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——On what's hot in global mobile industry with Yu Chengdong from Huawei

By Ian Scales

The mobile market has been thoroughly shaken up by numerous issues that span a range of industry fields such as service innovation, technological development and network reconstruction. Not only are these issues inspiring fundamental changes to the mobile industry, but they are also delivering enormous business opportunities.

What is Huawei's perspective concerning mobile market development and the dominant trends for future mobile networks? With this in mind, Ian Scales, interviewed Yu Chengdong, president of Huawei mobile networks.


Hot Issues in Mobile Market

Reporter: In the past year, the global mobile market has seen many cases of regrouping and mergers among telecom operators and equipment vendors. What do you think are the driving forces behind this?

Yu Chengdong: Well, many international telecom operators and equipment vendors were involved in regrouping and mergers in 2006 in order to increase competitive ability and reduce OPEX. We've seen AT&T's Bellsouth purchase and French Telecom's merger with Orange. If we carefully study these acquisitions and mergers, they tell us that the major trends in the future will be broadband, integration and mobile. It's these trends that drive regrouping and mergers among mobile and fixed operators and equipment vendors, to enable them to provide richer FMC services.

Reporter: In that case, what do you predict will be the key issues in the 2007 mobile market? And among these, which will be the most important?

Yu Chengdong: The most important issue will be mobile to IP network evolution, and the associated mobile network reconstruction. To date, IP technology has been applied to various layers of mobile networks including service, core, bearer and access. For large operators, an IP-based mobile network can help establish a unified bearer network that can reduce HSPA network transmission costs by 40-80%. Moreover, an IP-based mobile network can simplify network structure and improve network bearing capability. This is why the major global mobile operators have begun IP transmission tests, or adopted IP transmission as a necessary development path. For example, as part of Japan's first All-IP HSPA network, eMobile adopted Huawei's new-generation HSPA base station, which supports IP transmission.

2007 will also witness the large-scale commercial application of HSPA, as network operation and service deployment become more mature. This will allow users to enjoy high-speed mobile data services. In Europe, where communication systems are very advanced, 2G network users will be rapidly shifted to 3G networks, to reflect service focus.

In terms of the development of mobile communication markets, we can look at China and India as examples. GSM networks will still be key to network construction, but will possess lower power consumption, higher capacity, smaller size, packet platforms and flexible deployment. This will boost network construction in these markets and popularize low-price services.

Reporter: Mobile operators are deploying HSDPA networks. 3.6 Mbps HSDPA networks have already been put to commercial use, followed by 7.2 Mbps networks. In your opinion, what are the key factors that influence HSPA on-scale development?

Yu Chengdong: Some industry-leading mobile operators have begun a second round of 3G construction. Vodafone and NTT DoCoMo, for example, aim to solve service bearing and deep coverage problems during this phase. According to statistics, 80% of data services occur in indoor environments, and 20% indoor coverage can improve this effect. Therefore, deep coverage, including indoor coverage, has become a vital means of attracting HSPA network subscribers.

As the number of 3G subscribers grows, mobile operators have to constantly increase network capacity and coverage width. Compared with 2.1GHz frequency, UMTS900 can cover the same area with far less sites. With low overall network construction costs, UMTS900 has garnered the interest of mobile operators worldwide. France's SFR and Australia's Optus have already begun constructing trial UMTS 900MHz networks.

So, it's reasonable to conclude that the next large investment in mobile equipment will focus on indoor coverage and multi-frequency wide coverage solutions. To meet customer requirements, Huawei released its iDBS indoor coverage solution in 2006. In September 2006, Huawei and Qualcomm jointly launched the first UMTS 900MHz HSDPA IOT. To enhance coverage, Huawei launched its DNBS distributed base station solution. With considerable transmission power, great receiver sensitivity and a significant decrease in feeder losses, this base station can increase coverage by 30-40% compared with traditional macro cellular base stations. With their advanced performance and rapid deployment capabilities, Huawei's indoor coverage and multi-frequency solutions have won recognition among mobile operators throughout the world.

Reporter: It is becoming increasingly evident that mobile handsets will serve as integrated information carriers. New value-added services such as mobile newspapers and TV are attracting much attention. What's your view on mobile TV?

Yu Chengdong: Mobile phones are increasingly evolving into an information bearer rather than just a communication tool. During the 2006 World Cup, more than 100,000 PCCW subscribers in Hong Kong watched games via mobile phones. With traditional streaming-based mobile TV services, a cell can contain only 6-8 subscribers. When using CMB (Cell Multimedia Broadcast) technology, a cell can service 256 mobile TV subscribers. Mobile TV services based on broadcast and multicast still possess huge price-to-performance ratio potential.

At present, there are many mobile TV standards in the industry. MBMS (Multimedia Broadcast and Multicast Service) is the most advanced mobile TV standard. Operators can upgrade existing UMTS/HSPA network software to support MBMS, and savings can be made in expensive frequency usage fees. Compared with other mobile TV standards, MBMS supports more terminals and requires lower network deployment costs.

