Anda di halaman 1dari 24

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts

Analysis
November 1, 2013

TABLE OF CONTENTS
ABOUT THIS REPORT ............................................................................................................................. 1 TOP TAKEAWAYS: SON IS BAKED INTO LTE BUT OPTIMIZES 3G NETWORKS ............................................. 2 SERVICE UPDATES ................................................................................................................................ 2 MOBILE NETWORK OPTIMIZATION INCLUDING SON HIT $2.9B IN 2012, FUELED AGAIN BY SON FOR 3G HSPA+ OPTIMIZATION! ......................................................................................................................... 3
Fueled by 3G optimization, SON continues to explode . . . .............................................................................3 and in this case, C-SON is predominant ....................................................................................................3 Meanwhile, 2G/3G optimization grew 9.1% YoY.............................................................................................4 Actual 2G/3G optimization was on track at 1% above our predictions .............................................................4 Consequently, we have not touched our short- and long-term forecasts..........................................................4

WE EXPECT THE 2G/3G OPTIMIZATION AND SON MARKET TO HIT $3.3B BY YEAR END AND $4.8B BY 2017 ................................................................................................................................................... 5
Keeping Opex under control continues to be the chief driver..........................................................................6 Asia Pacific is where the action is and where it will stay through 2017............................................................7 The MNO market is fragmented, comprising a flurry of specialist vendors ......................................................8 Vendor consolidation was brisk and remains unabated ..................................................................................9 A large majority of these specialist vendors come from incumbent operator spin off........................................13

AS 74% OF WORLWIDE MOBILE SUBSCRIBERS ARE ON 2G AND THE REST ARE ON 3G, 2G/3G NETWORK OPTIMIZATION ACCOUNTS FOR 90% OF THE MNO MARKET IN 2012 ....................................................... 14
There are 2 types of systems for 2G/3G optimization......................................................................................15 But SON, driven by 3G optimization and LTE rollouts, explodes from $625M in 2013 to $1.6B by 2017, a CAGR of 39.2% ............................................................................................................................................15 ANR remains the most implemented SON feature so far ................................................................................17 However, SONs ANR is already implemented in HSPA as a key optimizer .....................................................18 Automation is not new, and SON is at the very early stage, with a bright future ...............................................19 Deutsche Telekom is leading the charge . . . .................................................................................................19 . . . Other operators rally ...............................................................................................................................20

BOTTOM LINE ....................................................................................................................................... 21

This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. i

SON and Optimization Software


LIST OF EXHIBITS
EXHIBIT 1 EXHIBIT 2 EXHIBIT 3 EXHIBIT 4 EXHIBIT 5 EXHIBIT 6 EXHIBIT 7 EXHIBIT 8 EXHIBIT 9

Annual Worldwide and Regional Market Size and Forecasts

MARKET ACTUAL AND FORECAST COMPARISON ..................................................... 4 WORLDWIDE MOBILE NETWORK OPTIMIZATION REVENUE: 2G/3G AND SON ............. 5 WORLDS TOP MOBILE OPERATORS BY 2012 REVENUE .......................................... 6 MOBILE NETWORK OPTIMIZATION 2G/3G/SON REVENUE BY REGION ........................ 8 SPECIALIST VENDOR SNAPSHOT ........................................................................... 10 2G/3G/4G MOBILE SUBSCRIBER FORECASTS .......................................................... 14 SON REVENUE: 3G AND 4G SPLIT .......................................................................... 16 NGMN USE CASES ................................................................................................ 18 DEUTSCHE TELEKOMS MOBILE OPEX BREAKDOWN ANALYSIS ................................ 20

This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. ii

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts

ABOUT THIS REPORT


Many of our customers have asked for a report on the self organizing network (SON) market. In this report, we size and forecast the SON market in the context of its broader, larger, and older parent market, mobile network optimization (MNO). The MNO market is as old as the mobile industry, and involves major RAN vendors and a flurry of small vendors that work closely with mobile operators. As we approach global mobile penetration saturation, every single country has at least one mobile network and very often three to five players. To explain what we are trying to accomplish with this report, here is some background on MNO: There are hundreds of specialist vendors around the globe ranging from very small companies with revenue less than $1M up to medium companies with revenue of $25M, and large companies with revenue between $50M and $100Mwe believe Optimi, acquired earlier this year by Ericsson, was one of those large specialist vendors We have found that in each country, there is at least a local MNO vendor. Tier 1 mobile infrastructure equipment vendors such as Alcatel-Lucent, Ericsson, Huawei, NSN, and ZTE provide MNO software tools along with the hardware and each generate more than $100M a year from it, given that a simple HSPA upgrade can be part of an optimization plan. None of the smaller companies involved in the MNO market are public. As a result, we had to perform some triangulation to size and forecast this market. On one hand, we looked at software spending by large mobile operators such as AT&T, China Mobile, Orange, T-Mobile, Verizon Wireless, and Vodafone. This led to a total envelope of $6B. On the other hand, we looked at mobile network cost models to determine the breakdown between hardware and software. We found an average of 5% of total mobile infrastructure spending was in MNO tools. Large Western mobile operators have created their own optimization labs (e.g., AT&T Resource Optimization) to analyze the impact of smartphones by collecting data (e.g., app data, protocol stack such as RRC state machine, TCP, and HTTP) and act accordingly to optimize their networks. For every LTE network deployed in the world, SON is deployed with it for its ANR (automatic neighbor relations) feature that self-configures the LTE network. This is only the early stagethe full-blown SON is not ready for commercial rollout yet, and it will be some time before it is commercially available. Our initial plan was to develop a SON forecast based on license fees or $/license, but we have not found anyone willing to share information with us. As a result, our SON market size and forecast is modest, but it will improve as we gather sufficient information in the near future.

