US 3G-4G Market Update

Amit Patel
CTO - US National Accounts

All Rights Reserved Alcatel-Lucent 2010

Rapid Adoption Of Data-Intensive Mobile Devices Drives Heavy Growth In Data Usage

Proliferation of Usage Heavy Mobile Devices

Subscriber Growth (CAGR 10-13)
400

Shift to Media-Rich Mobile Handsets in US

50%
US Mobile Subscribers (M)

Smartphone/Multimedia Phone Subs

Feature Phone Subs 306 312

40% 30% 20% 10% Feature Phone 0% 10 50 250 1000 SmartPhone iPhone

Data Card

350 300 250 200 150 100 50 218 169 135 108

288 271
53 119

298

163

198

223

89

2000+

2007

2009E

2011E

2013E

2015E

Typical Monthly Usage / Sub (MB)

Source: Cisco, Macquarie Research, Morgan Stanley, Barclays Capital, Nielsen, CSMG analysis

2 | 3G/4G Market Update | October 2010

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2Q2010 US Wireless Market Highlights US Wireless Data Market was $13.2B for 2Q, it grew 6% Q/Q, and 22% Y/Y
31% of users now have a smart phone Average user consuming 230 MB/month (Clearwire at 7 GB/month) Average user 639 texts/month (average teen is at 2272 texts/month) Tiered data pricing started with AT&T, likely will be adopted by VZ Average ARPU is $51.61, increased Q/Q by $0.46 (voice down $0.13, data up $0.58) Data represents 31% of ARPU or $16.00 (Industry lead is VZ at $17.37)

US subscriber penetration is 95% (100% if you dont count ages 5 and below)
Connected devices category hits next level with iPAD (after Kindle) Example: Verizon has 100M connections, of which 8M are connected devices Example: Connected devices are 7% of AT&Ts subscription base

Video is Booming
Take all the ABC/CBS/NBC broadcasts btwn 1948 and today . . . The equivalent amount of content is uploaded to YouTube every two months

Apple Opening Eyes (and Wallets)

iPod: 2 Years to reach 1M units sold iPhone: 2 Months to reach 1M units sold iPad: 1 Month to reach 1M units sold
3 | 3G/4G Market Update | October 2010 All Rights Reserved Alcatel-Lucent 2010

Source: Chetan Sharma Consulting and ALU Research

4G Excitement US Carriers Selecting LTE and WiMAX

Verizon Lighting up LTE in 30 NFL Cities This Year Sept 16, 2010 Verizon plans to launch its LTE 4G network in 25-30 markets in 4Q2010, covering 100 million POPs. Full nationwide coverage by 2013. DL speeds are expected to be 5-12 Mbps. Laptops and USB dongles will come first, followed by Smart Phones by mid 2011. Its envisioned that cars, cameras, appliances will all eventually connect to an LTE network. Verizon Considers Licensing LTE Spectrum to Rural Carriers May 12, 2010 AT&T to Launch LTE by Mid-2011 Sept 16, 2010 AT&T will launch LTE by mid-2011 and cover between 70-75M POPs by end of next year. This is on top of the current HSPA+ rollout which offers real-world download speeds of 7 Mbps. Previously, AT&T had said that LTE would not be mature until 2014. AT&T Touts UMTS/HSPA Network Improvements Sept 10, 2010 AT&T plans to roll out HSPA+ to more than 250 million people by 2010. In 1H2010, AT&T added 600 new cell sites, upgraded 925 sites to 3G and deployed more than 6500 additional radio carriers. The carrier also continues to massively upgrade its backhaul network.

