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Providers Work to Profitably Meet Data/Video Bandwidth Demand

Guest post by: Andy Marken

Article Overview: Friends in the Pacific Basin laugh at us when we talk about our 4G mobile service. When we say the infrastructure is being enhanced with LTE and soon we'll have 12MB bandwidth they look at us with pity. But when they look at our "all you can eat" service there is envy in their eyes. We don't bother telling them that the everything data plans are either capped or throttled and going away...why disillusion them? Some really smart people have an idea of how to build a new bridge and get us more bandwidth. It will come to pass even if the broadcasters don't like it because...there's money involved.

Providers Work to Profitably Meet Data/Video Bandwidth Demand

"We can teach these barbarians a lesson in Western methods and efficiency that will put them to shame." - Col Nicholson, "The Bridge on the River Kwai," Columbia Pictures (1957)

Once upon a time there was a huge hue and cry over folks suffering from dropped mobile phone calls. You might remember those days like they were yesterday.

Actually, the mobile people don't care about your calls.

There's no money in that old-fashioned way of communicating. It takes so little bandwidth ($$$ to them), the meter dial hardly turns.

Okay, that's not quite true. One mobile phone isn't much; but globally, we've surpassed five billion phones connected worldwide, according to CCS Insight. CCS Insight's Ben Wood noted that's more than three times as many PCs and a helluva' lot more than tablets and ereaders.

Col Green looked over the changing landscape and said, "As I've told you before, in a job like yours, even when it's finished, there's always one more thing to do."

The phone you don't go anywhere without could be the most prolific consumer device on the planet.

They're Everywhere

The numbers are pretty amazing:

- Asia-Pacific, including India and China, has the most growth, accounting for 47 percent of the mobile connections last year.

- In Western Europe, mobile phone penetration has reached 130%.

- In Eastern Europe, overall penetration is 123%.

- Mobile penetration in Africa has reached 52%.

More cheap feature phones are sold than smartphones; but if you saw Apple's quarterly earnings - and Samsung's, HTC's, Motorola's, etc. - the smartphone is like a rocket.

Phone Transition - Mobile phone activation has surpassed more than five billion. Feature phones are still the most widely sold devices globally (much less expensive); but in the U.S., users are rapidly converting to smartphones. Smartphones lead in activation in the Pacific Basin and are increasing at a slower pace in Europe. Source - Frost & Sullivan

Look at our family's usage and the darn things are like a submarine to our budget!

Price Shift - "All you can eat" plans offered by U.S. providers are slowly being replaced by tiered usage plans similar to those in the rest of the world. While many consumers find the bundled plans expensive, they are inexpensive compared to the cost outside of the U.S. The tiered plans will make sense for on-the-go business users because the quality of high-speed data communications will increase and be part of a company expense. The increases will come as a shock to people who want to enjoy video on-the-go.

It took the phone guys/gals a long time to understand that there's a big difference between a three-minute call and 3MB download.

After years of stringing wire and building towers, they discovered they weren't in the phone business but the information/education/entertainment business and that they could offer more to people (make more money) if they added data products, since people want to constantly be in touch.

Multiple Devices - In addition to using their smartphones, users are now carrying multiple devices to meet their communications/entertainment needs. However, for millennials, the smartphone will increasingly be the device they use to access the web. Source - IDC

The netbook looked like a great addition (remember them?) but then the tablet appeared and users said, "OMG this is what a mobile everything device is supposed to be!"

Sell the entertainment hungry public - video, music, games - a new device and BAM!! there's another data plan to sell.

Change of Plans

That went over like a lead balloon in our house, so we went to The Box Store and got Wi-Fi units.

Maj. Shears didn't like the offer either when he said, "You couldn't be further from the truth!"

According to IDC's Bob O'Donnell, our decision wasn't unusual and that a data plan for every device you carry is ridiculous.

Wi-Fi is available for notebook/tablet 90 percent of the time ... at least around here it is.

Who needs to use their 3G/4G wireless service?

Not at that price!

As Col Nicholson said, "I tell you, gentlemen, we have a problem on our hands."

The mobile people got the message and it won't be long that you'll be offered a sweet big bucket plan regardless of the device you're using.

