Hong Kong is a radio engineer’s paradise, a forest of skyscrapers in a difficult terrain of jungle and mountain. Its biggest network operator, CSL, has set down arguably the smartest mobile network infrastructure on the planet, running some of the fastest transmission speeds on the open market.
It makes UK brands, engaged presently in a public dogfight about network quality, look bad, and claims that their subscribers are well-served look preposterous.
But why should we care particularly about some parochial telecoms pyrotechnics in a former British colony in the South China sea? Well, in the first instance, CSL offers a glimpse of tomorrow, a view of a live HSPA+ network boasting topline download speeds of 21Mbps, and also of a trial LTE operation reaching a high-octane 100Mbps (see below).
And our own airtime providers care of course; in all, eighty operators have stopped by CSL’s state-of-the-art technology centre in downtown Hong Kong in recent months for a signpost to their own futures.
As well, this is a global market, and the clever author of CSL’s new infrastructure, the Chinese vendor ZTE, is busy in Europe and other markets now to make a name for itself.
CSL and ZTE offer a precedent for Orange and T-Mobile if, as curious market rumour has it, the pair are indeed considering new high-speed infrastructure to underpin their UK joint venture. According to CSL chief Tarek Robbiati (pictured), the main questions for western operators wishing to make such a leap are to do with the depth of their pockets, and the size of their cojones.
Robbiati, newly-appointed managing director of CSL-parent Telstra International, is good on the global market. Pegged for some time as a future leader of a tier-one operator in Europe or the US, and a major draw at Mobile World Congress in February for his punchy LTE address, Robbiati rounds on the UK, and most of mainland Europe, for network performance.
“The UK experience is shocking. You know, I have a home in London and whenever I travel, wherever I travel, I test the speed of networks – in part just to feel good [about CSL’s relative position in the global market]. And I am never disappointed. The UK is not good, Spain is not much better, Italy is okay, France is fairly good, and Sweden is considerably better.”
But more fighting talk later; first some background and context for this future gazing.
Robbiati joined CSL three years ago from Telstra Australia, where he had handled finances during construction of its ‘Next G’ UMTS network, built to replace the original CDMA business. Telstra’s Next G infrastructure went live in October 2006, running in the 850MHz band as opposed to 2100MHz spectrum most commonly utilised for UMTS; its CDMA network was turned off 18 months later.
Robbiati explains: “Next G was the first data network that solved many of the problems of 3G networks – it was a data network optimised for voice and not a voice network optimised for data.
“The networks that existed before were voice networks operating in the 2100MHz range, which over-promised and under-delivered on data. This was different. It operated in the 850MHz band, which allowed better coverage and faster speeds, and put data at the centre of everything.”
Telstra has a 76.4 per cent stake in CSL; the rest is held by local private investors. On joining CSL, Robbiati’s task was to replicate Telstra’s Australian model within the limited but ranging boundaries of China’s Hong Kong administrative region – “same design, same engineering, same brand.”
But Hong Kong presented unique challenges with its topography of clustered, impenetrable high-rises downtown, bearing high rentals for radio masts and access fees for maintenance, and the rugged mountain and jungle terrain leading away from it.
Robbiati and CSL technology chief Christian Daigneault, whose career has criss-crossed the world’s remotest engineering environments, selected to tear out all existing Nokia Siemens Networks kit to start fresh.
ZTE was appointed in March 2008 for its technical proposition, its price and its proximity to Hong Kong island – its headquarters are just two hours by car in Shenzen on the Chinese mainland, and afford CSL easy access to “thousands of engineers”.
Crucial to ZTE’s selection was its flexible software definable radio (SDR) platform, which makes new configuration of CSL’s radio network achievable by software tweaks, rather than by swapping out hardware – the sense is, maintenance costs are minimised, infrastructure is ‘future-proofed’ and operational expenditure is kept in check.
On top, ZTE’s technical infrastructure incorporates fibre (neccessary for LTE backhaul) between CSL’s sites and its core, creating a network whose component parts run off the same IP link.
But the Hong Kong market allows certain regulatory freedoms also. Its spectrum is technology neutral, enabling operators to run any transmission technology in any available bandwidth. They can effectively refarm spectrum as they see fit, with no cost to bear except for purchase and installation of compatible kit.
CSL has, with ZTE hardware, redefined its spectrum usage accordingly; its two 8.3MHz blocks in the 900MHz band (spectrum traditionally used for GPRS) have been reallocated to also run HSPA, HSPA+ and, down the line, LTE.
As well, the timing of Hong Kong’s 4G license auction was beneficial. Hong Kong was the third market to issue 4G licenses in January 2009 and, in the bidding, CSL paid HK$523 million (around £21m) for a twin block of 15MHz spectrum in the 2600MHz band, leaving it with considerably more bandwidth than local rivals – CSL has 127.6MHz spectrum in total, compared with 3 with 89.4MHz and PCCW with 87.8MHz.