Verizon is in discussions with a number of rural wireless carriers to license them its 700 MHz spectrum, in a bid to expand the reach of its LTE network. The goal would be to more quickly expand its LTE footprint. RUMOR: Verizon Switching to Usage Based Data Pricing July 21, 2010

Verizon CFO indicated a change in its pricing plans where it will not be unlimited, flat rate. Smartphone users use between 600-800MB, similar to AT&T report for the iPhone. AT&T switching to usage based pricing in June.
4 | 3G/4G Market Update | October 2010 All Rights Reserved Alcatel-Lucent 2010

4G Excitement US Carriers Selecting LTE and WiMAX

Clearwire Will Begin LTE Tests, While Supporting WiMAX Sept 17, 2010 T-Mobile Plans Upgrade to 42 Mbps HSPA+ Sept 2, 2010

By the end of 2010, Clearwire expects to have 3M total T-Mobile plans to cover 100 metro areas and subscribers. The carrier plans to expand to 80 markets and 185 million people with HSPA+ by the end of cover 120 million POPS by the end of 2010. Clearwire will 2010. End user DL speeds have been spend $2.8-$3.2B this year to build out the network. measured at 5-8 Mbps. HSPA+ supports peak Partners include Sprint, Comcast, and Time Warner Cable. DL speeds of 21 Mbps. HSPA+ Dual Carrier, ot In parallel, Clearwire has announced that it will being be introduced in 2011, will support a peak DL testing of LTE in the 2.5-2.6 GHz band, and with 40 MHz of of 42 Mbps spectrum will be able to offer 20-70 Mbps DL speeds. LightSquared (Harbinger) 4G Build-out Plans Current WiMAX DL speeds are 3-6 Mbps and the Aug 31, 2010 average customer uses around 7 GBs/month. LightSquared, has agreed to build a nationwide LTE Sprint Assessing Network Modernization Network based on MSS spectrum to cover 100 million Sept 16, 2010 POPS by end of 2012, 145M by end of 2013 and 260M by Sprint is evaluating a massive network the end of 2015. It will begin with 9 markets and 5K cell modernization that will reduce the number of sites in 2011 and grow to 20 markets and 18K cell sites cellsites from 66K to 46K. The carrier is in 2012. Its estimated that 40K cell sites will be needed looking for multi-mode radios that support for the nationwide footprint. The company is CDMA, WiMAX and LTE. Sprint owns 54% of investigating a variety of business models including Clearwire and is currently reselling the WiMAX hosting, wholesale, pooling and leasing. The aggressive service under the Sprint 4G moniker. build-out plans have some investors worried. Clearwire Open to Funding From T-Mobile Sept 24, 2010 Clearwire will to to get more funding in the form of debt and an equity purchase from T-Mobile, which would help fund its operations and buildout. Sprint board members are divided over this, but its Clearwires decision to make.
5 | 3G/4G Market Update | October 2010 All Rights Reserved Alcatel-Lucent 2010

4G Excitement US Carriers Selecting LTE and WiMAX

MetroPCS Launches LTE in Las Vegas Sept 21, 2010 MetroPCS launched its LTE service in Las Vegas, and is the first commercial LTE launch in the US. More markets are coming soon. $55 plan will include unlimited CDMA voice, texting and LTE data. First device to be used is Samsung smart phone with AWS support. Leap Wireless Focuses on EV-DO, Has Time For LTE Aug 4, 2010 Cricket plans to have its first LTE trial market by second half of 2011. Concerns about handset pricing and availability have Cricket targeting mid 2012 for LTE market rollout. US Cellular Accelerates EV-DO, Weighing LTE Trial Aug 6, 2010 US Cellular is working with multiple vendors on trials for a 4G LTE. However, no timetable announced at this time.
FCC Release on 21 Waivers: http://www.fcc.gov/Daily_Releases/Daily_Business/2010/db0512/DOC-298124A1.pdf
6 | 3G/4G Market Update | October 2010 All Rights Reserved Alcatel-Lucent 2010

FCC Approves Public Safety Networks Using LTE May 13, 2010 The FCC granted 21 waivers to regional and local entities to begin building wireless broadband networks for first responders in the 700 MHz band. The networks deployed must be interoperable in coordination with the FCCs Emergency Response Interoperability Center. Part of the public safety effort includes a re-auction of the D-block portion of the 700 MHz band, although that spectrum is NOT a part of the FCC waivers. NTIA To Open Additional Round of Funding May 16, 2010 NTIA said it would open an additional round of BTOP (broadband stimulus) funding for public safety waiver recipients, since they may have stayed away from applying previously without permission to use the spectrum. Applications can be submitted between June 1 and July 1, 2010.

