By Kyung Mun
I love sports cars - especially Ferraris. They exude beauty in design and engineering. Though I have only sat in Ferraris in showrooms, the experience always brings out a smile of excitement. In financial terms, however, the luxury sports car segment is not that exciting. Ferrari generates about $3.4 billion (€3 billion) in sales from a production of about 7,900 cars annually (partly to maintain exclusivity). This pales in comparison to a mass-production car company like Fiat Chrysler, which owned Ferrari before its spin-off a few months ago. Fiat Chrysler generates $125 billion (€110 billion) in sales from about 2.2 million cars sold annually. Despite the smaller revenue opportunity, most major auto manufacturers set aside large R&D and separate business units to focus on this high-end market. So, why would Fiat or any other major auto manufacturer bother to focus on this high-end segment when the payback is not that significant to the overall business?
Similarly, in the mobile industry, mobile operators are willing to invest millions of dollars in distributed antenna systems (DAS) and other mobile infrastructure systems at stadiums-- especially for the Super Bowl--despite a lackluster direct revenue opportunity from servicing the wireless traffic in and around the stadiums.
The wireless traffic consumed and generated in and around Super Bowl stadiums has dramatically increased in the past three years, rising from around 6 terabytes (TB) in 2014 to 26 TB in 2016. That's an over 300 percent increase in just two years! For mobile operators, an iconic cultural event like the Super Bowl is becoming a stage in which to showcase their network capabilities. An operator's worst nightmare would be a very public network failure from heavy traffic loads.
A Super Bowl stadium may be the most finely tuned wireless environment on Earth. A frustrated subscriber experiencing a network failure or congestion, seated next to a fan sharing a live video feed on a competing network may well be that one capitulating event that causes the subscriber to switch. At a highly public event like the Super Bowl, a network failure would be a major public relations blow that any operator would be highly motivated to avoid.
It is interesting to note that while Super Bowl in-stadium traffic on DAS and Wi-Fi networks have both increased, the percentage of traffic offloaded to Wi-Fi has dropped over the past three years, counter to the general trend in the market. For instance, during Super Bowl 48 at MetLife Stadium, about 53 percent of total mobile wireless traffic was offloaded to the Wi-Fi network. At Super Bowl 50 at the Levi's Stadium in Santa Clara, earlier this year, that figure had come down to less than 39 percent. It is tough to pinpoint this decline to a singular cause, such as the increasing base of unlimited data plan subscribers, performance parity, etc., but it is evident that Wi-Fi offload was less prevalent in stadiums where mobile operators and venue owners have made significant investments in DAS upgrades.
This is a key point: In this highly dense environment, people prefer LTE. In everyday life, about 75-80 percent of data is offloaded to Wi-Fi….up from about 60 percent three years ago. But in the fine-tuned environment of the Super Bowl, we see the opposite trend, with LTE taking a larger share of data.
As auto manufacturers sometimes use high-end sports car brands to cast a certain brand image, mobile operators appear willing to make the necessary investments at certain venues for similar reasons. It is plausible to believe that mobile operators view their stadium mobile infrastructure investment simply as a customer retention cost. In other words, the stadium investment spread across their subscriber base is cheaper than several hundred dollars of customer acquisition cost for each subscriber they may lose as a result of poor network performance.
While the motivations of mobile operators and venue owners for the stadium case are aligned to make a shared investment in stadium mobile infrastructure, the value of wireless and motivations for enterprise mobile infrastructure differs across the different vertical sectors. Mobile Experts recently published a report that examines the market for mobile infrastructure (small cells, DAS, and repeaters) purchased by enterprises across eight different vertical sectors, including stadiums, hotels, hospitals, airports, high-rise buildings, corporate headquarters, retail malls, and light industrial.
Stadium seats may not have the nice leather texture of Ferrari seats, but each seat benefits from the work of many engineering experts. There is one major difference: Ferrari engineers strive for people to notice the beauty and performance of their machine. Wireless engineers are successful when the end users never notice their efforts at all.
Kyung Mun is a seasoned technology strategy and product development professional at Mobile Experts LLC. Mobile Experts is a network of market and technology experts that provide market analysis on the mobile infrastructure and mobile handset markets. Over the course of his career, Kyung has contributed to the advancement of mobile communication and telecom industry and learned from colleagues at Motorola, Texas Instruments, Alcatel-Lucent, CableLabs, and a few start-ups in between.