Mobile broadband: When is it profitable? Page 2

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After being caught by surprise by the sudden growth in mobile data, mobile operators have started to realize that, to profit from it in the long term, they need to strike the right balance between pricing and traffic, and limit the scope of network expansion to increase capacity. If they raise the prices too much they risk losing subscribers. If traffic is too high, congestion and the need for expensive upgrades ensue--and profitability is threatened. If they spend too much on network expansion, they will hurt profit margins.

One solution that mobile operators have timidly started to mention is the introduction of traffic limitations. Subscribers have been grown accustomed to flat-rate unlimited services--for both data and voice--and it will be difficult to wean them off this type of plans. Unless strict--and likely to be highly unpopular--caps are introduced, they will only affect a small fraction of subscribers. For instance, on AT&T mobile network, 3 percent of subscribers use 40 percent of the bandwidth, according to the operator. Traffic caps may be useful in managing these 3 percent subscribers, but they miss large opportunities for improving traffic.

Increasing the efficiency of the network is crucial to manage traffic in ways that benefit both subscribers and mobile operators. Mobile operators no longer have to transport traffic through a passive, best-effort channel. They can use tools like quality-of-service and traffic prioritization, subscriber policies, compression, deep-packet inspection to give subscribers more control over their mobile online experience while increasing the perceived network capacity through to a more efficient use of resources. The rigidity of traffic cap can be avoided by using a more flexible approach in which traffic flows are actively managed depending on data and infrastructure requirements and operators data policies. And in the process, mobile operators can escape their dreaded fate as commodity providers, and leverage data management to differentiate their offering from competitors and extract more revenues from data services.

The tools to actively manage traffic are available today, yet their implementation is taking a long time. Mobile operators are rightly concerned about the reception among subscribers who may see traffic management as a way to limit their freedom, while in fact it is more likely to result in a more fair use of network resources. Transparency and subscriber education of what managing traffic entails is going to be the next step for mobile operators to gain better control over data services and their profitability.

Monica Paolini is the founder and president of Senza Fili Consulting. Senza Fili Consulting provides expert advisory services on wireless data technologies and services.

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