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2012-09-06 AICC Meeting Syed Zaeem Hosain Aeris Communications, Inc.

2012-09-06 AICC Meeting Syed Zaeem Hosain Aeris Communications, Inc. Topics. State of Cellular T echnology comments Carrier deployments 2G GSM/GPRS Shutdown Impact to Industries Strategies for mitigation Status of 4G LTE … and futures Near-term issues What the future holds Questions.

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2012-09-06 AICC Meeting Syed Zaeem Hosain Aeris Communications, Inc.

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  1. 2012-09-06 AICC Meeting • Syed Zaeem Hosain • Aeris Communications, Inc.

  2. Topics • State of Cellular • Technology comments • Carrier deployments • 2G GSM/GPRS Shutdown • Impact to Industries • Strategies for mitigation • Status of 4G LTE … and futures • Near-term issues • What the future holds • Questions

  3. Technologies, Protocols, Evolution • Note: Some LTE Advanced announcements are not formal yet

  4. Technology Evolution • Current ITU standards • Forward compatibility not possible • GPRS radios cannot operate in EDGE or HSPA modes • Backward compatibility is per standard • HSPA radios can operate in GPRS and EDGE mode • UMTS / HSPA standards kept modular by the ITU • To allow for easy removal of GPRS and EDGE … eventually • Radio technology transitions are required • HSPA transports use W-CDMA protocol (not TDMA like GPRS/EDGE) • Cannot co-exist in the same spectrum • LTE uses OFDMA protocols • Cannot co-exist in the same spectrum as W-CDMA (or CDMA or TDMA)

  5. Verizon • 1XRTT and EVDO everywhere • Will maintain through 2018-2020 – possibly longer • Deploying LTE ahead of AT&T and Sprint • MetroPCSwas first to go commercial though • Accounts for 70% of LTE deployments world-wide • LTE is deployed in 700MHz band • Using 20MHz in Upper C block • Will be adding 1.7/2.1GHz coverage now that FCC has approved • Goodspectrum position … after FCC approval • 700MHz, 850MHz and1.9GHz • Acquiring 1.7/2.1GHz in Western US markets from cable operators

  6. AT&T • GPRS/EDGE everywhere, HSPA in many markets • Plans: GPRS and EDGE completely removed by end of 2016 • Deploying LTE in major markets • Roll-out is behind Verizon, but ahead of Sprint today • Has greatly slowed their HSPA roll-out … 70% - 80% is LTE • T-Mobile acquisition effort • Failure of acquire hurt in multiple ways: capital and spectrum • Forced AT&T to start the “re-farming” of 2G • Spectrum position is weak for needs • 700MHz, 850Mhz, 1.9GHz and 1.7/2.1GHz in many markets • Needs to re-use spectrum with more efficient technology

  7. Sprint • 1XRTT and EVDO everywhere (at 1.9GHz) • Extensive roaming for coverage comparable to Verizon and AT&T • First to deploy All-Digital and first to deploy 4G • Was not affected by AMPS Sunset • WiMAX deployment in 2009 (via Clearwire) • Deploying LTE in 1.9GHz Block G • Has also received approval for LTE at 800MHz and 2.5GHz • Innovative Network Vision project uses spectrum wisely • Best spectrum ownership, but not deployment • Will convert iDEN (Nextel) spectrum to LTE and 1X • 800MHz, 1.9GHz and 2.5GHz

  8. T-Mobile • GPRS / EDGE in major markets, HSPA in many of these • Will keep GPRS / EDGE operational longer than AT&T, but still inevitable • Deploying HSPA and HSPA+ in their markets • Data speeds are fast, but not 4G • Also deploying HSPA+42 in some markets • Has announced LTE is in their future • Well behind the other Tier-1 Carriers • Losing market share and number of subscribers • Spectrum ownership is major markets only • Even after receiving spectrum in many markets from AT&T • Potential acquirer of 700MHz bands being sold by Verizon

