Report: Operators must reduce network costs by 50%

Deploying LTE or boosting efficiency gains in the macro network will not solve the problems of growing mobile data volumes and falling revenues per megabyte, according to a new study from Analysys Mason.

To tackle this daunting prospect, the market research firm says that operators must cut network carriage costs by 50 per cent or face an overwhelming eight-fold increase in the costs of radio access network (RAN) equipment.

According to Terry Norman, co-author of the study and lead analyst for Analysys Mason, if European operators attempt to meet the growing demand for data traffic by deploying more base stations, RAN costs could climb to $40 billion per year by 2016, compared with $5 billion per year in 2011.

"Operators can't afford to spend that sort of money," Norman said. "Therefore, operators will either accept network congestion or use pricing to control demand--neither is good business practice. The elegant solution is to make substantial efficiency improvements."

One option recommended by Analysys Mason is for operators to use small cells to carry a part of this traffic. "Because Wi-Fi is widely deployed and competitively priced, it is a leading candidate small-cell technology," Norman said.

However, the analyst warned that operators will be unable to attach adequate users to an outdoor Wi-Fi unit to relieve the congested macro cell that it is supporting. The study claims that almost 95 per cent of tablet users and 70 per cent of smartphone users will be found indoors, leaving very few heavy users of data outdoors.

While operators are already testing Wi-Fi offload, Analysys Mason recommends they extend the tests to include video services. It also suggests operators are unlikely to have the operational capability to deliver an effective Wi-Fi network and believes partnering with experienced companies is the way forward.

Of note, the study claims that the Wi-Fi industry must overcome present hurdles and deliver ‘carrier-grade' products and services, as already achieved by the femtocell industry.

The firm believes that the current battle between Wi-Fi and femtocell for small cell domination will be decided over the next two years, with the likely outcome being the convergence of the two technologies.

For more:
- see this Analysys Mason press release

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