For cellcos, too much of a good thing

What’s not to like about mobile broadband? For a flat-rate you can check your email, update Facebook pages and Tweet anytime, anywhere. Operators across the global have gone gaga in their rollouts of HSPA/HSPA+ and Wimax, introducing data cards and dongles so users don’t to have compromise on the “full internet experience”.
 
Operators love high-speed mobile access so much 36 have already announced firm commitments to deploy LTE -- a technology that’s at least 12 months away from the first commercial deployments.
 
The GSMA announced recently that the number of HSPA subs hit 150 million – that’s 100 million more than just a year ago. It’s a fraction of the almost 4 billion mobile subs worldwide, but they’ve only just begun.
 
That’s precisely the problem and something you’d think operators would be obsessing with.
 
Cellcos have learned quickly that data card users have a vastly different “load pattern” than voice customers or even iPhone users, who according to AT&T use more than ten times the network capacity than the average smartphone user. The GSMA says among its members globally the average usage for a data user is 5GB/month – that’s 15 to 20 times more than the average voice traffic.
 
IDC analyst Bill Rojas said the blended average usage of HSPA users in Hong Kong was several hundred gigabytes per month, with dongle usage even higher.
 
It was certainly revealing at the LTE Asia conference in Hong Kong earlier this month when CSL’s CEO announced that its network traffic had increased tenfold in just five months but wasn’t able to disclose the number of new subs or the increase in revenue since the launch of flat-rate plans. That’s with only a fraction of its user base signing on to HSPA+.
 
Its brand new all-IP network has the capacity to handle 40 times more traffic.
 
What seems obvious is that operators aren’t prepared for this medium-term capacity demand that’s putting huge stresses on networks. What happens when these flat-rate data plans go mass market?
 

To keep up operators last year increased their spending on mobile backhaul equipment by 19%, and Infonetics Research forecasts it to double by 2013. Juniper Networks said operators are seeing congestion in the network at the core for the first time.
 
Rojas said operators are clearly challenged in how they can handle this surge in bandwidth.
 
Operators typically are charging three to four times voice packages for flat-rate data plans with a fair usage policy, but customers are using 15 to 20 times the bandwidth. The numbers don’t add up.
 
The fundamental issue is that bandwidth demand is growing faster than revenue, which is plateauing.
 
It wasn’t supposed to be this way. In a Telecom Asia-Ovum survey in January, most operators expected mobile broadband to be a higher margin business than voice. That looks like wishful thinking now.
 
Juniper Networks senior VP Vincent Molinaro told a gathering of operators in Beijing earlier this month that telcos can continue to support the explosive growth in traffic with increased capital spend. “But the question is, are they spending capital as fast as they are increasing revenue?”
 
This is the fundamental issue – how long can they pour money into capacity upgrades with so little upside? The focus must turn to data efficiency – the cost per bit - and making better use of available network resources.

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