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 1

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts

TOP TAKEAWAYS: SON IS BAKED INTO LTE BUT OPTIMIZES 3G NETWORKS


Overall, the mobile network optimization market is fragmented, comprising a flurry of specialist vendors that each focus on a few key performance indicators (KPIs). However, they can be broken in 2 categories: subscriber- and network-based intelligence, and probe-based intelligence. In each country, there are at least three to five small vendors, most created after a spin-off from an incumbent. As LTE network rollouts ramp up worldwide, SON is gaining traction and is already used for 3G optimization purposes, reshaping the vendor landscape. The 2G and 3G optimization and 4G SON (self organizing network) market grew 17% YoY and hit $2.9B in 2012, driven by 2 major SON deployments at AT&T and KDDI and plenty of smaller deals. In a large majority of cases, 3G network optimization, rather than LTE alone, was a key driver for using SON. Nonetheless, the 2G/3G segment of the market grew 9% YoY and reached $2.6B. In this optimization scheme, we found that centralized SON (C-SON) is predominant and supplied only by SON specialist vendors such as AIRCOM International (Symena), Celcite, Cellwize, Cisco, and InfoVista and distributed SON (D-SON) comes baked into LTE eNodeBs that are supplied by major OEMs such as Alcatel-Lucent, Ericsson, Huawei, NSN, Samsung, and ZTE. SON for 3G rather than LTE had a minor implication on our 2012 market predictions: SON ended up 6% higher than the forecast, and 2G/3G optimization was just 1% higher. The small difference between actual and predicted numbers led us to keep our forecast intact; actual numbers just automatically increased 2G/3G optimization by 1% and SON by 3% for 2013. In 2016, 2G/3G optimization is higher by 1% while the SON forecast does not change. We expect this market to reach $3.3B by year-end and grow at a 10.6% 5-year CAGR to hit $4.8B by 2017, still driven by opex reduction and fueled by the combination of ongoing 2G to 3G subscriber migration and the preparation for 3G to 4G subscriber migrationspecifically LTE rollouts. SON tools revenue will grow from $625M in 2013 to $1.6B in 2017. 2G/3G MNO revenue is growing at a 4.3% CAGR, and SON revenue is growing at 39.2%. We believe the main impact of mobile network optimization tools so far is maintaining opex intensity at current levels, rather than achieving significant opex cuts, and keeping opex under control by implementing and using those tools for real-time optimization will remain mobile operators chief objective for some time.

SERVICE UPDATES
Since the last edition of this report, we added a new breakdown of the SON architecture: centralized and distributed.

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 2

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts

MOBILE NETWORK OPTIMIZATION INCLUDING SON HIT $2.9B IN 2012, FUELED AGAIN BY SON FOR 3G HSPA+ OPTIMIZATION!
Although there is no actual revenue to collect, sporadic anecdotal information suggests the MNO software market reached $2.9B last year, growing 17.1% over 2011 and driven by 2 major SON deployments that were officially announced in 1H12: AT&T: officially selected Intucell Systems (now part of Cisco) in early 2012 after major testing that occurred in 2H11. Although the company was in the midst of its LTE rollout, SON was deployed to optimize the 3G HSPA+ network (see complete analysis in the October 11, 2012, Infonetics CRS: AT&T Makes the SON Shine!). KDDI: selected NSN as its main SON supplier to optimize and manage its 3G and LTE networks together. As KDDI has been secretive about both LTE and SON, we are still collecting details on this one.

Although those 2 major commercial deployments were officially announced during 1H12, we were aware of 3G SON-based optimization in 2H11. In fact, the process started with major drive testing experimentation to ascertain the feasibility of using SON in 3G networks. In addition to those 2 announcements, there have been other low-profile unannounced 3G commercial SON deployments. Since last year, we have not heard of other major high-profile SON deals, but we know that all SON vendor specialists have announced their involvement in several SON deployments. For instance, Celcite said it is engaged in more than 20 centralized SON (C-SON) projects worldwide. Finally, NSN bagged a SON deal from TIM in Brazil in April 2013 as part of the LTE contract.

Fueled by 3G optimization, SON continues to explode . . .


As a result of AT&Ts and KDDIs SON deploymentsin addition to several minor ones around the world for 3G optimizationthe worldwide SON market reached $307M last year, which is more than 3 times the size of the 2011 market. We thought LTE would be the major driver and instead found that 3G HSPA+ turned out to be the chief driver for SON: we found that more than 80% of mobile operators worldwide are using SON for 3G/HSPA/HSPA+ optimization.

and in this case, C-SON is predominant


Initially, we thought SON would only come with LTE, which to some extent is still driving the market. However, SON market dynamics suggest centralized SON (C-SON) is supplied by SON specialist vendors including AIRCOM International (Symena), Celcite, Cellwize, Cisco, and InfoVista. . . and distributed SON (D-SON) comes baked into LTE eNodeBs that are supplied by major OEMs such as Alcatel-Lucent, Ericsson, Huawei, NSN, Samsung, and ZTE. At this point, it is extremely rare to see a major OEM compete against a SON specialist in a C-SON deal; in addition, we have noticed a 2-horse race between Celcite and Cisco, two companies with substantial installation and field experience.

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 3

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts


With the ongoing mix of C-SON sitting on top of multiple LTE OEMs D-SON, the final footprint looks more like a hybrid SON than anything else. Nonetheless, depending on whom you talk to, you get various perspectives. OEMs dont seem to care much about SON at this point as it appears the software comes for free as part of the eNodeB while SON specialist vendors will argue that the world is a C-SON landscape.