  9. Deployed Units (2012 Q2) • Tier 1 • VzW, AT&T and Sprint are adding units steadily • T-Mobile is losing units to others – mostly other Tier 1 • Tier-2 • Mostly losing units overall • MetroPCS is a counter-example • Tier-3 • Little overall change – slow growth/reduction • Significant competitive pressure from Tier 1 and 2 • Number of cellular units • More than 7% greater than US Population • More than 15% when under 5 year olds are not counted • Notes • Verizon subscribers include Strategy Analytics’ estimates for wholesale and connected device volumes • Sprint Nextel subscribers excluding estimated number of affiliate subscribers, but including wholesale • Clearwire subscribers include wholesale subs outside current 4G network coverage area from whom they receive nominal revenue • Cellular South is a private company and does not reveal its metrics, estimated 0.9-1.0 million subscribers Source: Strategy Analytics, based on Carrier reports

  10. 2G GSM/GPRS Shutdown • Predictable more than 5 years ago • Spectrum efficiency of TDMA far worse than CDMA • AT&T under strong competitive pressure from Verizon and Sprint • Data performance unacceptable with increasing use of Smartphones • Pressure on AT&T increased 1.5 to 2 years ago • Spectrum costs and availability continued to increase • W-CDMA deployments not sufficiently competitive to EVDO • In 2011, AT&T attempt to acquire T-Mobile failed • Accelerated the [inevitable] demise of 2G • Senior AT&T Exec made public comments about outcome • Early 2012, letters sent to Customers in NY • Asking them to swap out all their 2G devices, and then “re-farming” started • Recent announcement by AT&T • GPRS Sunset date set “Jan 1, 2017” … i.e., end of 2016

  11. Overall Impact • Major markets will shut down sooner • Probably as soon as end-2014 to mid-2015 • Re-farming of spectrum has already started in NYC • AT&T stopped certifying new 2G applications • No new 2G customers/applications can be approved or deployed • AT&T will soon disallow new 2G unit shipments • All Customers must plan to stop selling existing 2G product • Estimated 12 – 15 M units need to be replaced • In four years … or less! • Radio Module and unit suppliers revenues increase • May stress manufacturing capacity temporarily

  12. Impact to Alarm Industry • Alarm industry estimated at 4 – 5 M units • Impact greater than AMPS Sunset (was <1 M units) • Urban markets will degrade sooner than rural • Right where the alarm units are deployed • Putting aside new sales for a moment … • Industry must replace existing units at 4,500 – 5,000 units/day • … starting tomorrow, for the next 4 years • Could be double that rate in major markets (2 years is likely) • Moving to T-Mobile could extend the date • Most likely needs SIM swap in unit (unless AT&T assists) •  Industry needs a comprehensive plan • New designs, schedule from AT&T, logistics, training, etc.

  13. Options • These do not help the existing 2G unit deployments

  14. Replace with T-Mobile Service • Needs SIM swap in all likelihood • Most SIM’s are not programmable from one Carrier to another • Delays the sunset date • But does not eliminate it … T-Mobile will also eventually remove 2G • T-Mobile coverage not as good as AT&T • But many major cities are covered … where units are located! • Buys time to implement a longer-term strategy • Stretch 2 – 4 year problem to 4 – 6 year problem

  15. Replace with 3G HSPA Unit • Needs a new product • Alarm industry suppliers are on this path already • Radio Module cost is higher than 2G • Unit cost is likely to be higher • 3G HSPA coverage is less than 2G • Most major markets are covered, but … need to check! • In non-3G markets, 2G likely to be replaced by 4G • 3G HSPA will also get swapped for 4G LTE in time • Date is uncertain, but likely to be around 2018 to 2020 • Avoids current 4G issues (coverage, price, etc.) • But “third Sunset” will be worse (# of units)

  16. Replace with 2G 1xRTT Unit • Needs a new product • Alarm industry suppliers not on this path • Radio Module cost is higher than 2G GSM • But less than 3G HSPA or 3G EVDO • 1xRTT coverage as good, or better, than GPRS • Combined footprint of CDMA Carriers • Longevity of 1xRTT service is better • Better than 2G GPRS (2014-2016), 3G HSPA (2018-2020)

