The Global State of 2G, 3G, 4G, and 5G

Aeris White Paper

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THE GLOBAL STATE OF 2G, 3G, 4G & 5G COPYRIGHT © 2015, AERIS COMMUNICATIONS, INC. 1

Let our experts lead the way

THE GLOBAL STATE OF 2G, 3G, 4G & 5G COPYRIGHT © 2015, AERIS COMMUNICATIONS, INC. 2

Table of Contents

INTRODUCTION 1

GSM DOMINATES GLOBAL DEPLOYMENTS 1

2G GSM UNITS DECREASING 2

3G GSM LEADS MOBILE VOLUME 3

CDMA HAS STRONG GLOBAL PRESENCE 3

STRONG 3G HSPA GROWTH 4

LTE DEPLOYMENTS GROWING FAST 4

IOT / M2M TRANSITION TO 2G CDMA AND 3G 5

IOT / M2M TECHNOLOGY USE 5

FACTORS INFLUENCING TECHNOLOGY LONGEVITY 6

Smartphone Growth 6

Operator Size and Spectrum Pressure 7

RECOMMENDATIONS 7

ABOUT AERIS 8

INTRODUCTIONThe standards and technologies for wireless mobile communications are rapidly evolving to offer ever more advanced and efficient cellular services. Mobile cellular operators, including Internet of Things (IoT) and machine-to-machine (M2M) service providers, can no longer be sure the two dominant worldwide cellular standards—GSM and CDMA—will remain unchanged and in place permanently.

In fact, both GSM (Global System for Mobile Communications) and CDMA (Code Division Multiple Access) are giving way to the faster and more spectrum-efficient cellular standard— Long-Term Evolution (LTE)—as operators recognize its potential. But the shift to LTE will not occur quickly or easily. There are many issues for operators to consider in the coming years as they evaluate their cellular network service deployment strategies.

This white paper describes the state of global 2G, 3G, and 4G cellular services and what alternatives are available to companies when deploying IoT / M2M cellular devices internationally.

This paper will not offer an in-depth analysis of 5G because serious development has not yet begun. In fact, there is not yet an agreement internationally on what might constitute 5G. An article by GSMA Intelligence stated, “Discussion around 5G falls broadly into two schools of thought: a service-led view which sees 5G as a consolidation of 2G, 3G, 4G, Wi-Fi, and other innovations providing far greater coverage and always-on reliability; and a second view driven by a step change in data speed and order of magnitude reduction in end-to-end latency. However, these definitions are often discussed together, resulting in sometimes contradictory requirements.”

GSM DOMINATES GLOBAL DEPLOYMENTSFor the worldwide global mobile communications market, the dominant standard for cellular networks is the Global System for Mobile Communications (GSM), serving 90% of the market and reaching more than five billion people across more than 215 countries and territories, according to the GSM Association.

FIGURE 1. GLOBAL GSM MOBILE CONNECTIONS

THE GLOBAL STATE OF 2G, 3G, 4G & 5G COPYRIGHT © 2015, AERIS COMMUNICATIONS, INC. 1

GSM is in flux, as standards and technologies for mobile communications are evolving quickly and offer more advanced and efficient cellular services. In North America, 2G GSM, the low-cost standard favoured by many IoT / M2M deployments, is being phased out over time as operators seek to use its spectrum for more advanced 4G LTE networks.

AT&T announced a shutdown of its 2G GSM (including GPRS and EDGE) cellular network in the US by 2017. Although T-Mobile in the US has not yet formally announced 2G GSM sunset plans, it has begun re-farming its 2G GSM spectrum for use with 3G HSPA and 4G LTE. Clearly, it will also eventually announce a 2G GSM shutdown, although this is likely to be after the AT&T sunset date.

Outside of the US, 2G GSM networks are not facing imminent shutdowns. Ultimately, this older technology will also be removed almost everywhere, but no operator has announced plans or schedules.

Companies operating outside the United States have more time to transition from 2G and to choose a variety of options. Those options include replacing 2G GSM devices with 3G HSPA, 2G CDMA, or 4G LTE devices.

2G GSM UNITS DECREASINGAs projected by GSMA Intelligence in its “The Mobile Economy 2015” report, the number of 2G GSM units is continuing to drop over time, as existing 2G users migrate to 3G and 4G units.

Customers must carefully balance their productlifecycle, device cost, and market deploymentrequirements to select the correct technology

for their IoT / M2M application.

FIGURE 2. 2G GSM REGIONAL CONNECTIONS

THE GLOBAL STATE OF 2G, 3G, 4G & 5G COPYRIGHT © 2015, AERIS COMMUNICATIONS, INC. 2

As seen in Figure 3 below, the number of 2G GSM units peaked in 2013, but is projected to drop to 3.2 billion by 2020. The number of 3G HSPA units will increase to 3.7 billion units by 2020; LTE units will increase to an expected 2.3 billion units by 2020.