Meanwhile, 2G/3G optimization grew 9.1% YoY


This segment of the market reached $2.6B last year, up from $2.4B in 2011, driven by the need to cut operational expenditures (opex) by optimizing 2G and 3G networks, as well as rationalizing key performance indicators (KPIs).

Actual 2G/3G optimization was on track at 1% above our predictions


One year ago, we predicted the total market would reach $2.89B in 2012; it actually came in very close at $2.93B, or 1% above our forecast. The breakdown shows a slightly different story: SON ended up 6% higher than the forecast, and 2G/3G optimization was 1% higher (Exhibit 1).

Exhibit 1

Market Actual and Forecast Comparison


% Change of Forecast from 2012 Report vs 2013 Report 2012 2013 2016 2G/3G optimization SON Total 1% 6% 1% 1% 3% 1% 1% 0% 0.5%

This difference comes from the fact that our SON forecast model is linked to LTE deployments and did not take into account any major deployments for 3G optimization such as AT&Ts large-scale implementation.

Consequently, we have not touched our short- and long-term forecasts


Exhibit 1 shows the difference between the old and the new forecasts. The actual 2012 numbers have slightly increased the 2013 forecast for the 2G/3G segment by 1% while increasing SON by 3%. In 2016, 2G/3G optimization is higher by 1% while the SON forecast did not changewe can only compare 2016 because we did not forecast 2017 in last years report.

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 4

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts

WE EXPECT THE 2G/3G OPTIMIZATION AND SON MARKET TO HIT $3.3B BY YEAR END AND $4.8B BY 2017
We estimate the MNO software market to reach $3.3B by year-end, growing at a 10.6% 5-year CAGR to hit $4.8B in 2017, driven by the need to control operational expenditures (opex). In other words, the need to remove people from the equationas a way to reduce opex and to reduce the error humans inevitably introducehas not abated. This mobile optimization market is very mature and started 2 decades ago as mobile communications took off, but SON is still immature. Nevertheless, its the combination of the ongoing 2G to 3G subscriber migration and the preparation of 3G to 4G subscriber migrationspecifically LTE rollouts driving SON toolsthat will fuel growth throughout the forecast period.

Exhibit 2
$6,000

Worldwide Mobile Network Optimization Revenue: 2G/3G and SON

$5,000

Revenue (US$M)

$4,000

$3,000

$2,000

$1,000

$0 CY09 CY10 CY11 CY12 CY13 CY14


SON

CY15

CY16

CY17

2G/3G Optimization

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 5

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts

Keeping Opex under control continues to be the chief driver


MNO tools are as old as mobile networks and therefore have existed for two decades, so its hard to quantify where opex would be without those systems. Mobile related opex, standing at a 70% opex-torevenue ratio (see Exhibit 3), is in far better shape than fixed-line opex, which typically ranges between 80% and 90%. The fundamental reason is that public land mobile networks (PLMN) are way more recent than century-old public switched telephone networks (PSTN). As a result, first PLMN were launched with some degree of task automation and control that did not exist one century ago, and consequently, opex started at a lower level. In fact, this is illustrated in Exhibit 3 with China Mobile, which operates a shiny new network and has roughly the same amount of opex as the old legacy network operators but more revenue. Put another way, Verizon Wireless, Vodafone group, and AT&T Wireless have the same amount of opex as China Mobile but far less revenue. And given the magnitude of China Mobiles networkwith 400,000 3G BTS compared to the typical 55,000 for AT&T or Verizon Wirelessits understandable that opex should be much higher if the Chinese operators had the same generation of technology as its American counterparts.

Exhibit 3
$100 $90 $80 $70 $60
US$B

Worlds Top Mobile Operators by 2012 Revenue

$50 $40 $30 $20 $10 $0 China Mobile Verizon Wireless Vodafone Group AT&T Wireless
Wireless revenue Wireless opex

NTT DOCOMO

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 6

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts


We have not seen major changes in overall opex over the past five years. We believe the main impact of mobile network optimization tools so far has not been achieving significant opex cuts, but rather maintaining network opex at the same level, even whilst the network is required to do more/handle more traffic/subscribers/types of data: Network opex at 20% to 30% of total opex Total opex-to-revenue ratio at 70%

Asia Pacific is where the action is and where it will stay through 2017
By the end of this year, we expect Asia Pacific to command 48% of the total mobile network optimization tool marketSON is only starting this year, along with massive TD-LTE rollouts in preparation for commercial LTE launch in 2014 as mandated by the Chinese government. Prior to the government-led restructuring of Chinas telecommunications industry, we believe worldwide MNO revenue was roughly evenly split between North America, EMEA, and Asia Pacific, each region holding 30% of revenue. However, the 3G China race of 2009, while the West was in a recession, radically changed the landscape: major software-based optimization tools came along with massive 3G deployments, propelling Asia Pacific to almost 48% of MNO revenue. Our visits to major mobile operators' NOCs (those listed in Exhibit 3) suggest China Mobile has one of the worlds most advanced networks, with heavy usage of cloud computing, for instance, and particularly sophisticated monitoring and optimization tools. After the rush, Asia Pacifics share of MNO revenue declined in 2010 to 42% as North America woke up with major 3G upgrades and Verizons massive LTE rollout. Despite AT&Ts massive 3G optimization with SON implementation, we expect North America to decrease its share this year to 18.7% from 18.9% in 2012. This results from increasing activity in Japan, South Korea, and China, where SON is deployed more and more to optimize 3G networks across the board. In addition, Sprint is just deploying SON along with its LTE rollout but is studying it for overall optimization with C-RAN and HetNet, and Verizon is working on a broader project that incorporates SON, OSS, and BSS together to provide the best quality of experience without adding new capacity. Finally, EMEA is stabilizing its share at 25% and should decrease throughout the forecast period, while CALA will be slightly losing share from 11% in 2012 to 10% in 2013 and 9.6% in 2017. However, the 2014 World Cup and the 2016 Olympics, both to be held in Brazil, could be the driving force behind a potential rise that we just dont see at the moment. Brazil, CALAs largest economy and largest mobile market in terms of subscribers, is already preparing its mobile infrastructure to cope with massive multimedia traffic loads during the events. However, this has not translated into increased spending so far.

