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This article was taken from the October 2011 issue of Wired magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content by subscribing online.
Dennis Sverdlov, a quietly spoken man dressed in a black sweater, sits in his glass-walled office in St Petersburg. Through his large windows he can see out over the frozen seas of the Gulf of Finland far below: kiteboarders skim over dazzling ice that stretches as far as the eye can see.
The 32-year-old is CEO of Russian communications company Yota. For the last two years, it has been delivering "near-4G" WiMAX wireless broadband to 20 million people across the cities of Moscow, St Petersburg, Ufa, Sochi and Krasnodar. Whether walking the streets or sitting in their cars, users can connect to the internet via smartphones, laptops and tablets at speeds at least as fast as those that we in Britain achieve from our fixed-line cable modems. In St Petersburg you can walk down the street while video-conferencing or playing PlayStation online.
The great hope for 4G, when it's finally introduced, is that it will deliver speeds over 100Mbps when you're on the move and 1Gbps when you're not. By way of comparison, the current average UK broadband speed is 6.8Mbps. Steven Hartley, senior analyst at Ovum, says that 4G represents a subtle but significant shift in possibilities. "The things you've become used to doing at home or at your desk -- cloud computing, watching videos that don't judder, online gaming -- potentially, all that is available to you from the back of a taxi," he says.
Yota plans to have rolled out its 4G service to 180 Russian cities by autumn 2012; that would expand its customer base from its current one million near-4G users to a potential 70 million. Most of Britain is unlikely to be able to access 4G services before 2013 at the earliest. "But," Sverdlov says, "you have many other good things." Then he bursts out laughing.
Few people outside the telco-conference circuit will have heard of Yota, yet this Russian company is one of a handful of 4G providers, including Clearwire in the US and TeliaSonera in Scandinavia, that are competing to offer mobile internet that can transfer data at high speeds but with low transmission cost.
In Britain, telecom giants such as Orange, 3, Vodafone and BT spent much of the last decade trying to recoup the £22.5 billion investment they made buying 3G licences in 2000.
But Yota -- a company founded in 2007 by Serguei Adoniev, a Russian multimillionaire then with no telco experience -- leapfrogged 3G in favour of investing in a network that would be able to support fourth-generation wireless broadband.
In Russia's developing economy, in which 3G had barely begun to gain a foothold anyway, Yota ignored an entire telecommunications generation and fast-forwarded to the next. It helped that Yota is backed by state-owned companies: even after 20 years of capitalism, elements of the old Soviet command economy continue to give the state the final say. In effect, Russia has become a laboratory for how the rest of the world will use 4G. "When we started Yota, we understood that this was the moment,"
Sverdlov explains. "From the beginning we understood that wireless broadband will change everything. There were going to be new rules... a new business infrastructure." Old business models in which telcos tie consumers into a contract for a set number of talk minutes each month have no place in a 4G world in which voice is simply another form of data.
With 4G technology, your mobile-phone company starts to look much more like an internet-service provider. "And then," says Sverdlov, "if you are connected in this way, you start to think, how will it change our lives?"
However, Yota sees its real competitive advantage less in getting to the new technology first than in being the company that really understands how 4G will change the way in which we behave, online and off. It is experimenting not only with speeds and coverage, but also with how future 4G services will change the way consumers interact with devices.
Unemcumbered by a western-style government agenda of achieving universal coverage, Yota has been expanding into high-population areas in which it can quickly recover infrastructural costs. In Moscow, St Petersburg, Ufa, Sochi and Krasnodar you can buy a Yota dongle for RUB 2,390 (£53). Better still, the Yota Egg -- a standalone, battery-powered near-4G wireless router -- gives you access to the internet at speeds of up to 10Mbps for a monthly fee of RUB 1,400.
At 3Mbps to 5Mbps you can tolerably stream HD video to a laptop or mobile. A gamer could be standing at a bus stop playing World of Warcraft while his opponent in, say, Leeds is stuck behind her desktop, perhaps with a slower connection.
Telco standards are sophisticated evolutions of previous technologies rather than fundamentally different approaches. So far, the leading near-4G standards have been Worldwide Interoperability for Microwave Access (WiMAX) and Long Term Evolution (LTE). However, neither WiMAX nor the current release of LTE is technically counted by the International Telecommunication Union (ITU) as a 4G technology -- though both standards are being marketed worldwide as just that. The ITU prefers to label them "pre-4G technology" or 3.9G.
It's not just the speed that will be transformative: 4G offers consumers the opportunity to access gigabytes of data wherever they are. Unlike conventional telecoms companies, which typically sell a monthly data allocation, Yota places no cap on the quantity that can be downloaded; it's a digital all-you-can-eat buffet.
