The number of smartphones is rising fast, and each user will increase their data usage 700% in five years. How do operators make their local broadband business profitable, ask Jochen Dinger and Wolfgang Knospe
Demand and technology alignment, exploitation of an end-to-end view
are key for the development of an optimal broadband access strategy
How can the increasing demand for data be monetized, while at the same time minimizing investments in broadband capacity?
The long-awaited increase in fixed and mobile data traffic has finally arrived. New web 2.0-related IP services — such as social networking, VoIP, web conferencing, IPTV, video streaming and online gaming — are driving the demand for fixed as well as mobile broadband.
In addition, data processing and storage is shifting away from user devices into the cloud, bringing powerful applications to a range of fixed and mobile broadband subscribers while putting an increasing burden on the access networks.
Growing customer demand for higher bandwidths will continue to drive fixed broadband adoption in the future, especially in the underpenetrated emerging markets where millions of yet to be connected homes are poised to push a second wave of fixed broadband growth.
It is estimated that the number of fixed broadband subscribers worldwide will rise to 548 million in 2015, a compound annual growth rate of 3% from 2010 to 2015.
However, the biggest growth in data traffic will be in mobile broadband, with smartphones being the main drivers of this traffic. An estimated 400 million mobile broadband subscriptions already generate more traffic than 4.6 billion mobile voice subscribers.
Smartphone usage will widen this gap further as the average traffic per user is expected to grow by 700% from 85 megabytes a month today to 776 megabytes a month in 2015.
Broadband network capacity needs to be dimensioned to accommodate this growth, which is forecasted to result in the staggering worldwide volume of 3.6 exabytes — that is, 3.6 million gigabytes — a month by 2014.
Unfortunately the costs of expanding fixed and mobile infrastructure are often not being matched on the revenue side.
A smart rollout strategy based on the selection of an appropriate broadband access technology mix is therefore essential. But it can be a challenging task, as each technology has its advantages and disadvantages in terms of data rates, geographic density of users, type of services supported, and capex as well as opex.
Examples of technology options range from basic copper cable (ISDN, xDSL), hybrid-fibre coaxial cable (HFC), optical fibre (FTTH, FTTC, FTTN), to broadband over power lines (BPL), and wireless options such as wifi, WiMax, HSPA and LTE.
This challenge applies particularly to integrated operators, where different fixed and mobile broadband technologies compete for very limited financial resources.
As no single technology satisfies the full set of criteria given, a demand-driven broadband access strategy has to define the optimum technology mix by aligning demand, service revenues, and associated costs broken down to a local level.
However, developing such a local demand driven broadband access strategy is extremely complex. Economies of scale must be exploited, local strategies coordinated at a national level, existing resources analyzed, and the various fixed and mobile broadband access technologies thoroughly understood.
Traditional spreadsheet-based decision making is no longer suitable, instead topology-based analyses have to be applied in order to take correct account of these complex interdependencies.
Detecon’s proven development approach for broadband access strategy reflects these requirements and is broken down into five steps.
First, the existing fixed and mobile network topology, its infrastructure elements and their utilization have to be captured with a sufficient level of detail. With the help of a topology-based tool, such as Detecon’s NetWorks, geo-referenced brownfield data can then be evaluated at the street element level.
Secondly, the current and future broadband demand and service revenues are to be modelled. Data input must be at a local level to ensure the provision of realistic scenarios that allow for detailed bottom-up capabilities and scalability.
By letting current and future demand drive the technology selection and infrastructure rollout at a local level, a costly over-provisioning of resources is avoided.
Thirdly, the demand is mapped to corresponding fixed and mobile broadband services. The number of sites and devices needed to provide the coverage and capacity for the traffic demanded are then calculated. To exploit technology synergies it is important to consider both fixed and mobile rollouts at the same time.
Fourth, the results derived from mapping demand and technology are compared in terms of budget plan and fair lifetime by applying a set of predefined key performance indicators, such as net adds per technology, ARPUs, capex, net present value and discounted cash contribution.
Depending on the depth of the commercial and technical base data available, the model allows the analysis of all commercial scenarios down to street level. This involves the evaluation and ranking of alternative scenarios as well as the testing of the findings through sensitivity analyses of selected model parameters. At this stage it is vital that a holistic end-to-end view is applied to ensure a complete cost analysis and unbiased business case.
Finally, mapping of fixed and mobile demand to product groups and then to technologies allows identification of the most profitable broadband access rollout mix.
This approach ensures that all fixed and mobile broadband technologies are optimized in an unbiased manner.
Furthermore, it is fast as well as flexible and allows for the analysis of numerous options and scenarios with alternative demand and technology model parameters, therefore avoiding costly mistakes originating in the planning phase.
Moreover the geo-referenced broadband demand and visualization of existing infrastructure within a fully scalable network model with street element level detail provides a solid technical basis for network planning and deployment.
The main result is the selection of an optimum broadband access technology rollout mix according to key performance indicators such as return on investment.
Moreover, the consistent mapping of the target network in a tool environment supports monitoring and control during strategy implementation. GTB
Jochen Dinger is managing partner at Detecon and heads its telco strategies group; Dr Wolfgang Knospe is managing consultant and heads the company’s radio access and transport group