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 7

SON and Optimization Software


Exhibit 4
$6,000

Annual Worldwide and Regional Market Size and Forecasts Mobile Network Optimization 2G/3G/SON Revenue by Region

$5,000

Revenue (US$M)

$4,000

$3,000

$2,000

$1,000

$0 CY09 CY10 CY11 CY12


EMEA

CY13

CY14

CY15
CALA

CY16

CY17

North America

Asia Pacific

The MNO market is fragmented, comprising a flurry of specialist vendors


The major observation about this market, which also explains mobile operators 70% opex-to-revenue ratio, is that there are almost as many specialist vendors as key performance indicators (KPIs). Imagine if a mobile operator had to have an employee assigned to a single KPI; there are roughly 1,000 KPIs available today on major mobile networks (those with at least a few million subscribers). However, this does not mean there are 1,000 specialist vendors either. In fact, not all KPIs are crucial to maintain the correct level of network performance. As we could not get a clear consensus on how many KPIs are useful or crucial to the performance of a large mobile network, we assume that about half of those KPIs are useful. This assumption can be backed up by the number of specialist vendors focusing on one to ten KPIs; some are actually embedded in a mobile operator network and run network performances totally. That is the case with Tulinx in the Netherlands, which developed a sophisticated tool for KPN Mobile that collects information from all interfaces as well as from the OSS/BSS system to monitor and fix daily issues by prioritizing tasks for the maintenance staff. Here are some examples of vendors, broken down by specialization: Small to medium generic optimization firms: Aircom International, Astellia, and Celcite
Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 8

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts


Radio planning tools: Mentum (now InfoVista) is a major one; others have network component products that perform optimization in lower layers such as Celtro specialized in backhaul or Flash Networks focusing on video traffic optimization Traffic optimization: Arieso, Bytemobile Drive testing companies: Accuver is one of them, and testing companies such as Rohde & Schwarz as well as some telecom equipment vendors are also in this segment; in addition, others like Intucell Systems are proposing virtual drive test tools as opposed to physical ones that require someone in a truck testing the areas live; nonetheless, there are so many KPIs that the number of specialization categories is high; Exhibit 5 provides an overview of their focus

Vendor consolidation was brisk and remains unabated


2012 was marked by strong M&A activity starting with TEOCO/Schema (January), followed by Aircom International and Symena (April), and closing with InfoVista and Mentum (November):

2/12/12: TEOCO, provider of assurance and analytics solutions to communications service providers worldwide, completed its acquisition of Schema Ltd., a multi-vendor RAN optimization and SON specialist vendor 4/12/12: AIRCOM International, network planning and optimization vendor, acquired Symena, SON specialist vendor known for its Automatic Cell Planning (ACP) tools; the deal strengthened AIRCOMs LTE radio and SON capabilities 11/28/12: InfoVista, provider of service performance assurance software solutions for network and application services transported by all-IP networks, acquired RAN and backhaul network planning and optimization specialist Mentum; the deal enhances InfoVistas capabilities in longterm network planning and optimization.

2013 started with fanfare with Ciscos acquisition of Intucell Systems (January), quickly followed by JDSU and Arieso (March), and Amdocs and Actix (September):

1/23/13: Cisco Systems acquired SON specialist Intucell Systems as part of its newly crafted strategy to become a leading giant software player (see 1/23/13 Infonetics CRS: Intucell and Cisco: The Beauty and the Beast) 3/08/13: optical networking and test and measurement company JDSU agreed to acquire RAN optimization specialist Arieso for $85M in cash; JDSU said the addition of Arieso's location-based intelligence products to its portfolio will extend its view of the network all the way up to an individual subscriber's location; this one is also technically a cross-industry acquisition (see 3/13/2013 CRS: When the SON Never Sets) 9/03/13: Amdocs acquired network optimization specialist Actix; the deal augments Amdocs's OSS and BSS portfolio with Actix's geo-location data solutionscurrently in deployment with 350 mobile service providersenabling it to provide operators with an even more detailed view of the customer experience (see 9/11/13 CRS: SON of a Gun! Amdocs Moves into Network Optimization with Actix Buy) 9/21/13: IP and RF planning specialist InfoVista acquired Kuala Lumpur, Malaysia, based mobile network optimization specialist Aexio; nearly 1 year following InfoVistas acquisition of Mentum, this move reaffirms the companys strategy to enable mobile operators to plan, operate, optimize, and monetize their networks better
Gray shading denotes analysis updated since November 2, 2012

