The pace of growth in the wireless industry has been astounding. In the first quarter of 2009, the US market exceeded $10B for the first time. The subscription penetration is well past 90% and mobile data usage is on the rise. While the rate of new subscriptions has slowed, the pace of innovation is going very strong. It is quite apparent that the mobile industry is going through a significant transition from voice to data. Helped by the ever expanding wireless broadband networks, release of hit devices every quarter, and the insatiable appetite to consume information and content has brought us to the surge of a data tsunami that will shake the industry to its core.
Both the information repositories and the data traffic to access them is growing at an astounding rate. By most measures, by 2010, the global codified information base will exceed 1 yottabyte or 1,000 billion terabytes. In 2009, the global yearly mobile data traffic will reach a new milestone – 1 Exabyte. By 2016-17, the global yearly mobile data traffic is likely to exceed 1 Zettabyte or 1000 Exabytes. By 2014, in the US alone, the total yearly mobile data traffic is likely to increase from 138 Petabytes in 2008 to 42 Exabytes (EB) in 2014 or by over 300 times.
What does that mean for information consumption and the resulting traffic? How do we extract intelligence out of this data without jeopardizing the network or the storage? How do we do that on a per user basis? How do we manage peaks and surges? How do we put the intelligence from the data back into the system to empower the feedback loop? There are significant opportunities in how yottabytes are managed and understood. Rather than being overwhelmed by the data tsunami, we should learn to tame the beast.
It has become a cliché to say that the iPhone has changed everything. Apple’s iconic device has had a profound impact on the ecosystem on several fronts. First, Apple again taught the industry the power of simple user experience. Second, the appstore model has disrupted the traditional storefront model. Third, once exposed and addicted to mobile way of life, consumers are not looking back. Fourth, the flat data pricing is becoming the norm for the new smartphones especially in the US market. Finally, all this means significant jump in network traffic. As the percentage of smartphone subscribers grow, so does the traffic – by leaps and bound.
The main culprit of network traffic growth is not smartphones though they have a significant share, it’s the data cards and netbooks (or smartbooks or notebooks or pick your favorite digital book). The data consumed by these devices is typically 5-10 times your average smartphone usage. While P2P (Peer-to-Peer) and video streaming have been the main reason Wireline consumption shot-up, in the mobile world it has been the browser usage and P2P on smartphones, netbooks, smartbooks, laptops, and similar devices that is contributing to the bulk of data traffic followed by streaming and application downloads.
The growth in the network traffic can be quite injurious to the financial bottom line and to the industry’s ability to maintain pace with the demand. Unless a long-term plan is put in place that addresses and manages the traffic at a very granular level, the cost incurred due to an explosive demand will become unsustainable. At that point the revenue being generated could fall below the cost. However, if the operators attack the problem using several different strategies, the growth can be managed and brought in line with the technology evolution such that the industry can take advantage of the falling per MB costs. Some of the strategies for managing network traffic growth are:
- Faster LTE (or 4G) deployment
- Aggressive Femto-Cell deployment
- Congestion Management
- Network Optimization
- Adopt Broadcast Mobile Video
- Redefine Smart phones
It is quite apparent that the current business models and pricing schemes will be inadequate to maintain the levels of current profitability. If the revenue equation stays flat with price pressure and the cost equation is only going up, at accelerated rates, at a certain point in the time graph, the cost of delivering data services overtakes the revenue being generated from them. So, new business models are needed that take bandwidth consumption into account are needed to manage the traffic especially during peak times.
Operators typically have great intelligence on voice usage but for data, the infrastructure and efforts are generally not on par. There is little understanding of what consumers are doing, which applications and services they are tuned to at any given instant, forecasting traffic spikes, etc. As cost of supporting data services exceeds the cost of managing voice services, and as the revenues from data services become more prominent than those from voice services, operators will have to pay much more attention to the specifics at a very granular level and design business models and pricing plans per the trends and forecasts.
It is clearly a very exciting time in the mobile industry. The growth has been spectacular; its resilience a model for other industries, and its promise is something that keeps entrepreneurs on their toes. Within the next few months, for some of the leading operators like NTT DoCoMo and KDDI, the data revenues will overtake voice revenues for the first time. Gradually, rest of the world will follow suit. However, this growth comes at a price that of managing growth of data consumption from billions of devices and trillions of sensors around us. To be able to stay ahead of the demand, significant planning needs to go in to deal with the bits and bytes that are on the verge of exploding. New technical and business solutions will be needed to manage the growth and profit from the services.
