10 Dec 2010

Has Mobile Data Been Overhyped? - The State of the Market

Our Editor Ian Poole talks to Stefan Zehle, CEO of Coleago Consulting about the imminent LTE mobile data explosion, will it occur and in the ways people expect.

With LTE already launching in some countries, and mobile data predicted to rise, some people are asking whether the need for mobile broadband has been overstated - has mobile data been overhyped. Will LTE follow the same route as the initial offerings of UMTS WCDMA and not meet a real need?

To find out the answer to this, our editor, Ian Poole talked to Stefan Zehle, CEO Coleago Consulting - a company that provides telecoms consulting, advice, support and training to companies, investors and regulators in the telecoms, media and technology sectors.

Where is the mobile industry now?

Talking to Stefan we discussed first where the mobile industry is at the moment. With the global recession as well as new technologies moving forwards, it is good to have a view of the current situation.

Stefan Zehle said: "Currently there are many standards out there in the mobile industry - they start with GSM and progress through GPRS, and EDGE to UMTS WCDMA and on to HSPA and HSPA+ before starting with LTE. In some areas, of course, other standards such as cdmaOne and CDMA2000 need to be accommodated. All these standards will need to be addressed as phones or handsets will need to cater for a wide variety of them as a fall back when coverage of LTE is not available."

"It is also necessary to remember that there are also issues with frequency allocations - these are quite disparate even for GSM and UMTS. The situation is even worse for LTE where the additional spectrum, often coming from the digital dividend, is not the same around the globe."

"All of these factors will make global roaming increasingly difficult. However roaming is now taken for granted and must be possible for LTE to be successful."

Mobile data explosion

I mentioned that many people are talking about a data explosion with traffic increasing by twenty five to thirty fold between 2010 and 2015. I asked Stefan what he thought about this.

Stefan replied: "These figures are actually irrelevant. It is not just the overall level of data traffic; it is where it is and what it is that really counts. The figures need to be viewed on a case by case basis, not a global estimate as different areas are at different stages of development and they all have different requirements."

"Take the example of many areas in Africa. Currently there is no fixed line coverage at all, so as people start to use the Internet, there will be a huge level of growth. Also you need to look at the distribution of the traffic. If all the usage was spread out evenly over the globe then there would be no need for LTE. But this is not the case. Large cities such as Hong Kong, London, Chicago all have very high levels of usage, including data usage - this is indicated by the very high price recently paid for a new Hong Kong Licence."

"Although the global increase of twenty five to thirty fold is important, it is the data traffic density that is more important. This not only affects the radio access network, but also the backhaul capability requirements as well."

Mobile revenue predictions

Next we looked at the revenue predictions for mobile networks and we discussed how the issues associated with this need to be addressed.

Stefan commented: "You have to remember that there are many costs associated with running a network - not all that you may think. For example in a base station, two thirds of the capex cost are not directly radio related - only a third comes from the transceiver itself, the rest arises from the shelter, the mast, cabinets, and the like."

"For the operator, the key metric regardless of location for revenue is ARPU - average revenue per user. In Europe where the market is quite mature, ARPU is quite flat, but it is found that the proportion of revenue from data within the overall amount is increasing - voice ARPU is actually decreasing. There is an increase in some cases though, but this generally comes from the increased use of laptops. In general the users are now getting more for their money."

"In the emerging markets the picture is very different - many people have money but no connectivity, so connectivity is at a premium. Also some people are moving from DSL to mobile because DSL is not widespread and can be expensive, so they are moving to mobile connectivity as the best option."

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