This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 9

SON and Optimization Software


Exhibit 5
Specialist Vendors Actix (now Amdocs) Specialization

Annual Worldwide and Regional Market Size and Forecasts Specialist Vendor Snapshot
Mobile network analytics and optimization SW; ActixOne automatically geo-locates every call from every subscriber to build an accurate picture of customer experience and network demand I-VIEW standards-based framework allows mobile network operators to plan, manage, configure, and optimize their networks; Capesso is an automatic cell planning tool created by Symena that delivers results and performance Automatic cell planning (ACP) and RAN dimensioning/design tools; SONnovo is the SON configuration server at the heart of 3G and LTE; Capesso is an automatic cell planning tool created by Symena that delivers results and performance; acquired by Aircom International 4G eSON features include interference management, spectrum reuse, and no-touch or low-touch deployment; eSON extends SON well beyond this initial set-up phase to include comprehensive, distributed, real-time inter-cell coordination capabilities that allow neighboring base stations to communicate with each other to dynamically manage inter-cell interference and optimize frequency reuse, data throughput, and QoS during the operation phase LTE eNodeB framework, femtocell SW framework for SON, RRM, and OAM; Aricents SON offering includes distributed SON for LTE, which is a comprehensive list of LTE SON functions; it comes packaged as part of the ARICENT eNodeB software framework and provides complete SON functionality for automation and optimization across various parameters to streamline deployment and maintenance of LTE networks; UniSON: centralized SON offering, known as Universal SON or UniSON; it provides multi-Radio Access Technology (GSM, UMTS, and LTE) and multi-form factor and multi-vendor compatibility Network testing, TEMS visualization, SW: event-based infrastructure performance data for subscriber-centric view of operator networks Probe-based monitoring and performance management system for optimization of 2G/3G mobile networks; Nova is Astellias new generation of monitoring solutions for multi-technology mobile networks (2G, 3G, 4G); Nova brings unique network and customer insight to improve mobile operators' business performance, optimize end-to-end service quality and enhance subscriber satisfaction Services: quality assurance testing, BPM, ERP, and CRM

Aircom International

Aircom International (Symena)

Airhop Communications

Aricent

Ascom Astellia

Axis Technologies (continued, next page)

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 10

SON and Optimization Software


Specialist Vendors Celcite Specialization

Annual Worldwide and Regional Market Size and Forecasts

COPS-SON provides automatic remedial actions for improvement of radio resource management, automatic neighbor relation, load balancing, and cell outage compensation; SON feature policies include ANR (Automatic Neighbor Relation), LB (Load Balancing), SH (Self-Healing), APO (Automatic Parameter Optimization), and Plug-and-Play module for selfconfiguration when a new site is deployed; Celcite SON is a centralized self-optimizing product that triggers autonomous network configuration changes in real time to maximize the network potential of todays complex HetNets SON software platform, which includes 4 main components: Client, Server, Mediation, and Provisioning; product components are scalable, supporting all sizes of networks; product architecture has no single point of failure and uses mainstream networking equipment, storage, and blade technologies Mobile backhaul optimization Mobile bandwidth optimization and bandwidth management systems that reduce network congestion and increase capacity across the network; key product is CENTRIs Connected Experience Platform (CXP), which includes BitSmartCX and SmartStreamCX Virtual Drive Test: real-time RF visibility of entire RAN; using OSS data to automatically manage and synchronize network elements centrally; Intucell applications share a common platform that supports multitechnology and multi-vendor SON products; it provides real-time RF visibility of the entire Radio Access Network, using OSS data to automatically manage and synchronize network elements centrally Enterprise Grid SON: femtocell and small cell SON; Ubiquisys ActiveSON Grid products deliver the following benefits: identification and inter-unit collaboration of direct and indirect neighbors within enterprise and in external macro networks; automatic selection of scrambling codes and carrier frequencies, according to local conditions and operator policies; automatic power-level setting across the grid in its deployed environment; congestion relief load balancing between cells in the grid; efficient intercell handover between cells in the grid; flexible grouping of cells to form zones with varying behavior within an enterprise Test probes and monitoring to optimize performance of mobile network and services Eden-NET: real-time coordination of time, frequency, power, and spatial resource allocations; manages radio frequency interference and dynamic coordination of antennas; Eden-NET embedded SW: performance metrics; collect and pre-process automatic updates to localized LTE eNodeB scheduler

Cellwize

Celtro CENTRI

Cisco (Intucell Systems)

Cisco (Ubiquisys)

Commsquare Eden Rock Communications

(continued, next page)

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 11

SON and Optimization Software


Specialist Vendors Forsk Specialization

Annual Worldwide and Regional Market Size and Forecasts

InterDigital InfoVista

Atoll is a 64-bit multi-technology wireless network design and optimization software platform; Atoll 3.2 includes integrated single RANmultiple RAT network design capabilities for 3GPP (GSM/UMTS/LTE) and 3GPP2 (CDMA/LTE) technology streams Multimode modem core embedded SW and mobility middleware SW Platform for network, application performance, and SLA management; VistaSON supports RAN management and optimization including automatic outage detection and compensation, ongoing coverage and capacity optimization, and dynamic load balancing; InfoVistas 4-step approach to Self-Optimizing Networks (SON) provides MNOs with a RAN automation product that gives RF engineers a flexible and user-driven toolset for efficient maintenance, visualization, and optimization of 2G, 3G and 4G multi-vendor networks Software suite combines 2 mobile network-quality optimization and analysis tools: XEUS PRO (front end Desktop Analysis Software) and XEDA (back end enterprise Network Quality Management Platform) SW for network optimization and operation; access network and microwave backhaul network planning products: Mentum Planet for access networks and Mentum Ellipse for backhaul and transmission planning; Mentum Fusion provides automated management of key engineering Mobile network management SW: location-aware subscriber info; GEOson brings the power of location intelligence to automated network performance optimization Product such as TrueCall that analyzes call event data with location algorithms; real-time call visualization application delivering a complete network view, with drill-down capability to each individual call; TrueCall also creates maps and reports of user and network data based on individual call detail records C-SON software consisting of IP performance triggers, rules engine, feedback mechanism, and automatic network adjustments to optimize network traffic load P.I.Works's SON Suite provides end-to-end optimization features for mobile operators with drill down and root cause analysis functions SW and HW for RF services for RAN planning and optimization; provides turnkey radio network optimization and consultancy services Uses network KPIs, interference matrices, and alarms collected by wireless networks OSS and PM platforms to identify load imbalance, interference, and cell outage conditions, and resolve them through changes to antenna configuration parameters; InteliSON is a live network data-driven SON product designed to improve network performance; InteliSON delivers dynamic radio design optimization through antenna and RF parameter configuration changes

