As users consume more and more data it’s becoming clear that the profitability of Mobile Broadband services is falling short of traditional margins for Voice and Short Message Services.

Attitudes to this problem vary amongst operators: there are the optimists, who still believe they can claim a share of revenues back from the content providers, the pessimists who are solely concerned with driving down costs and a group we will call the realists, who are urgently addressing their cost base but also looking at changing the way they deliver the new services their users are demanding.

The Mobile Broadband revolution…

The Mobile Internet has been around for more than 10 years, but it was not until the last couple of years that things really began to take off. It was a combination of factors, which together created ‘Mobile Broadband’. Firstly, Mobile Network Operators quietly began to upgrade their radio networks. 3G networks became 3G+ networks through a software upgrade, which gave them High Speed Downlink Packet Access (HSDPA) speeds of 3.6Mbps, 7.2Mbps or even 14.4Mbps. Suddenly, the performance gap between fixed and mobile had been dramatically reduced and fixed network user experiences could be emulated on mobile networks.

The launch of the Apple iPhone created a phenomenon which suddenly transformed the Mobile Internet experience from a pain into a pleasure and has stimulated demand for mobile broadband access beyond any previous expectation.

Thirdly, at about the same time, mobile broadband HSDPA USB modems (or dongles) began to appear on the market. Whilst initially targeting business users for whom the laptop could now connect them to the office, the USB modem was quickly adopted by late teens and early twenty-somethings – students in rented or university accommodation who could not get credit-scored for a fixed broadband connection were buying mobile broadband instead. Mobile operators seized the opportunity to substitute fixed broadband and intense competition between mobile operators led to a price war and some incredible flat tariff plans. So suddenly, mobile broadband was here, it was attractive and it was affordable.

…and the Mobile Broadband Profitability Gap

Mobile operators have enjoyed very healthy revenue streams from voice and short message services (SMS) for more than a decade. Suddenly they have a new challenge: how to make a profitable margin from Mobile Broadband?

The fact is that – despite regulatory and competitive downward pressure on pricing – cost structures for handling voice calls are still able to maintain a healthy margin for operators and SMS is even more profitable than voice. In contrast, the outlook for Mobile Broadband margins looks decidedly gloomy. Even the most efficient operators are finding they can only break even.

The profitability gap is compounded by traffic growth predictions, with data already outstripping voice by a factor of 2.5 to 1 (Morgan Stanley, Mobile Internet Report, December 2009) and growing exponentially, whereas voice growth in developed markets has reached a plateau as market penetration has become saturated.

In fact, by the end of the first decade of the 21st century, market penetration in western markets had exceeded 100% – just about everyone who wanted a mobile phone already had one (or more!) and, as a user, what incentive could cause you to double your monthly voice minutes? In contrast, demands for data are soaring as device usability and network capability are at last coming together.

Mobile operators must take rapid and decisive action if they are to respond to these trends and protect their overall financial performance in an increasingly competitive, complex and difficult market.

Why Adaptive Backhaul?

With advances in RF technology such as HSPA, HSPA+ and LTE increasing available bandwidth on the air interface between mobile handset and base station, the bottleneck for data throughput is increasingly shifting onto the backhaul network – the transmission network which connects radio sites to the core switching network.

Today’s backhaul networks are reliable, dumb pipes which treat all traffic the same, irrespective of its value to the customer or to the operator. Premium voice traffic, delay-sensitive video streaming content, web browsing traffic and even peer-to-peer file sharing are given equal access to network resources and consume scarce and valuable resources within the mobile operator’s core, transport and radio networks. Adaptive backhaul consists of a set of key capabilities designed to alleviate bottlenecks while saving on backhaul and core network infrastructure budgets.

Wholesale services must evolve to support Adaptive Backhaul

Adaptive Backhaul leverages Ethernet as the underlying transport technology. Ethernet has already been widely adopted by wholesale network operators offering managed backhaul solutions to mobile operators in order to drive down backhaul service costs.

But for mobile operators to take advantage of Adaptive Backhaul these services must evolve to offer the ability to offload mobile broadband traffic directly from within the wholesalers’ managed backhaul network as well as offering the option to plug in caching, hosting and optimisation as additional value-added managed services. In this way, backhaul wholesalers can increase the value of their offer whilst taking advantage of their scale and specialisms to serve multiple MNO customers.

Meanwhile the wholesaler’s customer, the mobile network operator will be able to cap and outsource network capacity growth, while, crucially, retaining control of user quality of experience and policy control.

Conclusion

The Adaptive Backhaul techniques described will add new levels of value to the backhaul network, transforming dumb pipes into smart ones, which are able to make intelligent allocations of network resource, host content and applications or select on-net versus offload traffic routing per application.

When applied in backhaul wholesale scenarios, Adaptive Backhaul will give mobile operators the best of both worlds; a low cost base driven by economies of scale and a customisable architecture to lower cost of service delivery.

So whilst the network optimists hope their users will change their ways, and the network pessimists wait for them to lower their service expectations, the network realists can enjoy lower costs per Megabit and deliver increasing value for their end users.

Daniel Kidd writes about telecom issues such as wireless backhaul and local loop unbundling

Daniel Kidd writes about telecom issues like wireless backhaul. For more information please visit: http://www.mlltelecom.com/what-we-do/wireless-links

Author Bio: Daniel Kidd writes about telecom issues such as wireless backhaul and local loop unbundling

Category: Computers and Technology
Keywords: broadband, wireless, backhaul