Tuesday, March 17, 2009

The Tsunami is Coming: Mobile Operators, Brace Yourselves…

Why the use of the word Tsunami? Normally, this is a very scare phenomenon at sea. On land, we are faced with Thunderstorms, hail, wind, rain and so on. So, why ‘Tsunami’ in context of mobile broadband?  

The term 'Tsunami' comes from the Japanese, meaning "harbor" (tsu, ) and "wave" (nami, ). Source: Wikipedia. In the Tamil language, "Aazhi Peralai means “disastrous wave.” 

What mobile operators are faced with, for the next 5 years, is a series of waves when it comes to the increasing number of 3G subscribers, 3G enabled devices and laptops, application use and the enablement of video casting and photo sharing within social networks.

The first wave has already hit. Let’s call it the “Bold iPhone” wave of 2009

Last year, 30% of US consumers who purchased Apple iPhone 3G in the summer of 2008 switched from other mobile carriers to join AT&T. People want broadband and will make use of every bit in the network. In August last year, there were over 100 million 3G subscriptions out of a total of mobile subscriptions of 910.8 million in Europe (Source: Informa). It’s safe to predict that 3G subscriptions will reach 175 million by end of 2009 (iPhones , Blackberry BOLD, Android and other 3G phones).

Personally, I think the EO 2009 number will be closer to 300 million. According to The NPD Group, consumer sales of smartphones to US consumers represented 23% of all handset sales in Q4 2008 compared to just 12% in Q4 2007. By 2013, there will be 4.1 Billion subscriptions globally (source ITU). Of which 67% are 3G/3G+ capable (source: ABI).  That’s a staggering 2.7 million subscribers generating 80% of all global mobile traffic. 

Why is this scary? “A single high-end phone like the iPhone/Blackberry generates more data traffic than 30 basic-feature cell phones. A laptop aircard generates more data traffic than 450 basic-feature cell phones.” Source: Cisco Visual Networking Index (VNI) Jan 29, 2009:

Last week, it was widely reported that AT&T had network capacity issues due to heavy 3G usage in a central metropolitan location. We are talking about a few hundred to thousand subscribers congregating (imagine 60,000 people at Football game all using 3G to communicate and share video, photos, etc). Om Malik (Gigaom) predicted the impact on networks over a year ago. His March 16 post covered the AT&T network issue (See http://tinyurl.com/cn9pt8 )

The second wave: “the social broadband wave of 2010”

By 2011, we will most likely have over 1B 3G subscribers actively using multimedia to send/receive/share. In addition, 30-40% of the subscribers will watch live TV throughout the day, using mobile and/or Wi-Fi connectivity based on their location. This is reality today for some. Cable and Satellite TV can accessed vis phones and laptops (via DVRs, Slingbox and other services)

The third wave: “the TV/video wave of 2012”

Now, what happens when we have 2.7 Billion subscribers generating 2 Exabytes of usage, per month, by 2013?  We are talking about traffic doubling every year, a 66x increase per Cisco’s VNI where video accounts for 64% of all mobile traffic. http://tinyurl.com/b9berc

By 2013, the networks will crash unless something drastic happens. So what can be done?

  • Why can’t we just add more cell sites?
  • Why can’t we just add more spectrum?
  • Why cant’s we just limit the # of 3G subscribers?
  • Why’ can’t we just add Wi-Fi access points everywhere?
  • Why can’t we just add Femto access points everywhere?

The answer is ‘YES” to all of the above. But, there are restrictions.

  • Cell site costs can be as much as $500,000 in some cases. Even though AT&T is planning on spending $17 Billion on Capex this year, there are limits to how much an operator can afford to spend on network Capex, year after year. This is also why more and more operators are outsourcing management of their networks to Ericsson, Lucent, Nokia-Siemens, Huawei, etc – to reduce Capex. Of course, Opex increases but at least cost of equipment goes down. The net result is that the operators can demand better coverage and capacity from their service partners as demand for capacity increase from their subscriber base.
  • More spectrum is needed. Operators want more uniform global bands to  improve roaming across continents and to help reduce device BOM and price in the store.. Likely candidates for uniform bands for 2012 and beyond include 700MHz, 900MHz, 2.5 and 2.6GHz. Members of 3GPP and ITU are lobbying for more Spectrum from US and European regulators. From the time spectrum is awarded or freed up, it takes anywhere from 2-5 years to deploy sites and enable devices to work across the band in question.
  • You cannot limit the number of 3G subscribers, so take that option off the table (consumers have options with regard to operators)
  • Wi-Fi with 802.11n will help offload usage at home and within businesses much like Femto access points deployed strategically in suburban areas and within the enterprise. Today’s Femto products are yet not ready. Femto access points need more intelligence, interference management and scalability to help offload capacity from the Macro network to improve overall subscriber experience as they roam across the land. By 2010-11, we should expect solutions to these challenges and Femto, WiFi and Macro co-deployments will help add capacity in “3G and 4G hot zones.”

So when will the Tsunami hit?  Well, it already did with a small wave caused by iPhone and Bold subscribers. If predictions are only 50% correct, we will face significant mobile network issues as early as 2010.  If Capex money is available, 2010-12 could be good years for infrastructure vendors and mobile managed services providers.


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