Wednesday, June 08, 2011

#WIRELESS: "$1 Trillion in Revenue for Mobile—Not Enough?"

Mobile network operators are creating a huge market, the size of which is matched by only a few other mega-industries. With revenue on track for $1 trillion within the next five years, analysts nevertheless predict it will not be enough for these companies to make a profit. Juniper Research recently predicted that mobile network operators will grow a trillion dollar business by 2016, but surprisingly, it also predicts that if spiraling costs are not reined in by then, mobile operators will be losing money!

Called the "nightmare scenario" by Juniper Research, the surprising results come from extrapolating operator's growing costs as users are added worldwide.
In particular, as the user base expands, covering more and more territory, new methods must be found to cut network build-out as well as operating costs. Remedial action must be implemented over the next four years to head off the shortfall.
The usual suspects are to blame, according to the report, in particular the falling average revenue per user, which is conspiring with slowing growth due to local market saturation. As a result, revenue is expected to flatten over the next few years at the same time that smartphone users are creating increasingly more data traffic. That data traffic, which already doubled in 2010, will increase by more than 13 times over the next four years reaching a grand total of 25 exabytes (25 billion gigabytes) by 2015.

To meet users expectations for faster speeds for transferring all that data, the mobile network operators will need to dramatically increase their backhaul bandwidth—which costs a bundle—resulting in shrinking profits unless measures are taken now.
The light at the end of the tunnel for the large operators, unfortunately, will not be generated by next-generation technologies. But there is one exception. The one next-generation technology that Juniper Research cites as a good candidate for drastically cutting costs is offloading data channels of video content by developing Integrated Mobile Broadcast. IMB makes use of neglected TDD (time-division duplex) channels that today are underutilized by operators. Using TDD channels for broadcast video could offload data channels, thus reducing both operating costs and decreased backhaul needs.

One interesting side note in the report is that smaller mobile-network operators may in fact be better off, since they should be able to gain a competitive advantage by retaining the flat-rate data bundles that the larger operators can no longer afford to offer.
Further Reading