How does a conventional telco make money? It is based on two fundamental aspects – time and distance. For a domestic call, the further the distance, the more expensive it is. For international calls, apart from distance, charges differ according to the duration of your call, plus during peak or non-peak hours. That is how conventional telcos profit from the voice business.
Ovum indicated that consumers’ increasing use of IP-based social messaging services on their smartphones cost operators $8.7 billion (€7.1 billion) in lost SMS revenue in 2010 and $13.9 billion in 2011. Applications like Whatsapp, Viber, Skype, Google Talk and many more offer us cheap or even free instant messaging and voice calls. These free applications are threatening operators’ bread and butter.
US research firm Senza Fili Consulting pointed out that Softbank, the third-largest operator in Japan by number of subscribers, became the first worldwide to have a data ARPU higher than its voice ARPU in 2010. Conventional telcos are well aware of the necessary changes that must take place. However, decision makers are skeptical about which strategy to follow to reinvent the business model.
P1, a greenfield operator that started with all-IP technology, presented a business case that differs from its 3G incumbents, which used circuit-based technology. P1’s Wimax network is designed to provide high-speed and high-capacity broadband from the start.
On average, every P1 user consumes 17-GB of data monthly. This would crash a 3G network at any point in time because it is not designed to withstand massive loads of data transmission, unlike a 4G network architecture.
P1’s existing business model is being tested and has been modified since its inception to cope with the explosive data consumption by customers. In a media showcase in April 2011, P1 successfully demonstrated the ability to transition a Wimax network to a TD-LTE network in just 30 minutes via a software upgrade.
On the devices front, P1’s parent company Green Packet is developing TD-LTE devices. Globally, the momentum toward TD-LTE devices is quickly increasing. GTI, the Global TD-LTE Initiative, has over 30 devices developed and tested. They range from USB dongles, mobile routers, tablets, Mi-Fis and even smart robots.
TD-LTE will be the springboard for P1 to tap into true mobile broadband as well as the machine-to-machine communications market, a new virtually limitless level playing field for everyone. It is now just a matter of time for the whole ecosystem to ramp up, and that’s happening very soon. Softbank has already commercially launched its TD-LTE network, China Mobile is having trials in six major cities, and Reliance in India just firmed up its technology partner. Many more deployments are in the pipeline.
LTE will bring true super high-speed 4G broadband and with it a huge capacity to change lives. The technology is ready to show off its capability and operators must be ready to take up the challenge. Regulators are playing a crucial role where the policies will have a direct effect on the operators’ business model.
If the seven billion people on this planet start calling each other concurrently, traditional telcos will know how to handle the network. However, if the seven billion people go online at the same time, no one will know how exactly to dimension the network. Simply because the users may access many types of applications and content from multiple devices.
One classic example is the new iPad in the US, which supports LTE. Operators in America such as AT&T and Verizon are now facing a surge of data that will potentially crash their LTE networks.
So, is 3G to 4G an evolution? More likely it’s a disruption!
Michael Lai is CEO of P1.