The lower the frequency, the further the signal carries, and the better its penetration of indoor space. Hence, in Hong Kong’s chaos of concrete high-rises, network coverage is provided by CSL with fewer masts, reducing site costs.
CSL’s capacity in different bandwidths allows it to designate spectrum according to traffic volumes and, also, to personal subscriber profiles.
CSL launched its ‘Next G’ proposition in March 2009, with download speeds of 21Mbps and upload speeds of 5.8Mbps across Hong Kong.
CSL’s was the second commercial launch of HSPA+ in the world, coming two weeks after Telstra debuted its upgraded HSPA+ network in Australia (and six months before CSL’s compatriot Hutchison Whampoa made available similar speeds in certain Swedish cities, under the banner ‘HSPA Evolved’). CSL’s was the first to run off an all-IP core.
Until that point, CSL’s data traffic showed decent growth – typically, 100 per cent per annum. But that rate of uplift hardly shifted through transition to original HSPA, and was down essentially to availability of better devices.
The commercial launch of its HSPA+ network has brought better coverage, better speeds and better devices, and the incline in data growth has got very steep, very suddenly.
Data usage increased at 20 times the old rate in the first 10 months of Next G’s operation, to the point data traffic is now outpacing voice traffic by more than half.
“We built this network so that there are no capacity constraints, unlike with US and European operators. We built it as a function of this traffic coming down the line,” says Robbiati.
Eighty per cent of CSL’s new traffic is from USB dongles; just 20 per cent is from handset activity. It has started to sell wireless broadband routers also, working the terrain of fixed operators, and its new patterns of usage broadly reflect activity on the fixed web – internet browsing comprises 30 per cent of usage, P2P programmes take 21 per cent and multimedia represents 19 per cent.
But the Hong Kong market started to eat itself way before CSL’s HSPA+ launch, and CSL is selling a dream of the mobile internet to punters already used to unlimited minutes and mobile data for meagre sums.
So, instead, CSL is monetisising its fancy infrastructure by charging for speed of service, and trusting its coverage and quality alongside will draw business from rival firms.
Robbiati explains: “The bet we made is customers will value the speed experience. Everyone else in the world is billing per megabyte. We have gone with speed-based pricing. So you pay one price for a Fiat 500 in first gear, and another for a Ferrari.
“But we have had no choice – Hong Kong is very competitive; it has gone ‘unlimited’ before anywhere else. In Hong Kong, you can sell 850 minutes for HK$35, which is less than US$5 per month – and then you have bad debt and all other costs to recover.
“That’s how crazy things are. This market has been trashed to the point it is insane. As Confuscius said; quality is not cheap, and cheap is not good.”
The problem is only a minority appear so far convinced such quality is worth forking out for – five per cent of its base contributes roughly 50 per cent of its data traffic, a statistic likely to be loosely reflective of its biggest-paying HSPA+ subscribers.
Even so, CSL takes an 85 per cent share of the corporate sector in Hong Kong, the most obvious user market for high-speed mobile broadband. And rivals in Hong Kong are rolling out equivalent services, and yet continuing to lose share to it.
Robbiati reflects: “It is not the same implementation. No other operator can launch at 900MHz. It is like the difference between a good wine and a bad wine.”
And CSL is also mindful to be more than a utility pipe, that cliched but real fear of every mobile operator, and even to be more than an ISP, which its new data activity appears to bear comparison to.
“Technology is important but it is more important what you do with it. We’ve brought capacity, but we have brought services too. That question of a utility pipe is a real problem. How do you invest? Because you can’t stand still. You have to build inteligence into your network, which is the fundamental difference with what we are doing at CSL. We have 18 months, solid, on the competition in that regard.”
Beyond its quality of service management, then, CSL has launched a music download proposition, ‘Musicholic’, allowing access to a library of one million tracks from a varierty of devices, an HD mobile television service, ‘Studio on Demand’, offering live and on-demand local content and shows, and a multi-language internet hub, MyNet, which pulls together the usual social networking functions in a single portal.
Such speed and bandwidth, and indeed services, allow easy consumption. CSL is partial in this ‘net neutrality’ debate, and polices usage and switches the speed down to 16Kbps if it suspects illegal file sharing or somesuch. “The notion that the internet is free is an idealistic ‘Generation Y’ concept. Nothing in life is free,” remarks Robbiati.
Back to this loose commentary on the West. Robbiati observes three principle differences between CSL’s achievement for Hong Kong consumers and tier-one operators’ failures with much bigger audiences in Europe and the US: risk-taking, investment and regulation.
He is mindful of course Telsta’s experiment in the confines of Hong Kong took something different in terms of “billions of euros and management will” than required by behemoths in large and mature markets in the West.
But he makes the point: “For us, the mandate from Telstra was ‘go do it’. Without that management support, it is an impossible task for any chief technology officer.”