3G GSM LEADS MOBILE VOLUMEA majority of mobile devices are still connected via 2G GSM cellular, however, the Third Generation Partnership Project (3GPP) family of cellular technologies—i.e., GSM, GPRS/EDGE, HSPA, etc.—dominate the mobile services available throughout the world. In 2013, almost 6.1 billion subscriptions used this 3GPP family of cellular technologies, with about 1.47 billion HSPA units in use—comprising almost 90% of the entire global mobile market, according to Informa Telecoms & Media.

CDMA HAS STRONG GLOBAL PRESENCEAlthough GSM technologies dominate cellular deployments around the world, CDMA has a strong presence in North America—particularly in the US. However, there is a common misconception that CDMA is restricted to North America and a few Asian countries. On the contrary, as shown in Figure 4, CDMA networks are available worldwide, and 2G 1X and 3G EV-DO technologies are deployed by 314 operators in 118 countries. CDMA networks are available worldwide, and 2G 1X and 3G EV-DO technologies are deployed by 314 operators in 118 countries.

FIGURE 3. GLOBAL CONNECTIONS BY TECHNOLOGY

FIGURE 4. CDMA2000 DEPLOYMENTS WORLDWIDE (CDMA DEVELOPMENT GROUP)

THE GLOBAL STATE OF 2G, 3G, 4G & 5G COPYRIGHT © 2015, AERIS COMMUNICATIONS, INC. 3

As seen in Figure 5, the number of CDMA operators in Asia-Pacific and Africa-Middle East is larger than in North America. Most have deployed 2G 1X data services, along with a revision of 3G EV-DO in many markets, and there are also CDMA network deployment projects in progress.

STRONG 3G HSPA GROWTH3G HSPA networks continue to add users at a rapid pace. In October 2015, the GSA reported that there are 588 commercially launched HSPA networks in 218 countries. Of these, over 70% increased their data throughout with HSPA+ network deployments.

The GSA estimates that over 80% of operators worldwide are continuing their 3G investments, considering total global 3G connections are expected to exceed LTE until at least 2020. However LTE adoption is rising rapidly in the Asia-Pacific region and North America.

LTE DEPLOYMENTS GROWING FASTLTE network deployments are growing dramatically as cellular providers recognise the need to upgrade their infrastructure to accommodate high data traffic volumes and deliver services more cost-effectively.

LTE technologies use “All-IP” infrastructures and are more cost-effective to deploy and operate than 2G and 3G cellular technologies that use Signaling System 7 (SS7) for messaging.

Operators across the globe realise the potential of LTE for data services. As costs of deployment come down and as more handsets and applications are developed for LTE services, they will gravitate away from GSM and CDMA (and even HSPA, in time) to LTE.

According to the GSA, by the second quarter of 2015, LTE subscriptions hit 755 million worldwide. LTE is forecast to reach 8.54 billion global subscriptions in 2020. Also, the number of commercially launched LTE networks reached 422 by July 2015.

FIGURE 5. CDMA OPERATORS BY REGION (CDMA DEVELOPMENT GROUP)

THE GLOBAL STATE OF 2G, 3G, 4G & 5G COPYRIGHT © 2015, AERIS COMMUNICATIONS, INC. 4

IOT / M2M TRANSITION TO 2G CDMA AND 3GWith 2G GSM use declining and LTE still years away for many IoT / M2M applications, migrating to 2G CDMA and 3G represents a reasonable deployment strategy today—particularly if the availability and longevity of those technologies is sufficient for the product. For example, if using a 2G GSM module, the application providers can switch to 3G HSPA as an intermediate step to a 4G LTE solution.

For 2G CDMA applications, there is more time to transition—since 2G CDMA is expected to be available for longer than 2G GSM. Businesses using 2G CDMA have the opportunity to skip 3G entirely and instead deploy 4G LTE later, after module prices have dropped and service is more readily available.

IOT / M2M TECHNOLOGY USE

FIGURE 6. LTE DEPLOYED NETWORKS AS OF JULY 2015

FIGURE 7. DEPLOYED IOT / M2M DEVICES BY TECHNOLOGY

THE GLOBAL STATE OF 2G, 3G, 4G & 5G COPYRIGHT © 2015, AERIS COMMUNICATIONS, INC. 5

As shown in Figure 7, 2G and 3G are expected to dominate the technology for IoT / M2M devices during the next few years, although the number of 2G devices will not grow substantially after 2016.

There are a variety of reasons for this:

• Coverage of LTE networks does not yet match 2G and 3G.

• Cost of LTE modules remains very high—today and for the next few years.

• Increased complexity of LTE designs (multi-band support, MIMO antennas, etc.).

• The data rate of LTE is not required for many IoT / M2M applications.

However, once the LTE coverage is complete, and the cost of LTE modules drops substantially (this is occurring at a faster rate than other technologies), IoT / M2M devices and applications using LTE will become more common.

In time, cellular chipsets that are “LTE-Only” will be available—this will allow handset suppliers to remove “fall-back” support for 2G and 3G technologies that are needed for markets without LTE today.