One of its first customers stretched that point by consuming almost two terabytes in a single month -- the equivalent of nearly 450 DVDs. Although that individual was almost certainly doing something that involved infringing the copyright of large entertainment companies, within Yota the anonymous downloader has taken on the aura of a hero of the 4G revolution.
What is being experienced in the five Russian cities demonstrates just some of the innovations 4G will bring. With added scale and speed, new generations of devices will be able to pass ever-greater amounts of information between themselves wherever they're located. And when millions of consumers can watch movies, update social-media channels or carry out financial transactions on the go, the company believes 4G will disrupt not only the telcos' business model -- but lead to a revolution in content. "From day one," Sverdlov says, "when we started as an infrastructure business, we also started a company called Yota Lab to build the software, and another company to collect media content -- and the rights to media content." This is part of Yota's plan to secondguess what users will want from 4G services.
Ilya Oskolkov-Tsentsiper, the vice-president of Yota Group, is based at the company's London office. He talks enthusiastically of a 4G-enabled world in which consumers are constantly, universally connected. "All this will be happening wherever you are," he says. "You don't ever have to sit down in front of a specific device. You just move with this cloud over you."
Sitting drinking tea at The Bleeding Heart restaurant in Clerkenwell, east London, Oskolkov-Tsentsiper peppers his conversation with quotes from Turgenev and Pushkin. He says he comes to this restaurant because the grouchiness of the French waiters reminds him of home.
In 1999 he set up Afisha, Moscow's equivalent of the entertainment-listings magazine Time Out. Ten years later he cofounded the Strelka Institute, a postgraduate media, architecture and design-education initiative in the city. He explains that any moment now the company is going to launch Yota Play, a video-on-demand service that will allow subscribers to access content from any connected device, switching from one to another to pick up content from where they left off. By the autumn it plans to launch anonline banking service. "I'm hesitating even to call it a bank," says OskolkovTsentsiper. "We swore on the first day we wouldn't call it a bank, because the moment you do, it becomes a bank -- and no one likes banks. You don't want more banks in your life."
The project is still at Yota Labs, but it represents the scale of the firm's ambition by attempting to create something more than just a technology: it wants to discover what might be achieved by applying that technology to disrupt traditional industries... such as banking. "[With this project] we are redesigning money, rather than banks," Oskolkov-Tsentsiper says.
Yota sees its key advantage as not being a traditional telco. In fact, few senior managers among its 1,200 staff have ever worked in the sector.
The company emerged from a conversation that Sverdlov had in 2007 with his friend Serguei Adoniev, a major figure in post-Soviet entrepreneurship. Adoniev's first big success was with agribusiness venture the Joint Food Company, which he set up in 1994. When he sold his share six years later the company had an annual turnover of $200 million (£125 million). He has since diversified into an eclectic range of investments, including publishing: he owns the largest minority share of SPN, publisher of the Russian edition of Rolling Stone. "Look," said Adoniev to Sverdlov over the phone. "I've heard there is a technology called WiMAX. Could you check it out?"
Hearing that the 4G 2.5 Gigahertz frequency was up for sale, Adoniev immediately sensed an opportunity. At the time, Sverdlov knew nothing about 4G. But both men are post-Soviet entrepreneurs whose outlook is inevitably coloured by their experiences during the collapse of the Communist state. Sverdlov's generation believes that everything can be remade. In the 90s, Sverdlov's father took over part of the screw-and-nail manufacturing company he'd worked for all his life. Sverdlov Junior had set up his first consultancy company, IT Vision, aged 22. "I understood that the reality around us is not given," says Sverdlov. "If you push reality -- if you have a vision of how it should be -- then you have the possibility of changing it." "We come from a culture where more or less everybody is an amateur," says Oskolkov-Tsentsiper. "The collapse of the Soviet Union cancelled out previous life. Afterwards, if you were brave enough to invest in a business card that said 'Chairman of the Bank', in a year that person could indeed be chairman of the bank.
Part of the dynamic of Yota is this vastness of opportunity." Where the high costs of infrastructure made many telcos nervous of dipping their toes into 4G, Sverdlov and Adoniev saw possibility.
They saw 70 million potential customers. And there were enough wealthy Russians willing to pay premium rates for the service to kickstart it in the big cities. "What was interesting was that anyone could have bought this opportunity -- but nobody did. Nobody believed in it," says Sverdlov. Adoniev lined up investors -- and now controls 74.9 per cent of the company through his Telconet Capital fund.
