Roaming revenues in developed markets are under threat as regulators impose caps on what operators can charge. However, that isn’t necessarily diminishing operators’ appetite to serve their customers while they are away from their home markets. In fact, they are turning their attention to how to make LTE roaming work efficiently and profitably.
“There’s a sweet spot in pricing where profits are a combination of margin and volume,” says David Chambers, mobile solution manager at Amdocs. “More roaming traffic, even at a lower margin, is very worthwhile. Also, although rates are regulated within Europe, there are good margins to be made from roaming traffic from users from other countries.”
Kai Sahala, head of mobile broadband marketing at Nokia Siemens Networks, sees roaming revenues continuing to be important enough for operators to address the issues with LTE: “I don’t see why LTE operators wouldn’t be willing to welcome roamers. So far roamers are a welcome add-on to operators’ revenue streams. LTE roaming is a growing market and the first movers among the operators are those that already offer international LTE roaming such as TeliaSonera. It is an important piece of business.”
Stefan Zehle, CEO of Coleago Consulting, also acknowledges the spectrum fragmentation issue but sees potential for the 2.6 gigahertz band to become a global standard, with HSPA and wifi filling in any gaps. “The Samsung Galaxy device from Vodafone Germany, for example, works in the 800 megahertz, 1800 megahertz and 2.6 gigahertz bands so it is compatible with Europe and Africa and partially Asia with 1800 megahertz,” he says.
“Also with 2.6 gigahertz, which will be globally the most harmonised base, North and South America is addressed — but what isn’t in the European handsets is the US version of the digital dividend band. I don’t foresee this issue will be solved soon, so in cities visitors may well get 2.6 gigahertz or they’ll fall back to HSPA.”
Mary Clark, senior vice president of roaming at Syniverse, sees spectrum fragmentation as “probably one of the biggest issues” to overcome.
“Today as an operator, if you have an LTE deployment plan, a key component is understanding which are the likely partners that have similar spectrum. The planning process is in constant update to keep informed which operator in which bandwidth is launching now, what devices are available and what spectrum is available at the destination or serve environment from an attractiveness point of view.”
Shaun Cairns, general manager of NEC Europe, also sees the impact on chipsets and devices. “The lack of spectrum harmonisation represents a key challenge for the emerging LTE ecosystem,” he says. “It potentially prevents vendors from delivering globally compatible LTE products such as devices and chipsets, or requiring them to increase prices. These physical issues have direct impact on the ability of consumers to have one physical device that they can roam with.”
It’s not just spectrum fragmentation that is presenting problems. Aside from the different frequencies being used, operators are also rolling out different versions of LTE technology.
“Different technologies in TD (time division) and FD (frequency division) versions of LTE have been allowed in different countries,” says Tue From Hermansen, director of mobile data and advanced networks at MACH. “That challenge is being worked through now by chipset and handset manufacturers. Interoperability, in comparison to 2G and 3G, has presented a few problems but they are also being worked through by the roaming hub providers. There’s a clear business case for LTE that makes this work worthwhile.”
Clark at Syniverse identifies a further challenge posed by LTE roaming requiring a shift in protocol from SS7 to Diameter for signalling. That effectively means the 20 years of SS7 signalling experience the GSM industry has amassed isn’t applicable to LTE.
Mikael Schachne, director of mobile data at BICS, takes up the point: “The key issue is on the technical side, not the commercial one,” he says. “Today world roaming relies on a set of bilateral agreements and the international SS7 signalling network that carries messages from one visited network to the home network. That’s the key infrastructure that makes roaming possible from one GSM network to another.
“For LTE the signalling portal is completely different and Diameter, not SS7 will be used. This network isn’t here yet and companies like BICS are establishing the international leg from one LTE network to another. You need to build up a whole new international environment and a whole new set of international roaming agreements. In 2G that took about 20 years to establish. For sure, people are now more experienced so it won’t take 20 years for LTE.”
That’s partly why many, including Zehle, don’t see LTE roaming as a mass market in the short term. “Wifi is the alternative because people use large screen tablets when they are stationary so I think it’s not that great a problem. On LTE in particular I don’t know how big a problem European/US roaming is. I don’t think it will be that big because HSPA gives pretty good data rates so unless pricing comes down dramatically for data, it won’t matter.”
Sahala agrees: “For smartphone users the experience is not too different on good 3G than on LTE. There is a difference but it is not so visible to the user that there’s a big issue. For a roamer with tablet and laptop yes, the user experience can be different.”
Relying on HSPA to provide a good quality of experience, though, isn’t necessarily the safe decision. “The danger for operators who force all LTE roamers onto so-called ‘legacy HSPA+’ networks is brand image rather any LTE capacity issues,” adds Cairns.
Hermansen at MACH thinks LTE roaming’s importance is not so much in the capacity it brings but in the marketing potential it holds. “Roaming is about 5% of the total revenues of operators and as such LTE roaming revenues alone might not be the driver,” he says. “However, operators see it as a great differentiator. It’s something that will make business customers select one provider over another.”
Approaches will be different from market to market, depending on their state of development. “Some regions have backhaul as their main issue,” adds Hermansen. “If you put in LTE or even upgrade 3G nodes you would still have the backhaul challenge.”
Other markets will be constrained in the radio access network and increased consumption of data adds urgency to the LTE roaming challenge, says Clark. “We’re looking at a long ramp up both in the home network and roaming for LTE,” she says. “Subsequently there will be potentially higher bandwidth usage so there is plenty of opportunity to plan accordingly based on throughput. [The issues] are all about the air interface as an obstacle to roaming urgency associated with launching LTE.”
Chambers thinks roll out of domestic LTE will have a substantial impact on approaches to roaming in general. “One of the things we might see, as [domestic] traffic is migrated to LTE, is that it might free up 3G capacity for other things, perhaps more 3G capacity for roaming,” he says. “The reason why operators might invest in LTE roaming is if they believe they can differentiate the experience their users receive. It’s less about the cost of delivering data and more about the speed of delivery and attracting customers that way. LTE is one of the available means to deliver data services but it’s not the only one so we expect operators to have a mix of 3G and 4G and probably wifi as well. The best approach is to have a mix.”
Missing a trick
Simply looking to get round the spectrum fragmentation issue and then approach roaming in the same way as in 2G and 3G situations is unlikely to take enough of the potential of data roaming into account. “To my mind, operators are missing a trick and I think roaming will change fundamentally,” adds Zehle.
“Within three years, we’ll see something different. The notion of charging based on distance and location will have gone away in two years and I think this fear of regulation is overdone. Perhaps we’ll have a completely new style of agreements emerging that are per day or per month based. For example, an operator might collect $10 and share it 50:50 or offer ‘roam like home’ deals that we’ve seen to a small extent with 3 in the UK.
“Another issue I think we might see is the effect of a visited network hijacking the visitor. For example if a Vodafone customer from the UK goes to France and locks onto a network, maybe the network could send a message to the customer saying if they surf to an address and enter their credit card details they can have a day’s data usage for $10, like wifi today.”
Hermansen sees roaming continuing to be a significant source of revenue for operators regardless of regulatory influence and altered business models.
“Roaming is still attractive for operators,” he says. “It will generate $46 billion in revenue in 2012 and have a combined annual growth rate of around 7% until 2017 — traffic is still growing tremendously. In three or four years data revenues will be higher than voice and with new usage patterns and behaviours the roaming market will continue to grow.” GTB