After so long promoting high-speed mobile services, it seems surprising that operators could have been caught out by the surge in demand. By Sue Tabbitt
The mainstream adoption of smart phones, most notably the iPhone, has put pressure on operator networks but wasn’t this the traffic they were hoping for? AT&T in the US and O2 in the UK are just two operators that have had to issue public apologies for the resulting impact on service levels, promising to throw money at the problem.
“Previously, operators could predict traffic demand on their networks and contain growth,” explains Stuart Little, director of marketing at Aviat Networks, a provider of IP wireless backhaul services. “Even with the introduction of HSPA and the USB dongle, traffic demand was manageable, because use was primarily restricted to business users. But with the iPhone and devices like it, millions of non-business subscribers now have access to services and applications not previously available.”
This is no storm in a teacup either. AT&T now claims that just 3% of its subscriber base are generating over 40% of its traffic, as customers use maps, listen to music, share video, play web-enabled games and check their email.
For an industry that has long been in the doldrums, this ought to be heart-warming news – ie. that consumers now finally have a thirst for higher-value data services. Unfortunately, the flat-rate data charges that were designed to woo new customers and convert existing subscribers to premium price plans, have capped the immediate revenue potential. At the same time, the surge in demand has disrupted service levels, threatening consumer confidence.
The need for capacity will only increase, too, as operators move toward 4G networks, upgrading to newer cellular technologies, including HSPDA/HSUPA and LTE, says David Chambers, a product manager at billing systems vendor, Amdocs. “This will allow all kinds of devices like digital cameras, music players, video game devices, and countless other devices to use the network.” All of which is putting an enormous strain of the backhaul network.
O2 decided the quickest solution to the problem would be to align itself with BT wholesale services, in a vast managed service agreement. This will consolidate its UK fixed and mobile networks over BT’s 21CN IP-based broadband network, providing a cost-effective shortcut to higher-value revenues while safeguarding service levels for customers as their bandwidth consumption continues to skyrocket.
Another backhaul provider courting mobile operators is Verizon, whose global wholesale business offers fibre-based ethernet connectivity in some markets, including the UK. “By coming to us, mobile operators can go up the bandwidth chain without over-extending themselves,” says Larry O’Neill, ethernet services and product manager at Verizon’s wholesale business.
“The challenge for operators is that their revenue per customer is not increasing, and margins are slimmer, thanks to the all-you-can-drink data plans,” he notes. “Yet their costs are going up, with their increasing backhaul transport needs. This is resulting in mergers and alliances between tier-2 operators, as they attempt to improve their scale and command better deals.” Thanks to the recession, good deals are available, O’Neill adds. “Clearly, we want the operators’ business, so we’re being very aggressive.”
Operators going down this route will need to consider how easily their services will integrate, and how they will tackle synchronisation so that sensitive voice traffic isn’t compromised if they decide to consolidate all of their network traffic onto a single ethernet connection. While techniques are improving all the time to make this less of an issue, a popular stopgap is a hybrid solution. Here, traditional TDM networks are retained for existing traffic flow, using new, scalable Ethernet IP options for the additional demand generated by smart phones.
In some regions, ethernet services aren’t a given, however. In the Middle East and Africa, for example, fibre development is still ongoing and ethernet is not available as a wholesale product. Since fibre is costly to lease and even more expensive to install, alternative methods of connecting base stations may be needed, according to Aviat’s Little, who points to the continued merits of microwave technology. “Over 50% of the world’s mobile base stations now connected in this way,” he notes. “It meets the challenges of cost and capacity, and is quick to deploy.”
Being able to manage network traffic more effectively will be another important part of a long-term strategy. Says David Sharpley, senior vice-president at mobile personalisation specialist, Bridgewater Systems: “Operators need to plan for traffic growth, changing subscriber behaviours, and application trends, with much of the cost in managing both the traffic peaks and the patterns of data usage.” A small percentage of ‘heavy’ users will typically consume the majority of data, with the result that 80% of the traffic in some urban centres is being handled by 10% of the cell sites.
“Heavy users can be managed using policy control to ensure fair usage by prioritising traffic in real time,” he explains. “Application and subscriber policies can also be used to offer heavy users premium, usage-based plans with guaranteed service levels as well as real-time visibility of their mobile usage.”