4G Excitement US Carriers Selecting LTE and WiMAX Several US Broadband Stimulus Winners Are Planning Fixed Wireless Deployments to support their regions underserved areas Example of Round 1 and 2 Awardees include (not a complete list) Big River Broadband Buggs Island Telephone CellOne of East Central Illinois (expected to be HSPA+) Keystone Wireless Minnesota Valley Panhandle Telephone Pine Telephone (expected to be HSPA+) Pioneer Long Distance Rivada Sea Lion Sunman Wireless Utopian Wireless Vermont Tel West Virginia PCS (expected to be EVDO) Several Public Safety entities (more expected in Round 2.5)
7 | 3G/4G Market Update | October 2010 All Rights Reserved Alcatel-Lucent 2010

Worldwide Mobile Subscriber Forecast

3500 3000 2500 2000 1500 1000 500 0 2009 2010 2011 2012 2013
Source: Alcatel-Lucent,Delloro (2009)

2G
GSM CDMA LTE WCDMA CDMA EV

3G
WIMAX

3G 2G 4G

4G is Here, But Theres Still A Very Long 3G Window

8 | 3G/4G Market Update | October 2010 All Rights Reserved Alcatel-Lucent 2010

Peak Rates vs. Average Sector Throughput in DL

70 Mbps 60 50 40 30 20 10 0 EVDO Rev 0 Theory (Peak) Aggregate Average 7.2 3.0 EVDO Rev A 9.3 3.75 HSPA HSPA+ HSPA+ LTE 2x2 2x2 MIMO MIMO 28.8 4.2 36.7 6.0 LTE 4x2 MIMO 36.7 6.6 WiMAX WiMAX 4x2 2x2 MIMO + BF MIMO 27.6 11.0 27.6 11.0
160 140 120 100

FDD 5 MHz Up / 5 MHz Down TDD 10 MHz (32:15 FL:RL)

Peak Typical
Average macrocell spectral efficiency 1.2 bps/Hz, or 12 Mbps in 10 MHz

LTE Downlink Data Rates 2x2 MIMO

14.4 3.6

21.0 3.7

80 60 40

Rural Carriers Typically Have 5 MHz up and 5 MHz down

100 Mbps is NOT possible with this much spectrum OFDMA (LTE/WiMAX) benefit is reduced at lower bandwidths
9 | 3G/4G Market Update | October 2010

20 0 1.4 MHz/ 1.4MHz 3 MHz/ 3 MHz 5 MHz/ 5MHz 10 MHz/ 10 MHz 20 MHz/ 20 MHz

Theory (Peak) Aggregate Average

8.8 1.4

22.1 3.6

36.7 6.0

73.4 12.0

150.8 24.0

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Peak Rates vs. Average Sector Throughput in UL

9.0 Mbps

FDD 5 MHz Up / 5 MHz Down TDD 10 MHz (32:15 FL:RL)

8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0

45000 40000

Peak Typical
Average macrocell spectral efficiency 0.6 bps/Hz, or 6 Mbps in 10 MHz

EVDO Rev 0 Theory (Peak) Aggregate Average 3.2 0.6

EVDO Rev A 5.4 1.2

HSPA LTE HSPA+ LTE 2x2 WIMAX LTE HSPA HSPA+ 1x2 LTE 1x4 16QAM 16QAM 1x2 6.0 1.3 8.5 3.0 8.5 4.2 1.3 1.0

WiMAX WIMAX 1x4 4.0 2.0

35000 30000 25000 20000 15000 10000 5000 0

LTE Uplink Data Rates 1x2 16QAM

Rural Carriers Typically Have 5 MHz up and 5 MHz down

100 Mbps is NOT possible with this much spectrum and most system are asymmetrically engineered to favor higher bandwidth on the downlink
10 | 3G/4G Market Update | October 2010

