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