Cellular Update

© 2013 Aeris Communications, Inc. All Rights Reserved.

Cellular UpdateAICC / CSAA Meeting

December 10, 2013. Washington, DC.

Syed Zaeem Hosain (“Z”).

[email protected], Twitter: @AerisCTO

2© 2013 Aeris Communications, Inc. All Rights Reserved.

Aeris Communications Questions on 2G GSM Sunset Status of Alternatives Spectrum and Efficiency Cellular Trends

Presentation


Who is Aeris

Our Company Private, HQ in Silicon Valley, CA 100% Revenue CAGR (last 4 years) 200+ Customers

Our Solution Purpose-built M2M platform Complete stack: connectivity to

application enablement Fit to Customer business model CDMA, GSM, HSPA and LTE (soon) …

worldwide

We enable our customers to radically change their businesses

M2M Pioneer> 18 years

1 in 4 new cars sold in U.S.

built by Aeris customers

> 250 million M2M messages / day

99.995%Infrastructure reliability


Why is the 2G GSM Sunset occurring?

Will AT&T change their decision?

What about 2G CDMA?

What is status of wireless spectrum?

What are the cellular trends?

Questions


Smartphone Usage Growth is DramaticIncreasing rapidly in past few years

Source: NGNM Conference 2012 in San Francisco, slide by Ray Neville (T-Mobile CTO).


Average US user could consume 6GB of mobile data per month by 2017

Mobile Data Use AcceleratingData usage by consumers is growing faster than supply


Number of Cellular DevicesTop U.S. Carrier Metrics (2013 Q3)

Sources: Strategy Analytics, based on Carrier reports; FierceWireless article.

Carrier Total Units(millions)

M2M Units (millions)

Verizon 119.5 8AT&T 109.5 15Sprint 54.6 3.5T-Mobile US 45.0 3.3US Cellular 4.9Leap Wireless 4.6C-Spire ***Ntelos 0.46Cincinnati Bell 0.36


Assuming Average Data Use– 500 MB / month for handsets, 2.5 MB / month for M2M devices

Data Usage of M2M is LowTop U.S. Carrier Metrics (2013 Q3)

Sources: Strategy Analytics, based on Carrier reports; FierceWireless article.


M2M Units(millions)

Verizon 119.5 8AT&T 109.5 15Sprint 54.6 3.5T-Mobile US 45.0 3.3

0.05% of data traffic is M2M data traffic today


ARPU– ~ $ 51 / month for handsets, ~ $ 3 / month for M2M devices

Carrier Revenue from M2M is LowTop U.S. Carrier Metrics (2013 Q3)


M2M Units(millions)

Verizon 119.5 8AT&T 109.5 15Sprint 54.6 3.5T-Mobile US 45.0 3.3

Source: Strategy Analytics, based on Carrier reports.

0.57% of Carrier revenue is from M2M today


2G GSM devices no longer allowed– No new SIM’s can be activated for 2G GSM

Handset traffic and data growing– Data usage continues to increase– LTE congestion issues occurring

Market size growth is slow– Overall units limited by population– Verizon, Sprint and T-Mobile competing in saturated market

Spectrum remains an issue for AT&T– Are spectrum limited in many markets– Has acquired 2.3 GHz (for LTE) – future

AT&T’s 2G GSM Sunset Is RealYes, it is really happening!


Move to 2G on T-Mobile– In major cities, this is the common choice of customers– Some years after AT&T, T-Mobile will also sunset 2G GSM

Move to 2G CDMA on Aeris, Verizon and Sprint– Next choice for many customers and applications– Number of new radios and devices entering market

Move to 3G HSPA on Aeris, AT&T and T-Mobile– Third choice for some customers and applications– Cost of radio module is higher than 2G CDMA and 2G GSM

Move to LTE– Negligible choice – but some in design (2016+ deployments)– Coverage, radio cost, time, etc., are issues

Status of AlternativesWhat are the 2G GSM GPRS and EDGE customers doing


1xRTT continuing for next 10+ years– Commitment by Verizon & Sprint still strong– Sprint to extend 1xRTT into 800 MHz (iDEN) spectrum

Unit growth excellent– Customers continue to switch from 2G GSM– Aeris: 3X units since AICC meeting a year ago

Performance is excellent– More than sufficient for vast majority of applications– Coverage and footprint is excellent

Radio cost is now lowest– 1xRTT module less than 3G CDMA/HSPA and 4G LTE

What About 2G CDMA?


“… we have launched our CDMA cell communicators … and our dealers are absolutely loving the coverage and service. We already have installed several thousand...and as you stated...the CDMA network is fabulous for alarm communication.”

2G CDMA and Alarms


Carriers must re-use spectrum with efficient technologies … And continue to purchase more expensive spectrum

Spectrum and Efficiency

GSM

GPRS (5 tim

eslots)

EDGE (5 tim

eslots)

CDMA 1xRTT

CDMA EV-D

O Rev.

A

UMTS Rel 9

9

HSDPA

HSPA+ (2x2

MIM

O, 5MHz)

LTE (2

x2 M

IMO, 2

x10M

Hz)

LTE (4

x4 M

IMO, 2

x10M

Hz)0

4

8

12

16

0.032 0.07 0.2 0.252.4

0.42.8

8.4 8.6

16.3Theoretical Maximum Spectrum Efficiency

Effic

ienc

y (B

its /

s / H

z)

Source: “3G, 4G and Beyond: Bringing Networks, Devices and the Web Together”, Martin Sauter, Feb 2013.