At the same time, local cell site congestion can be reduced by combining real-time visibility of individual cell site congestion with dynamic policy control and subscriber data. “For example, customers attached to a congested cell site can be prioritised based on service plans, customer value, personal preferences or application type. They can also be offloaded to a local Wi-Fi hotspot using service control to transparently re-authenticate and re-authorise customers. Moreover, data offload can be combined with policy control to offload certain high bandwidth applications or traffic at specific times of day.”
Being able to prioritise and intelligently route network traffic is something fixed-line providers have had to get to grips with, with xDSL IP services; now it’s the turn of the mobile operators to have to differentiate between different types of traffic so that they can (a) ensure service levels, and (b) be clever with cost plans.
Flying the flag for Wi-Fi services as a quick and flexible means of extending very high speeds to mobile users is Steve Nicholson, CEO of The Cloud, which over the last seven years has evolved from a small indoor Wi-Fi hotspot provider to a substantial European wireless broadband network provider.
For Nicholson, mobile data demand is being driven purely and simply by the internet and the maturing of a generation that expects to be able to replicate what they can do at home when they are at work or generally at large. Coping with this growth requires a blend of 3G, 4G and Wi-Fi technologies, Nicholson suggests.
“Receiving email or instant messaging on a smart phone needs 50-100Kbps of bandwidth on a mobile; YouTube needs about 300Kbps, a TV i-player needs 500Kbps, and then you’ve got hi-definition and real-time TV streaming, where you’re looking at 800Kbps to 1Mbps per user. Mobile networks just can’t support that,” says Nicholson.
While conceding that Wi-Fi will never be ubiquitous, Nicholson believes that the service meets a real need, so that a user might do lower-bandwidth activities from a park bench or sitting in the back of a taxi, knowing they’ll soon be within reach of a much faster, office-like experience, whether on the train, in a café or at a customer’s premises. “Devices like the iPhone or Google’s Nexus One will look for Wi-Fi first, before a cellular connection,” he notes.
As an ‘edge’ provider, The Cloud offers wholesale arrangements to mobile operators which extend this flexible, high-speed Wi-Fi internet service right up to consumers and their compatible devices. The backhaul performance is then The Cloud’s problem.
Another option in this more holistic approach to maintaining consumer levels are femtocells - home-based cellular access points that use a subscriber’s existing broadband connection to provide enhanced voice coverage and data performance for mobile phones indoors. In Japan, KDDI, the country’s second largest mobile operator, has just announced a tie-up with US vendor Airvana, to harness the latter’s 3G CDMA femtocells and Femtocell Service Manager, as part of a solution being delivered by Hitachi.
When it comes down to it, “a service straining to perform under massive take-up is rather a nice problem to have,” according to Richard Brandon, head of strategy at MLL Telecom, which provides backhaul services to mobile operators. “Surely the real issue is that revenue growth is nothing like as fast as traffic growth.”
Certainly, working out practical price plans will be crucial, once the land-grab has settled down, enabling operators to start earning proper money again, which was their main impetus for getting into data service provision in the first place.
“So much of the cost of a network operator is fixed cost,” notes Rupert Baines, vice president of marketing at wireless technology vendor picoChip. “A successful operator gets more users, more revenue - and can afford disproportionately more investment, so can offer better service and be more attractive. In contrast, an operator with fewer customers and less revenue cannot invest so may be doomed to a downward spiral.”
Baines believes that developments like femtocells could change this, however: “They do change the economics quite significantly (opex, capex, and revenue from new services) and a carrier which uses this to change the rules of the game could profit,” he says. “But I think carriers have been quite unimaginative in their marketing and propositions. Perhaps the last big idea was pre-pay, but hopefully we’ll see someone come up with something clever.”
Phil Tilley, European marketing co-chair of the Mobile Entertainment Forum (MEF) and IP marketing manager at Alcatel-Lucent, believes flat-rate data charges won’t persist. “We’ll move to metering once there is more understanding of usage per subscriber, and the good subscribers can be separated out,” he comments. “Then we’ll see capped traffic, mobile advertising and all sorts of different pricing plans and packages. That’s when it will get interesting.” GTB