As greater numbers of commercial terminals now support MBMS, European operators will begin deploying MBMS mobile TV in 2007. While initial implementation will attract few subscribers, the service will enjoy rapid growth. Sufficiently low terminal prices will attract high numbers of mobile TV subscribers in developing markets as well, including China and India. In fact, terminal users in developing markets seem to accept and access multimedia services to an unexpected degree. In markets like China and India, mobile TV subscribers will mirror economic development and it is likely to become popular in 2-3 years.

Reporter: In the first quarter of 2007, Hutchison launched its tariff package X series in the European market, which included many VoIP services. By actively promoting VoIP application, Hutchison has greatly reduced voice service rates. We may forecast that operators will increasingly develop VoIP. What are the likely implications on network deployment requirements?

Yu Chengdong: Fierce competition has led operators to more or less adopt VoIP as an effective competitive strategy. They hope to use IP to improve network and operational efficiency in a bid towards network and service transformation. The coming years will see continual IP-based voice services' growth and convenience. It is predicted that, by 2010, the number of worldwide VoIP subscribers will quadruple.

All-IP core networks also represent a key development trend. A current mainstream choice for mobile operators is to use mobile softswitch for IP reconstruction and the construction of core networks. We have seen increasing numbers of operators such as China Mobile, Orange and KPN constructing IP-based mobile softswitch networks. Softswitch can provide mature voice services, while IMS is suitable for multimedia services. Softswitch and IMS will develop together and coexist in the long-term.

As a promoter of IP-based core networks, Huawei has accumulated much experience in deploying IP-based mobile softswitch products, including QoS, security and operation and maintenance, and we will also apply our knowledge to IMS. In 2004, China Mobile employed Huawei's mobile softswitch to construct an IP-based softswitch network that covers the whole country and is used to bear long-haul voice services. By the end of 2006, over 300 million China Mobile subscribers had enjoyed quality VoIP services via this mobile softswitch network.


Jointly Face Future Challenges

Reporter: Mobile operators globally are looking for high price-to-performance ratio equipment. However, equipment accounts for only 30% of overall network costs, while network operation comprises 70%. Can you describe Huawei's methods of helping operators reduce total costs?

Yu Chengdong: Network operation costs consist of transmission, electricity, installation, and network operation and maintenance. By continually innovating based on customers needs, Huawei has created numerous solutions. Our IP transmission solution, for example, saves HSPA operators between 40 and 80% in transmission expenses. In terms of electricity cost savings, Huawei's new-generation base station adopts a high-efficiency power amplifier, which saves 40% in electricity costs compared with traditional base stations. With respect to operation and maintenance costs, our mobile softswitch is large in capacity and supports IP-based distributed networking, thereby facilitating centralized maintenance for the core network. During mobile network construction, operation expenses occur when selecting sites and installing base stations. However, Huawei's distributed base station can greatly reduce site selection difficulties and our BBU is as small as a VCD box, meaning it can be located in the same cabinet as other equipment. The distributed base station's RRU can be installed below the antenna, which saves feeder losses and improves coverage effect. As the distributed base station is small, light and convenient to install, Vodafone Spain has utilized many of Huawei's distributed base stations in its HSPA network.

Reporter: By providing global mobile operators with end-to-end solutions, Huawei has gained credit from many customers. In your opinion, what will be the biggest challenges for Huawei's wireless product line over the next few years?

Yu Chengdong: Huawei has won respect and praise from some of the leading global mobile operators including Vodafone, Telefonica, France Telecom, KPN and Etisalat. Driven by customer needs and a continual push for innovation, Huawei has never stopped helping customers enhance competitiveness and profitability.

Customer needs are constantly increasing. Future network technology is growing more complicated and technological turnover is increasing. With an increasing mobile market share, Huawei is shouldering more responsibility to secure the mobile industry's healthy and sustainable development. Over the next 5 years, our biggest challenge will be to maintain our leading position in terms of responding rapidly to our customers against the backdrop of an increasing customer base and the number of networks we serve.


Concerns About 4G

Reporter: 3G has now gained general recognition and achieved increasing commercial application. Moreover, the concept of 4G has emerged. How does Huawei view the situation? How will Huawei respond to such trend?

Yu Chengdong: The development and deployment of any technology takes time. From WCDMA to HSDPA, from HSUPA to HSPA+ and LTE, we can see the process of service and performance enhancement, the purpose of which is to obtain higher frequency utilization and better service bearing capability. It has taken 10 years for WCDMA to reach maturity in all aspects of networks, terminals, services and profit models. To protect investment, operators will be very cautious when upgrading in order to inherit existing technologies and equipment.

In fact, there is as yet no clear definition of 4G. The industry is still discussing what 4G really is. As an initiator of LTE research, Huawei has conducted numerous LTE simulations and field tests and contributed 5% of LTE standards proposals. Although LTE standardization is slower than our expectations, we think its industrialization will be quicker than WCDMA, since it can effectively integrate and inherit GSM and WCDMA technologies.