231X


1900 MHz (PCS Block H) in January 2014– No bids by Verizon, AT&T or T-Mobile– Sprint has bowed out too (!)– Dish Network is likely prime bidder/winner

1700/2100 MHz (AWS-3) by Feb 2015– Defense Dept (and broadcast industry) need to open it

600 MHz– FCC has delayed auction to mid-2015

700 MHz sales– Verizon selling many non-Upper C Band markets– Prime purchasers are AT&T, T-Mobile, others

Spectrum Auctions and Sales


2G 1xRTT and 3G EVDO– Stable coverage and performance everywhere

LTE in over 500 markets– 300+ Million POPs– But, users are complaining that “maps are inaccurate”

Adding AWS to 50 markets by mid-2014– Early LTE phones cannot use AWS though

Congestion issues– “Some Verizon users might be dropped down to 3G as carrier

struggles with 4G LTE traffic in major cities” – Alex Colon, GigaOm

Verizon Coverage


2G GSM, GPRS and EDGE– Coverage is excellent today … – However, sunset at end of 2016 … in just over 3 years

3G HSPA, HSPA+– Est: 75% population, 60% geography covered– Spectrum availability limiting/preventing expansion of 3G

LTE in 470 markets– 288 Million POPs

Concern?– In some 2G markets, replacement in 2017 will be 4G, not 3G

AT&T Coverage


2G 1xRTT and 3G EVDO– Comparable coverage to Verizon (via roaming agreements)– Committed to 1xRTT longevity in iDEN bands

LTE in 230+ markets– 200 Million POPs by end of 2013– 250 Million POPs by mid-2014

Deploying Sprint “Spark”– Extends coverage and throughput in 2.6 GHz band– Aggregation of spectrum can provide fast performance

Sprint Coverage


2G GSM, GPRS and EDGE– Spectrum is being harvested in major cities– Sunset is inevitable, but still after AT&T’s date

3G HSPA, HSPA+– Deployed HSPA and HSPA+ into their markets

LTE in many markets– 180+ Million POPs– Some markets are 20 x 20 MHz high speeds

T-Mobile Coverage


2G– CDMA Coverage: Verizon and Sprint (via roaming)– GSM Coverage:AT&T (pre-sunset)

3G– Coverage: Verizon and Sprint (via roaming)– LTE fall-back performance: AT&T and T-Mobile

4G LTE– Peak (in top market) speeds: T-Mobile & Sprint– Average (overall) speeds: Toss-up

Units– Numbers growth: T-Mobile

Spectrum– Most spectrum ownership: Sprint

At The Top … Today


700 MHz interoperability requirements set– AT&T finally supporting fair rules for Band 12– Enables smaller carriers to get LTE devices

LTE congestion issues– Verizon falling back to 3G in some markets– AT&T is/will experiencing similar congestion

Innovations– Sprint “Spark” boosts spectrum selection and speeds– T-Mobile providing aggressive International plans

VoLTE– Deployment begun, but not yet common– 2014 may be the “Year of VoLTE”

Cellular News and TrendsThat affect Cellular in USA


Radio modules– Steep LTE price drop slowed by intro of multi-band modules– EVDO and HSPA radio prices flattening– 1xRTT radio prices continue to drop, but slowing– GSM sales (in USA) essentially stopped

M2M applications that use LTE– A few products are in design stages– Intros in 2014 - 2015 … growth after 2016+

Dish Network continuing noise– Needs partner to actually deploy network – Sprint?

Other Trends


Analog AMPS Sunset Units

– Impact: ~ 5 to 9 Million M2M devices went off-air– … after many years of successful operation

Companies– Large corporations survived (e.g., OnStar, Honeywell, Telular)– Many small businesses deploying M2M failed

Example: alarm and security industry– 1.2 Million AMPS units removed from service– Migrated to 2G GSM/GPRS

Past … February 18, 2008Major impact to M2M Industry


AT&T 2G GSM/GPRS shutdown … announced Units

– Impact: ~ 10 to 13 Million M2M devices need removal– Again, after years of successful operation

Cost– Impact: > $ 2 to 3 Billion … probably higher– More small M2M businesses likely to fail

Example: alarm and security industry– 4 to 5 Million GPRS units will be affected– Some migrating to 3G HSPA

Present … January 1, 2017A second impact to M2M Industry growth


Verizon 2G 1XRTT, 3G EV-DO (2020 – 2022)– Industry assumption (based on public comments)

AT&T 3G HSPA (2019 – 2020+)– Prediction (based on current spectrum position)

Sprint 2G 1XRTT, 3G EV-DO (2022 – 2025+)– Industry assumption (based on public comments)

T-Mobile 2G GSM/GPRS (2018 – 2020)– Prediction (based on current activity, refarming 2G)

Units impacted? Costs?– Many Millions of M2M units will be replaced …– At a very high cost to the M2M industry

Future Sunset Predictions … 2018+Technology changes occurring ever faster

Cellular Update

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