InfoVista (Aexio)

InfoVista (Mentum)

JDSU (Arieso)

Newfield Wireless

Optulink

P.I.Works Plano Engineering Reverb Networks

(continued, next page)

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 12

SON and Optimization Software


Specialist Vendors TEOCO (Schema) Specialization

Annual Worldwide and Regional Market Size and Forecasts

SW algorithms, data collection, analysis, optimization; network view based on real-time subscriber data; TEOCO Mentor is a next-generation self-organizing mobile measurements based analysis and optimization product for wireless networks; Mentor optimizes a wide range of key network configuration parameters such as neighbor list, power and tilt settings enabling mobile service providers to maximize network quality, capacity, and coverage Subscriber activity and data service operations monitoring SW OSS tools: network analysis based on QoE Mobile network performance management and optimization tools Uses solid land modeling to optimize microwave and RF radio planning, network dimensioning, analog to digital switch over, 3D territorial data elaboration, database management and data analysis, all web-based Network optimization and in rule-based performance management; the heart of Xynergy SON lies in its fully user-customizable business rules engine; the rules engine enables implementation of optimization algorithms that will operate across data sources to provide automated, indepth engineering results

Theta Networks TTG International Tulinx Vector

Xceed Technologies

A large majority of these specialist vendors come from incumbent operator spin off
The aforementioned KPN example is not unique. In fact, in many countries, there are at least three specialist vendors that were created as a result of a spin off from the incumbent operator. Here are some examples: Eden Rock Communications: AT&T TTG: Turk Telecom Actelia: France Tlcom Optimi (now Ericsson): Telefnica

Other firms were created by former executives of major mobile operators; for example, the CEO of Arieso is a former Vodafone executive.

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 13

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts

AS 74% OF WORLWIDE MOBILE SUBSCRIBERS ARE ON 2G AND THE REST ARE ON 3G, 2G/3G NETWORK OPTIMIZATION ACCOUNTS FOR 90% OF THE MNO MARKET IN 2012
Although all major mobile headlines involve marketing 4G (e.g., LTE), the mobile network optimization business is overwhelmingly focused on 2G and 3G optimization. This is no surprise, because 74% of the worlds subscribers are on 2G, the rest on 3G, and 4G is just starting (see Exhibit 6). However, as the second wave of LTE rollouts kicks in next year, SON will slowly increase its share at the expense of the 2G/3G optimization market, which will lose share and decline to 67% of MNO revenue by 2017.

Exhibit 6

2G/3G/4G Mobile Subscriber Forecasts

Source: Infonetics, 2G, 3G, 4G Infrastructure and Subscribers, August 29, 2013

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 14

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts


The share of 2G subscribers will decline to 57% in 2017 as subscribers shift to 3G (e.g., CDMA2000, WCDMA, and TD-SCDMA). 4G (e.g., LTE, WiMAX 802.16e and 802.16m) will grow from 1.6% in 2012 (dominated by WiMAX) to 8.8% of subscribers in 2017.

There are 2 types of systems for 2G/3G optimization


As previously mentioned, mobile network optimization tools are two decades oldas old as mobile networksso its no surprise that the main action is and will remain in 2G/3G networks for some time. Mobile network optimization systems currently used can be broken down into two types: Subscriber and network based intelligence: The system collects raw switch and OSS logs, CDRs (call detail records), translation routing, location information, and much more. This allows the operator to do several things, including capture and develop actual call based histograms overlaid onto a geographical map, which then paints a picture of issues. The system can also provide hypothetical solutions for areas, based on current system parameters and network intelligence, hence removing the common practice of testing solutions on a live network possibly impacting customers. This system eliminates costly and subjective drive testing along with subjective interpretation of the mass collected data. Probe based intelligence: The system relies on probes to collect network information and manage RF parameters. Network and call data is collected and sorted and applied to a standard data base. Once the collected data is in the standard database, rules are applied if performance parameters are out of scope. The system has built-in rules that allow the performance system to make changes in the configurations of the network to improve performance. Though not autonomous, the system is programmed with intelligence. This system allows for consistent adjustments to be made within the programming, maintaining a higher level of call quality.

Both tools run 24/7 to review and massage data, with the ability to manage performance with live system data and test solutions prior to implementation. They also have a degree of autonomy to make decisions on assigning employees to focus on specific tasks by prioritizing tickets. Optimization of multilayered networks is becoming increasingly complicated. Trying to manage capacity, interoperability, and performance metrics is proving challenging; thats why every mobile operator needs a combination of both systems.

