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Mobile broadband is today's growth engine for wireless network operators. Even in the current economic downturn, wireless network operators continue adding new subscribers on their data plans. In fact, Verizon Wireless reported 41 percent growth in data revenue for Q4 2008, and while AT&T's overall profit was down 23 percent in Q4 2008, it also added 357,000 broadband subscribers. This is great news for wireless network operators, and the even greater news is that the growth potential remains very strong: the number of wireline Internet users continues to grow, surpassing one billion users in 2008 according to comScore1. In short, we have a "perfect data storm" in the making as all of these users are potentially subscribers of mobile broadband--as long as the wireless industry is able to deliver high-quality data services.
Paradigm Meltdown
The biggest challenge network operators continue to face is how to keep up with seemingly insatiable demand for mobile broadband. The basic paradigm in mobile wireless networks has been to have a shared data channel--a big "fat bit pipe"--in every cell site whereby all the data users in that cell site share the channel capacity. Unlike voice, for which dedicated channels are allocated, for the most part data channels (both uplink and downlink) are shared. Theoretically the paradigm works well for data networks because data is considered to be "bursty" in nature, meaning the shared resource is typically available because each user's relative consumption of it is generally quite small and fast.
However, the nature of data traffic itself is changing. For instance, a simple Internet video download from YouTube sucks bandwidth out the network for sustained durations. Peer-to-peer (P2P) traffic is the root cause of congestion in Internet Service Providers' (ISPs') wireline networks, and mobile networks are just not ready to handle the traffic volumes generated by P2P. As such, strong uptake rates of wireless data cards, USB dongles and emerging netbooks all present a real threat: P2P traffic migrating from wireline networks to mobile broadband networks. Streaming traffic, like Internet radio, is another example of data traffic that breaks the shared channel paradigm. And last but not the least, Web site content is itself becoming heavier, for the average Web page size has tripled since 2003 as both the number of contained objects and the size of those objects continue to increase2. Because of these facts, data can no longer be considered only "bursty" in nature.
To meet the growing mobile broadband data demand, two main techniques are available to wireless network operators for adding capacity:
- Increasing Spectral Efficiency: Measured in bits/sec/Hz. Long Term Evolution (LTE) promises four times improvement over its predecessor, WCDMA.
- Splitting Cells: Adding new, smaller cell sites thereby reducing subscriber density in a given cell site.
Growth in data rates far outstrips the improvements in spectral efficiency, however. For example, LTE, which improves spectral efficiency by four times, will take anywhere from five to ten years for complete network rollouts and broad consumer adoption. In the meantime, mobile broadband operators are seeing traffic growth ranging from 400 percent to 700 percent annually--and so spectral efficiency improvements are just not enough. Similarly, adding new cell sites is a costly business, and operators need to find new ways to better monetize their current network infrastructure. All of these factors help underscore the business case for mobile broadband.
Business Case for Mobile Broadband
Unlike for voice, mobile broadband's business models are complex. Continuous innovation on the Internet is driving new applications and content that captures consumers' interests. The reality, however, is that mobile operators are not the best innovators for new data applications and content--and there is no better example to prove this claim than the fact that not a single mobile operator Web site shows up in the top 100 visited Web sites. From Yahoo to Flickr to YouTube, data traffic is dominated by Internet application and content providers. The challenge for mobile operators, then, is whether they should be relegated to being mere bit pipe providers or whether there are monetization opportunities beyond just providing seamless connectivity.
One key constraint on wireless networks is that they are inherently spectrum limited; throwing more spectrum at the problem is simply not an option for wireless networks (unlike the ability of wireline network operators to throw more fiber at bandwidth problems). At times, Radio Access Networks (RAN) are also capacity-limited by backhaul bottlenecks between NodeBs and RNCs. Thus operators need to find ways to effectively manage growing data traffic in their networks, and this must be done in ways where network monetization is maximized.
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