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Interview: Dennis Sverdlov of Yota

23 November 2010

Yota has expanded from Russia to Nicaragua and Peru, and is poised to switch technology from WiMax to LTE

Read more: Yota Russia 4G WiMax LTE Nicaragua Peru Belarus Intel

Mass market beckons as Yota plans LTE switch

Dennis Sverdlov: Yota has decided to go from WiMax to LTE
because most device makers support LTE

Dennis Sverdlov started Yota to address the market for high quality wireless broadband. By targeting progressive users, his thinking went, he could access customers that place a premium on wireless broadband access coupled with great customer service.
Those users aren’t the extent of his aims for Yota. They simply represent the 5-10% of the market that is currently willing to pay for the kind of service he offers and Yota’s business model is designed so the company can grow to address the mass market as demand arrives.
"We started to think of being a telco from a different approach," says the former consultant. "Internally we never use the term telco — although we have infrastructure, we have licences and we decide tariffs. We believe it is not just about using new technology, it’s about having a new business model and a new ideology along with that technology."
So far, so telco, except that Sverdlov is unencumbered with a century of telecoms dogma and unburdened by unrealised 3G investments. "We’re different in two aspects," he says. "There’s the emotional one — people like the brand, it’s not about what we’re trying to say, it’s about what we actually do — and there’s the practical reason that we provide real, unlimited bandwidth. We don’t limit it at all and that’s one of the many telco rules we break."
That helps Yota stand out. Networks in Moscow, for example, are heavily overloaded, says Sverdlov, and operators manage them by imposing limits unilaterally — but base stations could be empty in the evening. "If a base station is empty you don’t need to limit speed," he adds.
"I really believe people make an emotional decision to become our customer. One competitor in Moscow uses the same technology but only a fifth as many users as us. You can’t explain that just with rational things."
The name, incidentally, is a play on words, linking "iota", the smallest Greek letter, to denote its modest origins, with the prefix "yotta". A yottabyte — still rather more than the storage on all the hard discs in the world — is 1,000 trillion gigabytes.
Consumers who use large volumes of bandwidth are viewed by many operators as unwelcome customers who clog up their networks and are difficult to generate profits from.
Terabytes a month

For Sverdlov, all are welcome — and users pay an average fee of $30 a month. An average user downloads more than 12 gigabytes a month but Yota has one customer who downloads 17 times that, two terabytes a month.
"Right now data consumption is growing very fast," he says. "And that level of growth exactly proves that the behaviour of our customers is changing in time. Our customers use us all day and their consumption has already changed because of the availability."
Video is the key driver of bandwidth consumption. "Video is a huge part of traffic and we believe that all video will be consumed online," he adds. "By that I don’t just mean download and watch. With the very, very good speeds offered by LTE people will change how they use video and stream rather than download."
Sverdlov thinks his customers are demonstrating — in which they consume wireless broadband today — how everybody will live in the future.
"Our proposition is about people who understand the value of premium service," he explains. "They’re prepared to pay a premium for the capacity, the service and the value we give. Of course we want to address more people and we will address our services to a much wider community, but the time hasn’t come yet. The biggest issue that could happen to an operator is having big infrastructure but not enough customers. In our case, it’s balanced and the growth rate of our customers is faster than we can build [network]."
It’s easy to raise the accusation that Yota is playing a wise game, selecting cities with a base of progressive users that are poorly served by existing, congested capacity, but Sverdlov refutes this.
"Our business model works everywhere," he says. "At the current stage, new technology is quite expensive from a device and infrastructure point of view, so we address the premium market of 5-10% of the population. That market can be found everywhere, it doesn’t matter if it’s the UK or Nicaragua. We know our business model works."
Having said that, Sverdlov admits western European markets aren’t going to be easy for Yota to enter. "We understand how the competition is organised in western markets so it is not possible to get a licence — you have to partner. We see business models where we can help, but the biggest issue is that developed markets have invested a lot in 3G. But 4G is much better than 3G so the question becomes, what do operators do with 3G?"
For those reasons developed markets aren’t on his target list and Yota is set to confine its expansion to the regions in which it already operates. "Operationally we can start two or three projects a year so our focus is on the regions where we are already active: Central and Latin America, Asia and Russia," he confirms. "There are some opportunities in Africa but we are not seeking opportunities in developed markets."
Technology change

As he pursues those, Sverdlov also needs to change the technology of his operations from WiMax to LTE. He’s not unhappy with the performance of WiMax but recognises that the number of terminals and spread of vendors supporting LTE is far greater than for WiMax. "When we made our decision about the technology for the project, WiMax was the only technology available to us," explains Sverdlov. "LTE and WiMax from the customer point of view are almost the same thing in terms of the proposition but we have now decided to go to LTE because most device manufacturers support LTE. It has been a difficult decision for us but we have made it not because LTE is better but because the development ecosystem will be better. There is no other reason as far as I’m concerned."
Other operators are taking similar views: Indonesia, for example, though YTL in Malaysia is still determinedly in the WiMax camp.
Yota’s current technology providers include Intel, the enthusiastic long-term investor in WiMax technology. Others — Samsung, HTC, Cisco, Sequans and Asus — seem equally at home in the LTE world.
Sverdlov doesn’t think the migration will be particularly difficult — even venturing that migration from WiMax to LTE will be more straightforward than migration from 3G to 4G. "It doesn’t make a big difference for us because, from an infrastructure point of view, it is the same," he adds. "Even the equipment is multi-standard and one base station can work in different modes. Our business plan didn’t change when we changed technologies."
Nevertheless, that business plan has had to address how the future market will develop. "We already know what’s coming in the next 10 years," says Sverdlov. "It is important to know the business model and cover all the [network infrastructure] costs within seven years. Infrastructure is currently a competitive advantage but value is more related to customer service and products. For that reason, we’re open about network sharing and will share our infrastructure with other companies."
High speed wireless broadband backed by good customer service at a transparent price remains at the core of the Yota offering. "You can be a leader in products and services but that is really easy to copy," says Sverdlov. "The thing that is not possible to copy is behavioural, the way we do things. We have a lot of competitive advantage there in how we serve customers through call centres and retail. These areas are becoming a more important differentiator so we pay a lot of attention to making the experience as good as possible."
Sverdlov gives the example of a customer calling one of Yota’s call centres at 2am. The user had an issue with their computer rather than Yota’s modem or network. "Our call centre person spent four hours helping until it worked," he says. "It was not our direct job to help, but he tried to help."
That’s certainly not a traditional operator attitude to customer service, but Sverdlov sees it as at the core of bringing wireless broadband to the wider market. "When you live in an environment where a service works, your perception of it changes and it becomes more and more critical to you," he adds.
"It is not our idea to make our service premium. It is about meeting a need. The technology is new and expensive so it can’t be addressed to everyone today but think of mobile phones in the 1980s and how they later became ubiquitous and essential to peoples’ lives."
It takes time, he accepts, "but in the end you will see the same explosion in use", he accepts. "Mobile wireless will be more convenient than being tied to a wire, its growth will be absolutely the same as the mobile phone." GTB

Further reading
Russian regulator approves change from LTE to WiMax: GTB report here  
Interview with CEO of YTL Malaysia here