But SON, driven by 3G optimization and LTE rollouts, explodes from $625M in 2013 to $1.6B by 2017, a CAGR of 39.2%
Last year, we made the assumption that the SON market was directly positively correlated with LTE rollouts. In other words, there is not a single eNode being deployed without its inherent software used for self configuration, and that is SON. As a result, our SON forecast is directly linked to LTE hardware spending. Based on the 10/17/13 GSA report, the commercial LTE footprint can be summarized as follows: 2009: 2 networks launched 2010: 14 networks launched (year-end cumulative total = 16)
Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 15

SON and Optimization Software


Annual Worldwide and Regional Market Size and Forecasts


2011: 30 networks launched (year-end cumulative total = 46) 2012: 100 networks launched (year-end cumulative total = 146) 2013: cumulative total is 222 as of October 17, 2013; there are 260 commercial networks expected by year-end

That assumption remains valid but we missed that SON was also deployed for 3G HSPA+ optimization in a large scale (e.g., AT&T with Intucell Systems and KDDI with NSN). By taking this fact into account and looking at the AT&T implementation, we concluded that it was necessary to sort out the amount of SON spending allocated to 3G optimization versus the amount that was directly linked to each LTE rollout.

Exhibit 7
$1,800 $1,600 $1,400

SON Revenue: 3G and 4G Split

Revenue (US$M)

$1,200 $1,000 $800 $600 $400 $200 $0 CY09 CY10 CY11 CY12 3G CY13 CY14 4G CY15 CY16 CY17

As a result, SON revenue will grow to $625M in 201358% for 4Gfrom $307M in 2012, a 104% YoY increase, and is expected to reach $1.6B by 2017, a 5-year CAGR of 39.2%. At the beginning of the forecast, the 3G/4G split is almost even, but as more and more LTE networks go live, 4G gains predominance to finish 2017 with a 72% share of the total SON market. As we are still at an early stage of SON deployments, with limited information and only one feature implemented (ANR, which is also deployed in 3G HSPA+ networks), our forecast may still be modest. Questions we must continuously revisit include the following:
Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 16

SON and Optimization Software


Is SON an ongoing cost or one-off?

Annual Worldwide and Regional Market Size and Forecasts

How much SON spending is built into mobile RAN hardware costs and therefore not showing up here? Does SON software have a low ARPU/license fee?

The initial plan was to build a forecast model on license fees, but we could not find anyone willing to share information. Well continue trying to collect sufficient data to develop this type of model.

ANR remains the most implemented SON feature so far


Our discussions with a majority of mobile operators who have launched commercial LTE networks indicate that ANR is the most implemented SON feature so far. This does not come as a surprise, because ANR is a key function of the network planning stage for every LTE rollout, as part of the self configuration process. In 2008, the Next Generation Mobile Networks (NGMN) Alliance identified the SON use cases that mobile operators foresee; see the next table.

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 17

SON and Optimization Software


Exhibit 8

Annual Worldwide and Regional Market Size and Forecasts NGMN Use Cases

However, SONs ANR is already implemented in HSPA as a key optimizer


Some of the specialist vendors are not focusing on LTE rollouts because we are in the early days; mobile infrastructure equipment vendors such as Alcatel-Lucent, Ericsson, Huawei, and NSN are selling their SON software along with their eNodeBs wherever they are involved in an LTE rollout. As a result, small specialist such as Intucell Systems decided to apply some of the SON features, notably ANR, to HSPA+ optimization, now a huge market because 100% of commercial W-CDMA networks worldwide have deployed HSPA and are now being upgraded to HSPA+.

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 18

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts

Automation is not new, and SON is at the very early stage, with a bright future
The concept of automation through integration of network planning, configuration, and optimization into a single, mostly automated process requiring minimal manual intervention is not new, and implementing automation into mobile networks is now a top priority on 3rd Generation Partnership Projects (3GPP) and Next Generation Mobile Networks (NGMN) agenda. The chief objectives, again, of introducing self-organization into mobile access networks are operational and capital expenditure reductions by diminishing human involvement in network operational tasks, and network capacity, coverage, and service quality optimization. The European Union recently started research project SOCRATES (Self-Optimization and selfConfiguRATion in wirelESs networks), which includes two large vendors (Ericsson and NSN), a leading mobile network operator (Vodafone), and several European research and consultancy institutes (Atesio, IBBT, Technical University of Braunschweig, TNO ICT). This project is funded by the European Union in the 7th Framework Program and the main goals are the development, evaluation, and demonstration of methods and algorithms for self-configuration, self-optimization and self-healing of a 3GPP E-UTRAN, as the radio access technology of focus. On December 5, 2008, the NGMN published its recommendations for SON and operation and maintenance (O&M) requirements, and they have since become the blueprint reference that every SON vendor and mobile operator is using to develop and implement SON features. The main purpose of this document is to provide vendors with operator recommendations for and guidelines on requirements for implementing solutions to support SON use cases in future. The formulation of the recommendations on requirements is done in such a way that they are generic and would also align with future 3GPP features and enhancements as much as possible. This document may be updated in the future based on progress on SON in 3GPP.

Deutsche Telekom is leading the charge . . .


Worried about deploying LTE with current staff that is already swamped with 2G and 3G network operations, the German incumbent clearly set the stage: how to manage 30,000 network elements with hundreds of parameters with limited resources? Put another way: there is no way we can deploy LTE without hitting the wall and breaking the company! Thats exactly the issue SON is trying to resolve, and in order to have a clear framework, the MGMN Alliance work is synchronized with that of the 3GPP, and the European Commission is conducting SOCRATES, for which the status was presented. And as everyone expected, Deutsche Telekom did its homework and presented two key findings: a 40% opex reduction and plug and playself configuration in the table aboveand ANR as the first two features or use case to be implemented in live LTE networks early next year, providing vendors can deliver.

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 19

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts


On the opex front, the next table illustrates Deutsche Telekoms current burden and thinking. As installation and commissioning account for 60% of total opex, it is no surprise that some sort of automationsay, plug and playwould be more than welcome. Thats where plug and play and ANR come to the rescue during an LTE rollout: because eNodeBs are configured in the lab, only one technician is required to go to the site and it takes just 20 minutes to finalize the process. Compare this to the two or three people who need two hours to configure 3G NodeBs. When the job is done, ANR kicks in, and the eNodeB takes over and identifies its neighborsthe UE sends a report to the eNodeB itself and detects its neighbors through the X2 interface for handover, eliminating planning of neighborhood relationships.

