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Cellular Update

Cellular Update. AICC / CSAA Meeting December 10, 2013. Washington, DC. Syed Zaeem Hosain (“Z”). Syed.Hosain@aeris.net, Twitter: @ AerisCTO. Presentation. Aeris Communications Questions on 2G GSM Sunset Status of Alternatives Spectrum and Efficiency Cellular Trends. Who is Aeris .

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Cellular Update

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  1. Cellular Update AICC / CSAA Meeting December 10, 2013. Washington, DC. Syed Zaeem Hosain (“Z”). Syed.Hosain@aeris.net, Twitter: @AerisCTO

  2. Presentation • Aeris Communications • Questions on 2G GSM Sunset • Status of Alternatives • Spectrum and Efficiency • Cellular Trends

  3. Who is Aeris Our Company Private, HQ in Silicon Valley, CA 100% Revenue CAGR (last 4 years) 200+ Customers Our Solution Purpose-built M2M platform Complete stack: connectivity to application enablement Fit to Customer business model CDMA, GSM, HSPA and LTE (soon) … worldwide We enable our customers to radically change their businesses M2M Pioneer > 18 years 1 in 4 new cars sold in U.S. built by Aeris customers 99.995% Infrastructure reliability > 250 million M2M messages / day

  4. Questions • Why is the 2G GSM Sunset occurring? • Will AT&T change their decision? • What about 2G CDMA? • What is status of wireless spectrum? • What are the cellular trends?

  5. Smartphone Usage Growth is Dramatic Increasing rapidly in past few years Source: NGNM Conference 2012 in San Francisco, slide by Ray Neville (T-Mobile CTO).

  6. Mobile Data Use Accelerating • Average US user could consume 6GB of mobile data per month by 2017 • Data usage by consumers is growing faster than supply

  7. Number of Cellular Devices Top U.S. Carrier Metrics (2013 Q3) Sources: Strategy Analytics, based on Carrier reports; FierceWireless article.

  8. Data Usage of M2M is Low • Assuming Average Data Use • 500 MB / month for handsets, 2.5 MB / month for M2M devices • Top U.S. Carrier Metrics (2013 Q3) 0.05% of data traffic is M2M data traffic today Sources: Strategy Analytics, based on Carrier reports; FierceWireless article.

  9. Carrier Revenue from M2M is Low • ARPU • ~ $ 51 / month for handsets, ~ $ 3 / month for M2M devices • Top U.S. Carrier Metrics (2013 Q3) 0.57% of Carrier revenue is from M2M today Source: Strategy Analytics, based on Carrier reports.

  10. AT&T’s 2G GSM Sunset Is Real • 2G GSM devices no longer allowed • No new SIM’s can be activated for 2G GSM • Handset traffic and data growing • Data usage continues to increase • LTE congestion issues occurring • Market size growth is slow • Overall units limited by population • Verizon, Sprint and T-Mobile competing in saturated market • Spectrum remains an issue for AT&T • Are spectrum limited in many markets • Has acquired 2.3 GHz (for LTE) – future • Yes, it is really happening!

  11. Status of Alternatives • Move to 2G on T-Mobile • In major cities, this is the common choice of customers • Some years after AT&T, T-Mobile will also sunset 2G GSM • Move to 2G CDMA on Aeris, Verizon and Sprint • Next choice for many customers and applications • Number of new radios and devices entering market • Move to 3G HSPA on Aeris, AT&T and T-Mobile • Third choice for some customers and applications • Cost of radio module is higher than 2G CDMA and 2G GSM • Move to LTE • Negligible choice – but some in design (2016+ deployments) • Coverage, radio cost, time, etc., are issues • What are the 2G GSM GPRS and EDGE customers doing

  12. What About 2G CDMA? • 1xRTT continuing for next 10+ years • Commitment by Verizon & Sprint still strong • Sprint to extend 1xRTT into 800 MHz (iDEN) spectrum • Unit growth excellent • Customers continue to switch from 2G GSM • Aeris: 3X units since AICC meeting a year ago • Performance is excellent • More than sufficient for vast majority of applications • Coverage and footprint is excellent • Radio cost is now lowest • 1xRTT module less than 3G CDMA/HSPA and 4G LTE

  13. 2G CDMA and Alarms • “… we have launched our CDMA cell communicators … and our dealers are absolutely loving the coverage and service. We already have installed several thousand...and as you stated...the CDMA network is fabulous for alarm communication.”

  14. Spectrum and Efficiency • Carriers must re-use spectrum with efficient technologies • … And continue to purchase more expensive spectrum 231X Source: “3G, 4G and Beyond: Bringing Networks, Devices and the Web Together”, Martin Sauter, Feb 2013.