1.4 MHz

3 MHz

5 MHz

10 MHz

20 MHz

Theory (Peak) Aggregate Average

2.2 0.6

5.2 1.6

8.5 3.0

20.6 6.0

40.6 12.3

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US Spectrum vs Available Wireless Solutions

Frequency Band GSM CDMA W-CDMA (UMTS) LTE WiMax

2Q10(Tier 1)

700MHz
1Q11 (Tier 2/3)

Closed Solutions Available

850MHz Cellular

2011/2012

1900MHz PCS

2011

1700MHz/2100MHz AWS

2Q10 (Tier 2) 1Q11 (Tier 1/3)

MSS L Band 2500 MHz BRS/EBS

2011

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11 | 3G/4G Market Update | October 2010

Evolution 2G 3G 4G

1X DO RevA
2G
3G 3G

RNC
PCRF

HLR

DO RNC

PDSN

GSM UMTS HSPA+

RNC SGSN
PCRF

HLR

GGSN

4G

LTE
e SGW

MME

PCRF

PCRF HSS

PGW

12 | 3G/4G Market Update | October 2010

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Expected US Timeline for LTE (Patel Guesstimate)

2008
Standards Complete

2009

2010

2011

2012

2013

Interval from standards to mass rollout has taken 4-6 years for 2.5G and 3G solutions. LTE is expected to be a lot faster.
1st LTE devices (CI) (data cards)

OFDM/MIMO Demos LTE Tech Trials

1st LTE Commercial Handsets

First Customer Trials

Affordable Data cards

Initial LTE Deployments

Affordable Handsets

LTE Mass Rollout

700 MHZ Upper C AWS Band 700 MHz Lower B/C 700 MHz Lower A 1900 MHz 850 MHz ? 700 MHz Upper D ? 2.5 GHz Band ? Other Bands ? MSS L Band 700 MHz PS

First Commercial Releases of LTE Are Almost Here. The Eco-System for Data Cards and Devices Is In Its Infancy, But Developing Faster Than With 2G/3G.
13 | 3G/4G Market Update | October 2010 All Rights Reserved Alcatel-Lucent 2010

UMTS and LTE Device Reality for 2009-2014

USB Wireless Adaptor Price Curve - Per Category/Generation
3GPP Device Band Plan
Band 13 700 MHz Upper C [Driven By Verizon 2H2010 deployment] Band 4 AWS Bands [Driven By MetroPCS, Cox and Tier 2s 4Q2010 deployment] Band 17 700 MHz Lower B/C [Driven By AT&T 2011 deployment] Band 12 700 MHz Lower A/B/C [Driven By Cox, CellSouth, US Cellular time TBD] Band 14 700 MHz Public Safety [Driven by Public Safety Segment Time TBD] Initial data cards from established vendors is focused on Band 13, followed by Band 4 and 17; high end voice/data handsets will follow 6-12 months after data cards Only a couple prototype devices for Band 12 (due to interference issues of lower A and lack of standard) Devices for1900 MHz expected mid 2011 850 MHz Devices will be based on market demand/drivers

$10,000
LTE 1st generation

$5,000

Rural Carriers have 850, 1900, AWS and 700 Lower A/B/C

$1,000

$500

$100 $50

HSPA+ 1st generation

HSPA+ 2nd generation

LTE 2nd generation (multimode)

Commodity price

2009

2010

2011

2012

2013

2014

Source: Alcatel-Lucent Markey survey

14 | 3G/4G Market Update | October 2010

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www.alcatel-lucent.com/lte
15 | 3G/4G Market Update | October 2010 All Rights Reserved Alcatel-Lucent 2010