most being upgrades and additions. New architectures such as CCAP, DOCSIS 3.1 and Remote PHY are very appealing, causing MSOs to be hesitant to commit CAPEX to existing technologies.

• The industry is doing itself a major disservice by selling on bit rate and not the value and experience of the services they provide; it is akin to digital camera megapixels. More the better? Consumers do not understand that beyond 6 Meg it really does not matter for 99 percent of the use cases; the huge file size of 10+ megabit images is less desirable and arguably useless to consumer. Same is true with gigabit.

• Content acquisition is top video priority: Big issues are all about providing compelling content and “skinny bundles” emerging as key force in industry.

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Greg Whelan
gwhelan@acgcc.com
acgcc.com

Voice over Wi-Fi: Cable versus LTE: Part II

In the article “How Big a Threat Is VoWi-Fi to the LTE Operator?” (Video: https://www.youtube.com/watch?v=o8hgAzT073Q) I illustrated the potential threat cable voice-over-Wi-Fi is to the mobile network operator. In Part II of the LTE threat I look at this issue from the CxO’s point of view of each organization.

Cable executives see VoWi-Fi as “nothing but upside.” VoWi-Fi enhances customer bundles, adds new revenue opportunities and is technically achievable. From a network perspective, their HFC networks are widely deployed, minimize access point backhaul issues, and have a presence in millions of homes and small/medium businesses. This physical presence gives them instant Wi-Fi access points on which they can add voice services. Additionally, they have a voice backend, and they are well positioned to handle the additional voice traffic throughout their network. Given these strengths, they can and will move fast, hence, “nothing but upside.”

Mobile network operator (MNO) executives see Voice over Wi-Fi as “nothing but threats” to subscriber relationships, top-line revenue and profits and CAPEX flexibility. These threats are visualized in a number of ways. MNOs lack a physical presence in the home beyond the end-user devices with most users already off-loading to broadband delivered Wi-Fi for performance and data cap reasons. Although LTE backhaul networks have substantial capacity it is questionable whether they can gracefully cope with an onslaught of Wi-Fi data traffic. No company will deploy a voice-only Wi-Fi network. MNOs that do not own fixed network assets have a more daunting competitive environment; however, those that do have fixed network assets still have substantial challenges. 

Cable is not without its own challenges. Given that they will be a new entrant to the mobile voice market they must meet certain baselines of quality of service, which will add to the deployment time, cost and complexity. Cable companies will never build out an LTE network. Never is a long time but, this is a safe bet. True, they can become MVNOs or be bold and buy Sprint or T-Mobile. Without LTE cable companies will not be able to offer the coverage MNOs can.

New Wi-Fi voice and data technologies are under development. Improvements to the over-the-air protocols to address fairness and contention are emerging but VoWi-Fi technologies are nascent and standards take time. All of this will delay cable’s first mover advantage. 

MNOs have advantages as well. The biggest, as well as the most technically challenging, is intelligently leveraging their fixed and mobile networks to gain real-time insights of both networks’ end-to-end conditions such as congestion. Then, using these insights they can provide a superior quality of experience to their subscribers, particularly those deemed as high-value subscribers. For example, a default “off-load-to-Wi-Fi” strategy may not make sense for all subscribers if the Wi-Fi network is congested and the LTE network is not. 

MNOs with small cells sites can upgrade them with LTE/Wi-Fi combo devices. The MNO has already solved the tough small cell site problems (real estate, backhaul, powering, etc.) so swapping out devices is manageable. Keep in mind that these small cell sites are not randomly dispersed. They are located in high-traffic, high-value locations. This enables the MNO to quickly expand its Wi-Fi network presence in these and high-value locations. Even more powerful is the ability to add Wi-Fi to its Self- Optimizing/Organizing Network investments. 

The MNOs have a bold strategy available to them. They can move fast too, and because they have a carrier-class LTE network on which to fall back they don’t have to start with a gold plated Wi-Fi network. They state that they want to be more like web companies and deploy services fast and improve them over time. On this point, they can walk the talk and rapidly deploy a data-only Wi-Fi network that’s “good enough” and let their subscribers use it for free until they attain the level of quality they really want. A lesson from the web world is capturing customers quickly, which is paramount to success. 

Voice-over-Wi-Fi has the real potential to be a major disruption to the service provider industry. Cable companies see this as nothing but upside, whereas mobile network operators see this as nothing but threats. Both have advantages and challenges. Cable has the footprint, voice backend and potential first mover advantage. Yet, as a new mobile voice entrant they have minimum quality thresholds they must meet to be credible. MNOs, on the other hand, lack a strong physical presence in the home and may face network capacity challenges with the addition of massive amounts of Wi-Fi data traffic. However, they have the ability, if bold enough, to take a page out of the web company playbook and move even faster to deploy a “good enough” data-only Wi-Fi network using today’s technologies and their current installed infrastructures.

Want more information or to discuss strategies to dominate the game changing market of voice-over-Wi-Fi? Cable companies, mobile network operators and vendors to both industries contact ACG at sales@acgcc.com to schedule an appointment to discuss these issues with our analyst Greg Whelan. 

Greg Whelan

gwhelan@acgcc.com

acgcc.com