The history of mobile communications is a riot of competing technologies. Because technical standards evolve fast and vary so much between territories and companies, the ITU has tried to impose order by defining these leaps forward as "generations".
Initially it was all about voice. Bell Laboratories laid the groundwork for mobile telephony in the early 70s with cellular telephony -- a series of "cells", each with a transmitter and receiver that could pass calls from one cell to the next as users moved around. Initially available in Scandinavia in 1981, 1G mobile telephony was analogue. Ten years later, digital was introduced with 2G, which allowed greater usage of the spectrum; phones could, at least in theory, carry data and fax (though the big hit of the system proved to be SMS). Yet voice still dominated each generation.
The launch of 3G sped up data rates massively, by using packet switching -- by which data is broken down into individually transmitted chunks. (Voice is still transmitted by old-fashioned circuit switching.) In contrast, 4G treats everything as data, travelling at speeds that can exceed 100Mbps.
Sverdlov understood that, for Russia, 4G was an excellent opportunity to develop an entirely new marketplace. He launched the company in March 2007, and his investors (in the Russian way, largely unnamed) sucked up the $300m cost of installing the initial 1,600 base stations in Moscow and St Petersburg. Meanwhile, developers spent months rewriting software in order to trim down the self-install operation for customers to a one-click operation.
Yota launched its first pilot WiMAX service in St Petersburg in November 2008 -- two months after American telecoms giant Sprinthad started to roll out its own service in Baltimore, Maryland. In the absence of 3G networks in Russia, Yota had a clear run. That same month the company had created its first seamless plug-and-play 4G dongle and, working with HTC, developed and sold the world's first WiMAX smartphone. "They're not doing anything that other players like Clearwire in the US aren't doing, building urban 4G networks," says Phil Kendall, director of wireless operator strategies at Strategy Analytics. "But it's the speed at which they became profitable that's really interesting."
Amazingly, Yota has undertaken almost no customer research.
Fixated by the idea of a seamless, ultra-simple pay-andconnect service, Yota doesn't want to interrupt its users by making them pause to enter personal, trackable data. And the IP-based nature of 4G means that Yota isn't harvesting the same kind of data that telcos rely on. Yota isn't billing you according to calls you make, so it can't track your consumer habits in the same way. Instead, it is relying solely on a gut-instinct picture of who needs its network. "These are the people who really need to be connected at all times. Age or gender doesn't matter," insists Sverdlov. "Some of them download as much as two terabytes, while others may download just one gigabyte, but what unites them all is that they need to be always connected."
The point at which the wider telecoms industry woke up to Yota was when, in May last year, the company announced that it was switching from WiMAX to LTE. The move was widely reported as a major blow to the WiMAX standard: a Russian startup was now effectively playing a major hand in defining the new standard for 4G. "That's when we realised we had become famous," says Sverdlov. "That's when people started to look at us." "It was a significant move from the point of view of a WiMAX operator that had scaled relatively quickly," Kendall says. "The decision to drop WiMAX was another nail in the coffin -- not the only one by any means, but yes, a major one."
Yota initially backed WiMAX because it had no choice -- LTE wasn't a viable technology at the time of its launch. "The name of the technology does not matter," says Sverdlov. "We will use any technology that will give better wireless broadband to our customers, and -- and this is really important -- which will create the biggest device ecosystem." If 4G is all about connectivity, it's important for telecoms companies that they pick the standard that has the most compatible 4G devices. By late last year LTE was beginning to look like the one to back: manufacturers -- including HTC and Samsung -- threw their considerable weight behind the standard, releasing LTE handsets in the spring of 2011, and they were closely followed by Motorola and LG.
Meanwhile, Yota had been discreetly talking to the 4G network Clearwire, which also backs LTE. The two companies agreed to collaborate on a strategy to allow each other's customers to have roaming access, which meant that both would have to share the same system.
The rush to 4G isn't simply about competing to become market leader -- it's about creating an ecosystem that will allow other companies to bring other products and services to the market. As David Erixon, Swedish vice-president of products and customer experience at Yota, says, "If we believe that 4G is going to be a real gamechanger that's going to lead to a cultural shift, our job is to understand more than provide a product or a service. The question is, how can we actually facilitate an entire marketplace?"
That question was partly answered on March 3 this year. At the start of the month, caretakers were removing the long icicles that dangled from the roof of Yota's Moscow HQ to smarten up the building, and staff swapped jeans and casual shirts for suits and ties. The prime minister, Vladimir Putin, was about to drop by, accompanied by the heads of Russia's four top telecom operators, MegaFon, Mobile TeleSystems (MTS), Rostelecom and VimpelCom.