There is also, perhaps, the inherent preciousness of the engineering fraternity to contend with. “There is all kinds of legacy infrastructure. And there are engineers who are too enamoured by it, and who don’t want to take the bold steps to remove it. So you end up sticking with old technology and seeing incremental improvement, as opposed to radical improvement.”
He says also: “You can find 15 reasons not to do something. There is always an excuse in life.”
More concerning is general market funding in other territories. Robbiati suggests UK operators have been hamstrung by their original investment in 3G licences in 2000 (£22.47 billion between five), and been made risk-averse consequently, and innovation has been halted.
“In the western world, at a macro-level, if you look at the ratio of investment in infrastructure as a percentage of GDP, it has gone down – in any sector; in telecoms, energy, railroads, airports. Infrastructure investment is very important for economic growth. China has taken a very different approach. You might argue that its telecoms market is less competitve but at least it is investing.”
In certain developing markets, he argues governments approach licence auctions like state fund-raising only, and miss the opportunity to foster economic and social good.
“Compare it with India; the government still issues one licence at a time to create funds and so there is less opportunity to invest. In India, the networks are working terribly. It is very concerning,” he says.
Robbiati won’t reveal CSL figures, but Telstra invested AUS$1 billion in its Australian Next G operation and, in three years, created a AUS$1 billion revenue business on top. As a frame of reference, the typical break-even for investment in fixed infrastructure comes after 12 years, and for wireless after seven. “So the return is very satisfactory,” he says.
Even so, the technology gamble for CSL was reduced by ZTE’s SDR hardware, and practically made a sure thing by Hong Kong’s easy regulation, as well as the timing of its 4G licence auction.
The UK dynamic is very different, of course. In Europe, most spectrum is restrictive and forbids the usage of 900MHz spectrum for anything but 2G transmissions, for instance. It is a central tenet of communication minister Lord Carter’s report last year into the barriers to a ‘Digital Britain’, and advice on refarming of spectrum.
“Why is it forbidden? Spectrum is finite, so you need to make sure it is used efficiently,” remarks Robbiati. Regulation around spectrum must be relaxed so operators can use it as they see fit.”
Which is what CSL is able to do freely, of course, with staggering performance results.
CSL’s LTE network set for 2010 commercial launch
Hong Kong operator CSL is not hanging around. Having launched its commercial LTE+ network in March last year, with download speeds of 21Mbps across Hong Kong, it pushed the envelope with trial of LTE in November, and superfast speeds of 100Mbps.
It is a giant leap, which will leave bigger rivals in mature markets in the West for dust.
As a frame of reference, Vodafone is claiming 14.4Mbps in certain London enclaves, but UK users are lucky, realistically, to get 3.6Mbps. In the US, operator Sprint has just launched ‘4G’ WiMAX with speeds of 3-6Mbps. “They’re calling it ‘4G’,” remarks CSL chief Tarek Robbiati. “Our 3G is faster than that.”
CSL’s closest rivals for speed on the international market are network operators in Sweden, which have variously made available equivalent 21Mbps in certain urban centres under the banner ‘HSPA Evolved’, and are also trialing LTE. Vodafone and O2 parent Telefónica are, meanwhile, in early trial of LTE in Germany and Spain, respectively.
But CSL has just expanded its LTE trial footprint from 20 cell sites to 40 around Hong Kong, and will extend it to 60 in total in two frequency bands – 1800MHz and 2600MHz – before its commercial launch, slated for late 2010.
Its LTE tests are showing considerably better indoor coverage and better throughput, as well as improved latency by a factor of four times compared with HSPA+, noticeable particularly for uploads.
For context, HSPA+ allows download speeds of 21Mbps and uploads speeds of 5.8Mbps and LTE enables 100Mbps and 50Mbps for the down link and up link, respectively. In between, CSL will launch dual cell HSPA+ with 42Mbps and 11.5Mbps.
Of course, as UK consumers have found and UK operators have started to admit, such speeds are theoretic, and dependent upon breadth of spectrum and capacity. CSL has riches in both – 127.6MHz across four bands (900MHz, 1800MHz, 2100MHz and 2600MHz) – and regulatory freedom to utilise each as it pleases.
As it stands, it is studying LTE propagation across clusters of cell sites in urban and rural settings to define deployment at launch, and is in tandem pushing device vendors for compatible equipment. CSL technology chief Christian Daigneault says: “We don’t need to deploy LTE everywhere – we will only deploy it where there is a high density of traffic.”
By the end of 2011, CSL will migrate existing customers from 3G to its HSPA+/LTE network.
The point? Money, ultimately, as well as user experience. CSL is deploying LTE to reduce operational costs and bring value to the consumer experience by differentiating on, and charging for, speed. Most of an operator’s costs are in site rental and backhaul.
Daigneault says CSL reduces its relative cost per bit by 40 per cent with LTE. By 2014, and full commercial operation, running costs will be around 20 per cent of present 3G operating expenditure, he says.