Group CTO, STC: “We are just at the beginning of the most exciting phase of mobile network development.”
Dr Zeyad Bin Thamer Al Otaibi is the group CTO of STC, one of the leading operators in the Middle East region and will be interviewed on stage on Day One of the LTE MENA conference taking place on the 29th-30th April 2012 at the Westin Mina Seyahi, Dubai. We talk to him about his views on how OTTs can contribute to the cost of networks, how LTE will lead to increased revenues and why unlimited data deals may have a future after all.
What are the main milestones you have reached with relation to your LTE deployment?
We have already launched LTE service at 2300MHz using our Single RAN platform and over the calendar year of 2012 we will continue our roll-out to cover over 70 per cent of the Saudi population.
What are the main challenges you have faced, or expect to face, as you roll out LTE?
Given that we are adding LTE on top of our Single RAN sites, adding the LTE radios is quite straightforward. We recognise that many mobile operators have major challenges deploying sufficient backhaul bandwidth. At STC we are fortunate to have a very extensive fibre network connecting both businesses and consumers and we can easily leverage our FTTH programme to provide FTTM (Fibre-to-the-Multi Dwelling Unit).
Where do you stand on the issue of Over-the-Top (OTT) players contributing to the costs of deploying networks?
STC will provide both consumers and content providers with whatever they have paid for. At the moment most consumers choose to purchase “best-effort” internet services and over-the-top (OTT) providers may choose to purchase content delivery network (CDN) services. In the future consumers may wish to purchase premium video services from the likes of Netflix, Amazon, and iTunes and STC will certainly provide the underlying QoS capability.
There are several viable commercial models to make it easy for the consumer. It may be easier for the OTT provider to collect the payment for the movie plus the premium QoS connection and then remit the payment to STC (so in that sense the OTT player is “paying” for the connection).
Alternatively, STC may provide the OTT content player with a carrier billing service where STC collects the payment for the movie and the connection and remits a share of the revenue to the OTT player. Or the OTT player could provide a channel of content on STC’s IPTV platform and the revenue is shared. In all these scenarios, where the consumer has, one-way or another, chosen to pay for premium content, the OTT is player is in effect contributing to the cost of deploying the network.
To what extent can LTE provide an insurance against declining revenue streams from voice and SMS?
LTE will give STC a lot more data “inventory” to sell at a lower unit-cost per GB and therefore it will increase our potential revenue. For example, and using hypothetical numbers, if LTE increased our network capacity from 100TB to 1,000TB and reduced the cost of data by 5x we would have the capacity to increase potential revenue by a factor of two. As consumers become more habituated to wireless data they may be prepared to pay for ever greater quantities of data and in the same way that fixed broadband reversed the decline in fixed ARPU, mobile broadband may, as you put it, provide insurance against declining voice and SMS.
However there is also a whole series of new “Operator-On-The-Top” services (RCS, mobile advertising, carrier billing, mobile payment etc.), which are enabled by HSPA and LTE and which will generate new revenue lines.
Is there a place moving forward for unlimited data tariffs? Are they sustainable?
There is a place for all tariff packages, at the right price! The right price for an unlimited package depends on the cost of providing the data. STC is very focused on reducing the Total Cost of Ownership of every GB of data and taking all steps to reduce that cost. As more and more new technologies are deployed in the field to reduce the unit-cost of data (more spectrum, LTE, mimo, adaptive antennas, Cloud RAN, targeted offload, etc, ) the cost of providing unlimited packages will fall to the point where it becomes more and more affordable. Today demand for data is rising faster than the supply which is why some operators are discontinuing the unlimited packages, but as the new technologies drive unit cost down, unlimited packages will be affordable again. Operators do have to manage the rebalancing of voice/sms and data tariffs so that total ARPUs are maintained or increased.
With so much attention paid to the radio access network is there enough focus on backhaul?
STC is fortunate to have such an extensive fibre network. For several years we have been investing in providing both point-to-point and GPON fibre and this positions us very well for LTE. I would agree that if an operator does not have a rich fibre backhaul option that the benefits of LTE/HSPA+ may be more constrained. Moreover as we move into the future world of small cells, especially Cloud RAN architectures, fibre backhaul becomes an ever more critical component.
What’s your view on FDD vs TD-LTE spectrum?
All spectrum is good spectrum. At the moment all the players in the Kingdom of Saudi Arabia (KSA) have TDD spectrum and this enables us to deploy immediately. In the future, as demand rises, we expect that we will have to use additional FDD blocks (1800, 2600) as and when these blocks become available.
We do recognise that the value of a block of spectrum depends heavily on the eco-system of other global operators who use it and thus the number of device vendors who will produce compatible terminals. We note that for TD-LTE there is a huge potential market in both China and India for TDD and this will drive the availability of devices. We also note that unlike 3G, in LTE many of the devices and chipsets will usually support both FDD and TDD, making the number of compatible devices even greater.
Do you think that VoLTE will have an impact and if so in what time frame?
There are at the moment many different ways to provide voice (2G, 3G, OTT, RCS etc) and there is no urgency for yet another system. However we have deployed IMS to support our Voice-over-Broadband for our FTTH and RCS customers. In due course, as devices become available, VoLTE will be added too.
Is there enough innovation occurring in the mobile network industry? Can you provide some examples?
There is a huge amount of innovation going on in the mobile Industry as a whole but perhaps not enough by the mobile network operators. Handset, infrastructure, and App developers all have many innovations in the market and in their development pipelines. Most operator innovations have revolved around pricing promotions to attract and retain customers but the operators would benefit from more innovations to increase their revenues. However with the RCS and WAC API initiatives there are positive signs that operators are starting to do more to develop “Operator-On-The-Top” services that will generate new revenue streams. STC has not in the past been a pioneer, preferring to be a fast-follower. However, we have recently established a VC fund to nurture innovations relevant to our markets and are reinforcing a culture of innovation within STC.
What changes would you hope to see in the industry in the next five years?
We are just at the beginning of what is perhaps the most exciting phase of mobile network development. In KSA we have a national project to re-orient our economy from commodity based to ICT based. In five years I would hope that STC has made excellent high-speed, low-cost, fixed and mobile broadband services available to all our citizens.
I would like to see that in five years the industry has made smartphones and excellent quality high-speed wireless data services affordable for the mass market and that mobile operators are fairly compensated for providing these services. I would hope that by then mobile operators are providing their customers with a much wider range of content, applications and transactional services in a seamless manner. I would like to see more local Middle Eastern and Saudi companies developing and hosting these services on top our high-quality high-performance network.
Dr Zeyad Bin Thamer Al Otaibi is the group CTO of STC, and will be appearing on Day One of the LTE MENA conference taking place on the 29th-30th April 2012 at the Westin Mina Seyahi, Dubai. Click here to register your interest.