When mobile operators embarked on 3G deployments earlier this decade, they did so not fully understanding the demand for mobile broadband services. It has only been in the past year that the industry has seen a dramatic deluge of mobile data services thanks to the appeal of smartphones, wireless-enabled laptops and flat-rate pricing. Today, data traffic is ramping up so dramatically that analysts say operators are desperate to launch all-IP long-term evolution (LTE) technology as soon as possible to cost-effectively ease the capacity constraint. But experts warn that focusing too long on simply offering a fat mobile IP pipe will be a mistake.
[1]A new study from Unwired Insight paints this dire picture of a capacity crunch. 3G traffic volumes are set to increase by a factor of 20 by 2015--driven by many technology factors and also dramatic reductions in mobile data pricing. Alastair Brydon, co-author of the new study, said mobile broadband pricing has fallen in some markets as low as $2 per gigabyte, "which is nearly half a million times smaller than the price per gigabyte of an SMS message."
Indeed, Verizon Communications CEO Ivan Seidenberg, whose wireless division is one of the most aggressive in terms of migrating to LTE with plans to light up 25-30 markets next year, indicated that Verizon Wireless sees data traffic doubling every year, and in four to five years, video will account for more than 60 percent of data growth.
As such, 3G networks are experiencing a capacity crunch and costs associated with transmitting data are rising. "The most important thing operators need to be able to do is to be cost competitive against what they have already deployed," said Keith Mallinson, founder of consulting firm WiseHarbor. "LTE needs to be cheaper and ultimately it may have additional functionality, but the crucial thing is the ability to deliver capacity at a lower cost per bit."
While this lower transport cost is essential to compete in the flat-rate pricing game in the short-term (operators also have no choice until LTE devices come to market.), analysts warn that becoming the proverbial "dumb pipe" doesn't make sense in the long run.
"LTE is more of a catalyst for a broader change in service provider market strategies as opposed to a technology that enables this change," said Phil Marshall, senior research fellow with the Yankee Group. "As service providers move down the path of transforming fundamentally, they need to think carefully about their role in the experience. They no longer control the applications--they just don't. They need to optimize the business with a mind of being a much more intelligent service distributor, and they can start to do that now."
Ken Wirth, president of Alcatel-Lucent's 4G/LTE networks division, said LTE networks will enable a host of unique attributes operators can leverage to generate revenues and boost their relevancy in service creation. These include offering varying levels of Quality of Service, personalized and location-aware services and mobility that is optimized for the host of connected devices, ranging from digital cameras to M2M modems.
Capitalizing on these attributes, however, requires a mentality change on behalf of the operator, Wirth said. "It's not just about a network transformation. It's an entire business model transformation that will be enabled by building partnerships and the open ecosystem," he said.
Service development initiatives will be a key component to this change, Marshall said. Operators can no longer dictate the ecosystem like they have in the past but they have the opportunity to guide it.
"Basically, there needs to be more emphasis toward the developer community but with the assumption that the developer community becomes a huge monolith," Marshall said. "The application environment is highly fragmented into app silos. The value add for the service provider is to cut across and integrate them, morph them for the mobile network."
Verizon Wireless has established an LTE Innovation Center both online and at a functional lab located in Waltham, Mass. The operator has promised developers online access to collaborative tools and support services for the creation of LTE products and solutions across a variety of vertical markets. In addition, the virtual center will enable matchmaking with players across the ecosystem, as well as technical expertise on device/network integration.
More recently, Verizon brought together players from both the wireless space and venture capital under the new 4G Venture Forum, which is designed to encourage investment in LTE services and devices. Essentially, the VC firms will identify and help commercialize ideas. The VC firms involved have identified up to $1.3 billion available for development.
In February, Alcatel-Lucent launched the Next Generation ng Connect Program to spur an ecosystem of device manufacturers, application developers, content providers, gaming experts, computing, and other relevant expertise to create and test proof-of-concepts for next-generation services. The company provides the framework and funding for the project to ensure its timely availability in the marketplace.
Recently, the program announced a new proof of concept developed by The MediaTile Company, a provider of cellular digital signage and SaaS management solutions, called the HumanKiosk. The solution leverages LTE to deliver a live, two-way in-store video session between a consumer with a product question and a representative of that product or service. For instance, a customer seeking information about a prescription after their in-store pharmacist has left for the day, can tap the touch screen to establish a live visual and audio connection with a pharmacist or product expert at another location.
Links:
[1] http://www.unwiredinsight.com/reports.aspx