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Mobile Capacity Issues Will Lead to Business Model Changes

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January 06, 2010

Mobile Capacity Issues Will Lead to Business Model Changes

By Gary Kim, Contributing Editor


Mobile data capacity is growing at about twice the historical rate fixed network demand did, implying that it will take about four years for mobile broadband networks to reach the same one exabyte load that the fixed networks took eight years to reach, say executives at Openwave. That means serious capacity challenges lie ahead.

 
The good news for service providers is that their efforts to sign up users for data plans are working. The bad news is that people actually use the connections.
 
The clear result is that 'operators are facing the prospect of seeing their traffic grow faster than the rate in which they can add capacity,' Openwave says. Depending on how one chooses to calculate the bandwidth difference between fixed and mobile networks, the delta between any single user's fixed bandwidth and mobile bandwidth can range from more than an order of magnitude such as 10 times more, to a couple orders of magnitude - 100 times more - to worse.
 
Physical spectrum suitable for mobile use is finite and has competing uses, so potential mobile bandwidth has scarcity value and always will.
 
Video accounts for a large part of the growing bandwidth problem. Video is becoming the dominant source of bandwidth consumption in the mobile business, as it already dominates demand on the global backbone network.
 
'Video will comprise 75 percent of all mobile network traffic within the next couple years,' Openwave predicts. But that is going to intensify financial pressure on the ecosystem, as service providers struggling to keep up with bandwidth demand - caused specifically by video - start to ask for burden sharing on the part of the providers of that content.
 
Openwave speculates that this situation is untenable over the long term. Network service providers virtually must find some incremental new sources of revenue to pay for the bandwidth upgrades. Right now it is users who pay the full bill, and many observers think business partners will, over time, have to contribute as well, much as most other media rely on a mix of subscription, advertising and placement or licensing fees.
 
There are some steps mobile service providers can take, and among them are retail pricing plan changes, shifting away from 'one price, large bucket' to tiered pricing plans based on expected consumption and possibly quality metrics as well. Openwave believes tiered pricing is coming.
 
All of the pressure created by higher use of data bandwidth and greater consumption of video are leading to new stresses in the mobile service provider business model. That inevitably means changes, both for consumers and business partners.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Stefania Viscusi







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