The day before Putin's visit, these industry power-brokers had signed a deal with Yota -- which, at that point, had existed for only four years -- under which the startup agreed to build one giant national LTE network that would be shared by all five of them. Less than 12 months earlier, Yota had been promising to bring 4G to five Russian cities. Now it found itself responsible for creating a network that would span some 180 cities, supplying super-fast wireless broadband to around 70 million customers.
Sverdlov believes that, instead of service providers each creating their own dedicated vertical network, they should think of themselves as airlines sharing a single airport -- the Yota network. The terms of the deal mean that each of the telecoms companies becomes a shareholder in the network.
Yota's enthusiasm for this model -- in which a single company acts as the wholesaler for the entire network -- is shared by the company LightSquared, which plans to use satellite networks to blanket 92 percent of the US population with LTE coverage by 2015.
This kind of model is ideal for developing markets such as Russia, where no single operator could ever afford to build the infrastructure. (Kenya is also planning to auction its spectrum to a single network operator.) And, if sharing costs allows Russia to move ahead technologically, Yota and the partnering companies will be free -- not least financially -- to concentrate on the next stage: the service layer.
At the moment, 4G is about accessing larger volumes of data, faster. But what happens when new services, tailored to the new opportunities, start to emerge? 4G will transform mobile video, for example. Yota believes it can turn 4G into a significant revenue stream by the creation of Yota Play, which launched in July this year after the firm had acquired the rights to show 5,000 hours ofBBC programming over three years via its on-demand service.
Since 2007 Yota has been gathering rights to content from film studios across the globe. In some ways Yota Play is a VOD service like LOVEFiLM or blinkbox -- except that it's not just portal-based. It's a social-media channel that's integrated across the user's devices. So you might find a Yota Play clip on Facebook that a friend is enthusing about and, with one click, add it to your favourites. When you want to view it, click a button and it will appear on your iPhone. When you get home, you can plug your 4G modem into your Yotaready TV and pick up the film exactly where you left off. Yota's clout means it can start to persuade partners such as TV manufacturers and games-console makers to advertise Yota-ready USB ports. And the next generation of modems will include a chip that eradicates the need for consumers to download drivers.
Yota's wireless broadband router is evolving too. The newest model on offer, the Yota Many, has a simple switch: while "off" the device provides access to a single user; switch it on and a small smiley face appears, indicating that you have now switched on Yota Share, through which up to ten people can use your 4G signal.
Ultimately, Yota sees Yota Many as a personalised wearable -- a kind of cigarette case for our age -- and has commissioned British designer Richard Seymour to devise a new look. The company is looking at how 4G will change how users interact with each other.
What if someone trying to connect via Yota Share was automatically redirected to a web page -- a kind of personal Facebook page -- that sets the terms for sharing the network? If you're in a café, the cost could be: "Buy me a coffee." Or you could ask a potential user to donate a few pence to a chosen charity. Or maybe just ask for some cash. Your personal space can become a real social environment as much as a virtual one.
Yota is spreading to emerging territories, too, setting up networks in Belarus, Peru and Nicaragua. The "just pay me" Yota Share option could form the basis of a microbusiness in an emerging economy, allowing technology to trickle downwards.
Sitting in his office, eating a lunch of almonds, raw carrots and dried cranberries, and drinking hot water with honey, Sverdlov talks about how Yota can be the engine of change that opens up the Russian mindset. "We don't care," he says. "We can change the reality around us." Ask him what he ultimately wants to achieve, and it's quite simple. "What's the most famous company you know from Russia?" he says. "The Russian Ballet? Ask people to name a tech company from Russia and they can't answer. We want to be that company."
The world prepares for 4G
<img src="http://cdni.wired.co.uk/455x303/s_v/Screen shot 2011-09-08 at 15.26.38_455x303.jpg"/>
Who's ahead of Britain?
Too focused on recouping their investment in 3G, the UK's telcos have been much slower than overseas operators in preparing for 4G.
Here are three of the territories that will beat us to the next generation**.**
Jersey
The largest of the Channel Islands isn't in Britain, but it's the closest the mainland gets to a functioning near-4G network. The island's near-4G is a trial project. Residents also enjoy broadband faster than anywhere outside South Korea.
Nicaragua
Although 48 percent of the population live below the poverty line, Nicaragua offers one of the world's fastest mobile-internet services and runs near-4G now. Yota recently built a network here as well as in Peru, which expects 4G in 2012.
Belarus
It's a small eastern European authoritarian state with a questionable human-rights record. But in one respect, it beats the UK: Belarus wants to be technological leader in its region. Its solution: 4G, again run by Yota.
This article was originally published by WIRED UK
