At Yota, Creativity Rules in Mobile Broadband

Yota is one of the best examples of this.  I met them in February and I
found them amazing, but at the same time I was a bit suspicious.  Could
they really pull it off? Well, a few months later, they appear to be moving in
the right direction and if anything they are doing better than I expected. 
True, having deep pockets helps, but that does not guarantee innovation, and in
some cases it may stifle it.

So what’s special about Yota? They are one of the many WiMAX operators in
Russia, but they are the ones with the strongest focus on mobility.  They
have 2.5 GHz spectrum and $470 millions funding.  Since their launch in
June 2008, they have signed up 76,000 customers and claim to sign up 1,300 new
subscribers a day (suggesting that demand has started to pick up lately).

Of their 850 employees, 200 develop software, because Yota sees itself as a
content and application provider as well.  The service offered includes
voice and a subscription to video and music content, and it has been all tightly
integrated since the very beginning.  They are working with major content
providers, like EMI, Sony, Universal, and Warner.  All the services they
offer are on based on unlimited use to make the service simple and attractive to
subscribers.  With the all-you-can-eat plan at $16/month, it will be
challenging for Yota to offer all this and become profitable, but they may be
able to generate the volumes needed.  It is a big gamble though.

Yota has been the first operator to launch a WiMAX and cellular phone.  The
proposition they offer to their subscribers is very simple: they can choose the
cellular operator they want and they are in charge of managing their contract
with the operator as they wish.  In most cases, this probably means that
the subscribers simply move their existing SIM card from their old handset to
the new one.  The phone works like a regular cell phone where there is no
WiMAX coverage.  In WiMAX areas, subscribers can receive calls to their
cellular number and their VoIP line, and can decide whether to place a call
through the VoIP or cellular line.  This leaves maximum freedom to the
subscribers and removes the need for Yota to establish a partnership with one or
more cellular operators.  As a result, the WiMAX phone was introduced in
the market right away, since lengthy negotiation with cellular providers could
be skipped.  More importantly, this approach provides subscribers with a
device that combines good coverage (in cellular-only areas) with good throughput
and lower cost services where WiMAX is available.

The phone is quite expensive at over $1,000, but not much more expensive than
other smartphones, but that does not stop subscribers from buying it.  In
February, the company said that 20% of their subscribers had a phone. 
That’s quite a high percentage given the cost of the phone and the fact that the
core WiMAX services typically appeal to the laptop users.

More devices have been announced, including a mass-market phone and a
middle-range Android phone.  It will be interesting to follow the evolution
of their service.

Along with its subscriber numbers, Yota disclosed some interesting data on their
subscribers’ usage profiles.  Within three months, the operator has noticed
a rapid shift towards mobility.  Subscribers quickly discover on their own
the value of mobility and gradually expand the area where they use the service. 
This is not a surprising trend, but it is remarkable how fast the process is-a
month or two.  Clearwire has observed the same phenomenon in Portland and
within a comparable timeframe.

The scary part comes with the traffic generated by subscribers.  Excluding
idle and abusive users, the average traffic generated by a Yota subscriber is
10.3 GB per month.  This is 20% over Russian DSL subscribers and 100% than
2G/3G data users.  Yota subscribers are early adopters who are well versed
in all sorts of traffic-intensive applications and are typically heavy users of
video applications.  The increased availability (compared to DSL) and speed
(compared to 3G) of the connection contribute to explain the higher traffic
levels for WiMAX.  But this does not change the fact that that traffic
levels are growing very fast and that WiMAX operators are likely to be the first
to see the full extent of the increase in traffic because they have more
capacity per subscriber in their networks.

The trend towards high traffic levels is confirmed by other operators as well,
even though the numbers I have seen are not this extreme.  While these
usage levels confirm that subscribers value the service, they spell trouble for
the operator.  No matter how spectrally efficient technologies like WiMAX,
HSPA and LTE are, all wireless operators are bound by limited spectrum (and
funding) resources.  Eventually operators will have to start face
congestion issues.  High traffic levels will push operators to operate
differently.  They will have to use more sophisticated techniques to manage
traffic over their networks and they will have to plan their network with an
architecture that relies more on pico and femtocells that increase the overall
network capacity.  The days when the brute-force approach of just adding
more macro cells where needed was sufficient to keep subscribers happy are
forever gone.

Monica Paolini is the founder and president of Senza Fili Consulting and can
be contacted at
monica.paolini@senzafiliconsulting.com.  Senza Fili Consulting (
www.senzafiliconsulting.com)
provides advisory support on wireless data technologies and services financial
modeling, market research, business plan support, business development, RFPs,
due diligence, and white paper preparation.  Independent advice, a strong
quantitative approach, and an international perspective are the hallmarks of our
work.