Exhibit 9

Deutsche Telekoms Mobile Opex Breakdown Analysis

. . . Other operators rally


I have to admit that scheduling the Deutsche Telekom presentation to kick off the event was a brilliant idea because it covered all the items discussed throughout the conference. The presentation was engaging, and it prompted several operatorssome speakers, others attendees there to learn from their peersto ask questions. AT&T has caught everyone by surprise with its massive SON rolloutdefined by the 1,200 SONmanaged RNC installed in less than 9 monthsto optimize its 3G HSPA+ network. The company has commercially deployed Intucell Systems SON product in a hybrid architecture where some decentralized features are implemented at the network layer and others remain centralized either within a vendor (e.g., self install/configuration, automatic neighbor relations (ANR) planning, primary scrambling code (PSC)/physical cell identity (PCI) planning, and automatic parameter) or at the network management layer. Bell Canada is still at the exploratory stage with SON because the reality is complex and a lot of work needs to be accomplished to better understand how SON fits and removes real-life issues. Anything that touches traffic growth-related features is top priority at the moment. Its worth mentioning that the Canadian incumbent exited the CDMA club and rolled out an HSPA overlay network without GSM, EDGE, and W-CDMA.

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 20

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts


Elisa has deployed SON as part of its small LTE rollout and said that a zero-touch network remained hard to achieve. In fact, its technicians tried to configure eNodeBs the old way, which is a tremendous human error of not knowing that an eNodeB is by default self configured! Hutchinson 3 UK is convinced that SON will eventually help it cut a significant chunk of opex, but rather than rushing into LTE, it prefers to optimize HSPA network performances that are directly linked to customer retention and churn without SON. KDDI has deployed NSNs iSON solution that also uses the vendors advanced NetAct Operations Support System (OSS). iSON manages and optimizes both 3G and LTE networks. Portugal Telecom has been playing with SONs ANR for a few months, first with a trial on 2G optimization that consisted of assessing how many 2G transceivers needed to stay active under specific conditions, and second with ANR in 3G. In both cases there were issues that led to uncomfortable feelings about SONs algorithms. In other words, the Portuguese incumbent thinks SON is great, but not yet ready for prime time. SK Telecom caught everyone by surprise by bringing an unfortunate use case to the table: the North Korean attack of a tiny island in South Korea that damaged two out of the three existing BTS and a few of its 14 repeaters. In the absence of SON for self recovery, the company had to send 10 people to fix it, which took 24 hours. Telenor has high expectations for SON, but stays on earth as meeting them is unlikely in the short term. Telenor sees plug and play and ANR as the top priorities and top candidates for opex savings. However, the company does not believe drive test (e.g., verification of the coverage for each cell of each radio site and of its continuity) is set to disappear anytime soon, but rather will be optimized by SON. TeliaSonera has now been running the worlds first LTE network for almost a year, and what has never been said before is that its also the first live SON up and running. In fact, TeliaSoneras rapid rollout and integrated Network Operation Center (NOC) from day one would have never happened without SONs plug and play feature, which has been successfully coexistent with current 2G and 3G networks so far. They used one UE with ANR support in a car to emulate real traffic such that all necessary cell relations were added automatically. The net result was a stellar 100% handover rate. Vodafone is currently testing SON as part of its femtocell initiative (in this case, Home eNodeBs as well as public access femtocells), and has high expectations for plug and play, which is no surprise given the potential scale of commercial deployment. Imagine Vodafone sending technicians to every household that has ordered the service!

BOTTOM LINE
SON is growing fast, but it's not where we were really expecting it! Make no mistake, SON remains baked in LTE, but as an evolutionary 3GGP technology, SON is compatible with every 3GPP release and will continue to evolve with more and more advanced features. Consequently, deploying SON for 3G optimization with zero-touch network as the long term goal sounds natural and logical.

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 21

SON and Optimization Software

Annual Worldwide and Regional Market Size and Forecasts


Nonetheless, we believe there is at least one cumbersome task that cannot be easily automated and will require human intervention for quite a long time: drive testing. Some of the specialist vendors, such as Intucell Systems (now Cisco), argue they have an automated tool for that. However, our discussions with large mobile operators confirm that there is no way to replace todays rudimentary technique of having a crew cruising a neighborhood in a truck to measure whats going on or not going on. Despite swift consolidation, the 2G/3G traditional mobile network optimization market remains fragmented, is big and mature, and is very similar to the OSS/BSS market in the sense it involves a flurry of small focused specialist vendors not really competing with each other. Indeed, the OSS/BSS market also involves those smaller vendors being increasingly squeezed by larger equipment suppliers happy to throw in software as a value-add to infrastructure. Apparently, there is no slowdown in sight. Rather, the tough economic situation in Europe is creating an opportunity and keeping the market afloat; mobile operators are busy sweating their assets, looking for operational efficiencies to squeeze as many bits of information as they can through every Hertz they have in their existing portfolio. The expected proliferation of small cells in LTE networks increases the challenges to a level that automation is required to rollout the new technology.

Analyst Contact Stphane Tral Principal Analyst, Mobile Infrastructure and Carrier Economics +1 (408) 583.3371 stephane@infonetics.com

Gray shading denotes analysis updated since November 2, 2012 This is a paid service intended for the recipient organization only; reproduction and sharing with third parties is prohibited. Copyright 2013 by Infonetics Research, Inc. All rights reserved. 22