If leadership can be defined by as the ability to make a bold change before others, then Hong Kong’s CSL is a prime example. With just under 25 per cent of its local market it may be second to Hutchinson in market share, but it nevertheless has a number of significant firsts under its belt. Not least of these is that when its hybrid dual-carrier HSPA+/LTE network was launched in mid-2010 it was not only the first of its kind in its market, but the first such network in the world.
As a recent report from Informa (LTE Early Mover Strategies) identified, there are a number of reasons why being at the bleeding edge can be a risky strategy for an operator. Customers could potentially be put off by the high initial prices of new technology—and if that technology doesn’t deliver the promised benefits then the company’s brand equity could be negatively affected, leading to customer churn. What’s more, the initial vendor deals could prove expensive as economies of scale have yet to kick in and lower equipment prices. Meanwhile rivals could step in soon after and take advantage of these lower prices to roll out with lower CAPEX.
As CSL’s chief marketing officer Mark Liversidge explains to Telecoms.com though, the benefits of an early LTE launch outweighed these potential pitfalls. Indeed it was actually the concluding part of a medium-term strategy. “The launch of LTE for us was the final phase of a complete network swap out programme that had been ongoing for three years. Literally every piece of hardware is new, built in partnership with our vendor ZTE; so a vast, very significant investment.”
The process started for CSL in 2009 it launched the Next G network. This was the first all-IP network in the world and one built on software defined radio. This enabled it to be the backbone on which, some 18 months later, it would launch its combined dual-carrier HSPA+ and LTE network.
However, while the LTE network was ready, the devices were not, which limited the LTE launch to a pre-commercial phase only. The issue—a familiar one—was that devices were LTE only, providing no fall-back to 3G, which simply was not a viable option for commercial launch. In fact, getting hold of quality LTE devices, Liversidge says is, “still proving to be a challenge, as it is for all of the early LTE operators”.
While the implementation may have had challenges, the need for it was clear to CSL. Unlike some operators, the operator had foreseen the huge explosion in data growth both globally and in particular in the Hong Kong market, with its constant flow of technically savvy, and data hungry travelling business executives.
“We foresaw the upcoming data boom in consumption terms and we were very clear in understanding that here in our market in Hong Kong we knew that we would be in a market full of data consuming devices,” says Liversidge.
The key driver for CSL, then, was preparation, as it sought to learn from the mistakes of other operators round the world. As Liversidge explains, “some of them have had stability problems, as we’ve seen in other markets; some of them very major ones. It was widely publicised that when things like the iPhone 4 launched it caused instability on some very, very significant networks in the world. We’ve not had any of those issues.”
The question remains though as to why LTE was important for CSL to implement as this stage, especially when it has what it considers to be a first-rate dual carrier HSPA+ network. The decision boils down to CSL’s long-term thinking and its desire for operational efficiency.
“LTE has an efficiency benefit for network capacity operations, so understanding the growth of data we wanted to get onto an LTE backbone as quickly as possible—so we could carry more capacity and serve more customers. Also, from a cost efficiency perspective we could reap the benefits of that as quickly as possible in the life-cycle of the data boom era.
“Efficiency is a real driver for us. From a business perspective it’s a network operational issue, and it’s a cost financial issue, and then on the consumer side it’s about providing capacity that enables people to move without boundaries.”
In terms of spectrum Liversidge says that CSL is in good shape. “We still actually have considerably more spectrum to utilise when we are required to do so from a capacity position.” It has rolled out at 2600MHz, giving it a good level of capacity. Liversidge admits that this does mean that it suffers a little in terms of in-building penetration LTE coverage, which is why its dual carrier HSPA+ is so vital at this stage, offering a step down network that still offers a good level of speed.
However, things will improve for LTE performance further once CSL begins to roll out LTE at 1800MHz of which it has a healthy 23MHz to play with. It currently employs 1800MHz for 2G services, but intends to gradually refarm this for LTE by moving 2G customers to 3G or directly to LTE.
Liversidge identifies 1800MHz as important, again due to the migrating nature of many of its customers. “From our perspective one of our service requirements is in-bound travellers. So as our colleagues at other operators build out their customers on 1800 we want to be able to ensure that they work with LTE as they are inbound into Hong Kong.”
While many operators have concentrated on speed, Liversidge says that a key strategy for CSL is focussing on the customer experience. He’s particularly opposed to the fixation on quoting theoretical headline speeds which bear no relation to what users actually see in the real world. “We believe that for the health of our local market, we need to move away from the notional speed quotes that have become the norm. It’s not customer centric, it’s not customer friendly and frankly it isn’t actually a relevant number for the end user.”
Instead, the focus on what customers can do with the service they pay for, such as speed of connection, responsiveness, downloading fast files, and watching high definition content via their mobile broadband.
Despite this, Liversidge is happy to state that its customers will normally see between 35 and 40Mbps on the downlink, with many hitting 50Mbps. The uplink of 25Mbps, is much faster than most fixed-line connections round the world.
In fact, Liversidge controversially says that he believes that what CSL is doing now will eventually be the death knell for fixed line. “I think globally we can all see that across the world people are going to abandon conventional cable packages of 500 channels, 490 of which they never watch. They are going to transition to the Hulus, the Apple TVs, and the Netflix’s and watch on-demand. And when they do it’s on-demand instant gratification. They don’t want to download it overnight, they want to click it and go.
“Equally, gaming is a big market and it’s going on line: gaming platforms which enable [consumers] to play 3D high-def games across the world with each other. Our technology enables them to do that. On top of that there is a vast wealth of business service applications. You can start looking at and imagining.”
Despite this demand for online services CSL is carrying through with a change in focus over how consumption of data is priced. “We’ve completely gone away from our marketplace which is normed on unlimited service plans and being speed based, to offering service applications and volume-based pricing,” says Liversidge.
Unlimited plans are still available as part of its LTE only Premium 1010 package, and one of the options of its one2free packages but Liversidge says CSL is already reaping the benefits of its programme of educating its consumers over the benefits of just paying for the consumption they need. “We still do have unlimited plans, but we are averaging 50 per cent of our sales on volume pricing”. Liversidge says.
Pricing of those plans is also critical, with most coming in at the same level as that of 3G. The strategy is to extract value from the large investment that CSL has made in the Next G network by developing mass market propositions. “We’ve entered the market with LTE services not at a premium. The aim is to cease selling other types of mobile broadband and only sell LTE, and we’re pricing it accordingly.”
All of these measures are vital, Liversidge believes, for the long term health of its business. “For our long-term health we need to bring value back into our core proposition. We’re a mobile network operator – our manufactured product is network air time. If we don’t put value back in that we’re no more than a dumb pipe in the future. We want to be a smart enable and a smart content provider. And that means breaking the unlimited plan fixation. And we’ve done that. And I would strongly advice all of our fellow marketers to do the same.”
With Amazon and Google launching smart home initiatives, have the telcos missed out on their chance to cash in on this market?
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