  15. Spectrum Auctions and Sales • 1900 MHz (PCS Block H) in January 2014 • No bids by Verizon, AT&T or T-Mobile • Sprint has bowed out too (!) • Dish Network is likely prime bidder/winner • 1700/2100 MHz (AWS-3) by Feb 2015 • Defense Dept (and broadcast industry) need to open it • 600 MHz • FCC has delayed auction to mid-2015 • 700 MHz sales • Verizon selling many non-Upper C Band markets • Prime purchasers are AT&T, T-Mobile, others

  16. Verizon Coverage • 2G 1xRTT and 3G EVDO • Stable coverage and performance everywhere • LTE in over 500 markets • 300+ Million POPs • But, users are complaining that “maps are inaccurate” • Adding AWS to 50 markets by mid-2014 • Early LTE phones cannot use AWS though • Congestion issues • “Some Verizon users might be dropped down to 3G as carrier struggles with 4G LTE traffic in major cities” – Alex Colon, GigaOm

  17. AT&T Coverage • 2G GSM, GPRS and EDGE • Coverage is excellent today … • However, sunset at end of 2016 … in just over 3 years • 3G HSPA, HSPA+ • Est: 75% population, 60% geography covered • Spectrum availability limiting/preventing expansion of 3G • LTE in 470 markets • 288 Million POPs • Concern? • In some 2G markets, replacement in 2017 will be 4G, not 3G

  18. Sprint Coverage • 2G 1xRTT and 3G EVDO • Comparable coverage to Verizon (via roaming agreements) • Committed to 1xRTT longevity in iDEN bands • LTE in 230+ markets • 200 Million POPs by end of 2013 • 250 Million POPs by mid-2014 • Deploying Sprint “Spark” • Extends coverage and throughput in 2.6 GHz band • Aggregation of spectrum can provide fast performance

  19. T-Mobile Coverage • 2G GSM, GPRS and EDGE • Spectrum is being harvested in major cities • Sunset is inevitable, but still after AT&T’s date • 3G HSPA, HSPA+ • Deployed HSPA and HSPA+ into their markets • LTE in many markets • 180+ Million POPs • Some markets are 20 x 20 MHz  high speeds

  20. At The Top … Today • 2G • CDMA Coverage: Verizon and Sprint (via roaming) • GSM Coverage: AT&T (pre-sunset) • 3G • Coverage: Verizon and Sprint (via roaming) • LTE fall-back performance: AT&T and T-Mobile • 4G LTE • Peak (in top market) speeds: T-Mobile & Sprint • Average (overall) speeds: Toss-up • Units • Numbers growth: T-Mobile • Spectrum • Most spectrum ownership: Sprint

  21. Cellular News and Trends • 700 MHz interoperability requirements set • AT&T finally supporting fair rules for Band 12 • Enables smaller carriers to get LTE devices • LTE congestion issues • Verizon falling back to 3G in some markets • AT&T is/will experiencing similar congestion • Innovations • Sprint “Spark” boosts spectrum selection and speeds • T-Mobile providing aggressive International plans • VoLTE • Deployment begun, but not yet common • 2014 may be the “Year of VoLTE” • That affect Cellular in USA

  22. Other Trends • Radio modules • Steep LTE price drop slowed by intro of multi-band modules • EVDO and HSPA radio prices flattening • 1xRTT radio prices continue to drop, but slowing • GSM sales (in USA) essentially stopped • M2M applications that use LTE • A few products are in design stages • Intros in 2014 - 2015 … growth after 2016+ • Dish Network continuing noise • Needs partner to actually deploy network – Sprint?

  23. Thank you! Syed.Hosain@aeris.net +1 (408) 557-1905, twitter: @AerisCTO, blog: www.aeris.com/blog

  24. Past … February 18, 2008 Analog AMPS Sunset • Units • Impact: ~ 5 to 9 Million M2M deviceswent off-air • … after many years of successful operation • Companies • Large corporations survived (e.g., OnStar, Honeywell, Telular) • Many small businesses deploying M2M failed • Example: alarm and security industry • 1.2 Million AMPS units removed from service • Migrated to 2G GSM/GPRS • Major impact to M2M Industry

  25. Present … January 1, 2017 AT&T 2G GSM/GPRS shutdown … announced • Units • Impact: ~ 10 to 13 Million M2M devices need removal • Again, after years of successful operation • Cost • Impact: >$ 2 to 3 Billion … probably higher • More small M2M businesses likely to fail • Example: alarm and security industry • 4 to 5 Million GPRS units will be affected • Some migrating to 3G HSPA • A second impact to M2M Industry growth

  26. Future Sunset Predictions … 2018+ Verizon 2G 1XRTT, 3G EV-DO (2020 – 2022) • Industry assumption (based on public comments) AT&T 3G HSPA (2019 – 2020+) • Prediction (based on current spectrum position) Sprint 2G 1XRTT, 3G EV-DO (2022 – 2025+) • Industry assumption (based on public comments) T-Mobile 2G GSM/GPRS (2018 – 2020) • Prediction (based on current activity, refarming 2G) • Units impacted? Costs? • Many Millions of M2M units will be replaced … • At a very high cost to the M2M industry • Technology changes occurring ever faster

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