Even though folks will like the idea of that flexibility, Pew Research recently reported that 42 percent of 18-to-29-year-old smartphone owners use them mostly for web access,

Mobile Data Traffic - Around the globe, carriers have seen a significant and steadily growing move from calls to data communications. By 2015, Cisco projects 66% of the mobile data traffic will be video. Source - CiscoVNI

In addition to web surfing, folks are using these little suckers for email, listening to Pandora, watching the Hawaii 5-0 and Bones shows they missed, checking dumb, dumber YouTube shows.

The fact that a smartphone has phone as part of its name is becoming almost incidental because now what they carry - and use - is a mobile data device.

Cisco reported that mobile data traffic will double every year through 2014 worldwide.

Bandwidth Supply

Bytemobile, which monitors/sells to service providers worldwide, says the mix of data traffic is consistent across all geographic areas, including Europe which has the most avid video users. They say the average video consumption will be 43 percent of the traffic.

Watching the movie Maj. Shears commented, "The only important thing is how to live like a human being."

Worldwide Traffic - The mix of data traffic is consistent across all geographies with video becoming the dominant form. Europeans are the most avid video users while web browsing dominates in Asia. Source - Bytemobile

The impact of data - and specifically video - is one of the reasons AT&T wants T-Mobile. Not for the subscribers (O.K., that will be nice), but for the infrastructure that's already in place and can be beefed up to higher-performance LTE (Long Term Evolution).

Then they, and the rest of the providers, can quit market spinning 3G+, 4G, better than 4G and can start delivering real bandwidth (and yes, they'll put up more towers as rapidly as they can wade through local/regional red tape).

Of course, it isn't that simple because they need to optimize the video and data for transmission.

Referring to the "opportunity" Col. Saito said, "All work and no play make Jack a dull boy."

Entertainment On-the-Go - The demand for mobile video/TV consumption will grow steadily over the next few years. By 2014, Yankee Group projects there will be more than450 million viewers. Source - Yankee Group

The biggest challenge is just having a big enough digital wireless network.

Right now, we're on the verge of swamping the wireless networks:

- Mobile networks in North America are filled to 80 percent of capacity

- Global networks in other regions are utilized more than 65 percent

- 23 percent of base stations worldwide had capacity constraints

- Latin America's mobile networks will hit 85 percent average utilization within a year

The European Union has a solution none of the big providers like -- the creation of high-speed fiber networks that operate like utilities and are open to their telecom competitors.

No one is making that kind of suggestion in the Americas...nope.

Shapiro's Solution

CEA's Gary Shapiro is too smart to put forward an idea like that which would tick off way too many deep-pocketed folks.

Naw...the broadcast folks have bandwidth they aren't using right (and hey, folks are using the other pipes) so he's pestering Capitol Hill to sell off all that excess bandwidth to mobile folks.

Rationale?

- It will put billions back in the government coffers

- Mobile is the way people are going

- New technologies that will use the bandwidth more efficiently will be used

- The build-out will stimulate the economy

- It will put billions in government coffers

Imagine the cable folks as Brits as you recall Col Saito's frustration, "I hate the British! You are defeated but you have no shame. You are stubborn but you have no pride. You endure but you have no courage. I hate the British!"

Phone folks (and Shapiro's device-producing members) like the idea so they've said they're going to do what they can to optimize video for you.

Oh and BTW, you probably heard the "all you can eat" plans are being retired.

New Plan Balloons - All of the U.S. carriers have announced (or semi-announced) new capacity usage plans for consumers. At this point, none are set in concrete and they will change over the next year as carriers strengthen/expand their networks and figure out the best plan structure for all concerned. Source - Barclay Capital, reports

There's no money in fixed-pricing and the carriers can make more by charging the heavy data users (like our kids).

Maj. Clipton heard the news and said, "Madness! Madness!"

Don't get your shorts in a knot! Carriers say that 10 percent of the smartphone users are the data gluttons and most folks will "hardly" notice.

Since the carriers aren't sure where your pain threshold is yet, you'll see a lot of pricing experimentation with different speed tiers, switching traffic between 4G and 3G networks, different levels of video quality.

Don't worry, they'll work it out so you'll kinda' like it and they'll love it.

It'll be a beautiful toll bridge when everyone is done...wait and see.

As Col Saito said, "Be happy in your work."

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