  17. Replace with 4G LTE Unit • Needs a new product • Alarm industry suppliers must start new designs • Radio Module considerably higher today • Will drop in time of course • Coverage is very limited today • Will improve in time of course • Other near-term issues • Will describe shortly

  18. Do Not Replace 2G Units • During AMPS Sunset, many companies failed • Financial impact of replacing units was simply too high • Could also happen with GPRS Sunset • Current GPRS application providers could fail • Consumers and their units be impacted • This is not good for the M2M industry • Dramatic growth could slow down for some years

  19. Recent Aeris Experience • Large number of GPRS  1xRTT service migrations • Aeris is gaining many new Customers … new designs, of course! • Some customers moving to HSPA • With AT&T, T-Mobile, Aeris and others – a few concerned about next Sunset • A few Customers moving to EVDO • Enhanced data rate is interesting for new application and features • Longevity of 1xRTT service is appealing • Particularly for automotive industry • 1xRTT Module cost lower than 3G (HSPA and EVDO) • Reduced cost burden • Customers can maintain dual-technology service • Aeris providing single interface for multi-technologies

  20. Verizon LTE (“304 cities, 200M POPs”)

  21. Verizon LTE • Has 700 MHz band 13 (“in the entire US”) • This is all of the 700MHz Upper C • For 10 MHz up and 10 MHz down (total of 20 MHz) • Has 700 MHz band 17 (“in many Eastern US markets”) • But has offered up their Lower A, B and E spectrum to get AWS 1700/2100 from SpectrumCO (particularly in Western US)

  22. Verizon 3G/4G Coverage

  23. AT&T LTE (“47 markets, 74M POPs”)

  24. AT&T LTE • Has 700 MHz band 17 (in some of the country) • This is in the 700 MHz Lower A, B and C blocks • Plans 1700/2100 MHz band 4 (in much of the country) • But currently running UMTS and HSPA in that spectrum • Needs more spectrum to deploy LTE in some markets

  25. Sprint 3G / WiMAX Coverage

  26. Sprint LTE • LTE deployment started • 4G LTE and enhanced 3G service launched in Atlanta, Dallas, Houston, Kansas City and San Antonio • Includes surrounding markets • Expansion by end of 2013 • … To the picture shown on next page • No definitive schedule announced yet

  27. Sprint LTE (“250M POPs end of 2013”)

  28. MetroPCS LTE (“16 cities, XXX POPs”)

  29. US Cellular LTE (“6 Markets”)

  30. US Cellular LTE • Expansion planned in 2012 • “Additional cities in Illinois, Maryland, Missouri, New Hampshire, Oregon, Tennessee, Vermont, Virginia, Washington, and West Virginia will also have access to 4G LTE by the second half of 2012.”

  31. Near-term LTE Issues • Limited radio Module availability and support • Only single-band LTE (hence, single-Carrier) models available today • Module fallback to 3G and 2G are different • Radio Module costs are high today • Will drop in time • LTE roaming agreements not in place yet • Technical and business barriers • Coverage is limited to major cities • 36 frequency bands approved by ITU • ~6 bands required for North America, ~4 bands for EU, ~4 bands for Asia • >12 needed for Single-SKU worldwide deployment

  32. US Spectrum Overview

  33. LTE Bands and Combinations

  34. Protocols in Use and Futures

  35. Technology in Radio Modules

  36. Radio Module Pricing Today • Low volume

  37. Contact • Syed Zaeem Hosain (“Z”) • Chief Technical Officer • Direct: 408-557-1905Fax: 408-557-1925E-mail: Syed.Hosain@aeris.netTwitter: @AerisCTO • Address • Aeris Communications, Inc.2350 Mission College Blvd., Suite 600Santa Clara, CA 95054-1574. • Corporate Web site • www.aeris.net • Technology Blog • Aeriscto.wordpress.com

  38. Thank you!

  39. Backup Slides

  40. Core US Spectrum Bands

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