These LTE-only chipsets, and LTE-only IoT / M2M modules, are likely to become available in 2017 and 2018. This will make LTE much more cost-effective for IoT / M2M applications. FACTORS INFLUENCING TECHNOLOGY LONGEVITY

FACTORS INFLUENCING TECHNOLOGY LONGEVITY

SMARTPHONE GROWTHDuring the last five years, users have moved rapidly from simple cellular handsets that are only capable of voice and text messaging to smartphones that use IP data services for new capabilities (such as web surfing, etc.). In many countries, the deployed number of smartphones exceeds the number of simple cellular handsets, and sales of smartphones are growing rapidly everywhere.

Strategy Analytics notes that 2.5 billion people worldwide own smartphones as of 2015. In its VNI Mobile 2015 report, Cisco projected that the percentage of smartphones will grow to 40% of all connected devices in 2019. See Figure 9 for more detail.

This requires spectrum-efficient IP data technologies—such as those provided by W-CDMA-HSPA and LTE—to be made available by most operators.

FIGURE 8. GROWTH OF MOBILE DEVICES

THE GLOBAL STATE OF 2G, 3G, 4G & 5G COPYRIGHT © 2015, AERIS COMMUNICATIONS, INC. 6

OPERATOR SIZE AND SPECTRUM PRESSURE

In the US, two large operators, Verizon and AT&T, together comprise two-thirds of the deployed cellular devices, with about 135 million and 123 million subscribers, respectively. Thus, these two operators have far more subscribers than the largest European operators within their respective countries. For the data needs of their customers, the two US operators need efficient use of their spectrum for deploying LTE.

That process has already begun, and as noted earlier, AT&T has announced a date when it will remove its 2G GSM (including GPRS and EDGE) network to convert that spectrum into more efficient cellular technologies. Other operators have re-farmed—i.e., converted—existing 2G spectrum to deploy 4G LTE. This trend is likely to continue as the number of 2G devices decline.

Outside the US, however, the available spectrum capacity can still support older cellular technologies. Hence, it is likely that 2G GSM will continue to be available in most countries for the next six to eight years—possibly longer in some countries.

RECOMMENDATIONSIn many cases, IoT / M2M devices and applications enjoy long product lifecycles. Unlike the consumers who tend to replace their cellular handsets—whether simple cellular phones or smartphones—every two to three years on average, IoT / M2M devices are often deployed for a decade or longer.

Thus, businesses must carefully balance their product lifecycle, device cost, and market deployment requirements to select the correct technology for their IoT / M2M application. For example, in the US, it is no longer viable to deploy a new 2G GSM device and application and expect service longevity—customers must choose other technologies.

Across Europe, regardless of the continued availability of 2G GSM services, it is best if businesses deploying IoT / M2M devices avoid using 2G GSM modules if their applications require operation for more than eight to ten years. This could include a transition deployment over some years to avoid high module costs today. In many cases, if the application devices last for many years, then the costs of later replacement—for example, for a relatively inaccessible IoT / M2M unit—may be considerably more expensive than deploying a 3G (or even a 4G LTE) device today.

Companies may also find it advantageous to move from a 2G GSM module to a 2G CDMA module at a much lower cost than moving to 4G LTE technology, with module costs of $80 to $100. The cost of a 2G CDMA module at $20 to $30 may be a more affordable step at present, from the $10 to $13 of a GPRS module.

Another benefit of taking the intermediate step of moving from 2G GSM to 2G CDMA and 3G technologies is that the number of IoT / M2M applications requiring LTE capacity and throughput is low. Customers may be able to get maximum business benefits for their IoT / M2M applications using 2G and 3G for the next two to four years before LTE becomes more widely used.

Jumping from 2G GSM over 3G to 4G LTE is a viable option for some IoT / M2M customers who can afford to take a risk that the applications they need will use LTE in the future for other features that need the performance. However, if the cost of a 3G or 4G module inside the device is too high for the application sales today, then a 2G GSM device could be deployed now—while a clean product transition plan for new devices using 3G HSPA or 4G LTE is readied. This would minimize exposure to 2G GSM longevity concerns.

THE GLOBAL STATE OF 2G, 3G, 4G & 5G COPYRIGHT © 2015, AERIS COMMUNICATIONS, INC. 7

ABOUT AERISAeris is a pioneer and leader in the market of the Internet of Things – as an operator of end-to-end IoT and M2M services and as a technology provider enabling other operators to build profitable IoT businesses. Among our customers are the most demanding users of IoT services today, including Hyundai, Acura, Rand McNally, Leica, and Sprint. Through our technology platform and dedicated IoT and M2M services, we strive to fundamentally improve their businesses – by dramatically reducing costs, improving operational efficiency, reducing time-to-market, and enabling new revenue streams.

Our global headquarters is in Silicon Valley (Santa Clara, California). Our European headquarters is near London, UK. Visit www.aeris.com or follow us on Twitter @AerisM2M to learn how we can inspire you to create new business models and to participate in the revolution of the Internet of Things.

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To learn more, contact us at info@aeris.net or 1-888-GO-AERIS in North America or +44 118 925 3202 in Europe.

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THE GLOBAL STATE OF 2G, 3G, 4G & 5G COPYRIGHT © 2015, AERIS COMMUNICATIONS, INC. 8