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Monday, 7 March 2011

Honey They Shrunk the Broadband!


Broadband on our Mobile phone – like WOW! I still remember accessing the Internet through a 64kbs line, now we have mobile operators offering internet at speeds of up to 20Mbps (and in some cases more!) - well at least they were!
Mobile Broadband has become the latest craze for all parties:
  • Operators have latched onto Broadband as the source of new wave growth to offset the slowing growth of their SMS and MMS platforms.
  • Mobile manufacturers can’t churn out mobile devices fast enough to meet the take-up for the latest gadget, tool, and function that end users are screaming out for.
  • Content providers are also realizing the opportunity to drive new wave revenues, across what is very much an open platform with few controls.
  • The working man/woman now is able to have a virtual office with all of their business tools and applications coming to them rather than having to find a Internet Access point.
  • Generation Z – who have finally found a way to surf the web, chat and socialize without their Parents looking over the shoulder.
Interestingly enough it is the Mobile Operator who is increasingly becoming the frustration of all the other groups. With demand for Broadband access accelerating faster than what many Operators, Analysts and even regulators had expected!
The dynamics have changed though, the business cases that many operators used to justify investments were developed using a similar traffic growth pattern as had been seen by the SMS traffic forecasts. This approach would seem sound particularly given the fact that SMS was initially not predicted to grow at the initial rates that it did. However Mobile Broadband has now become second nature to many businesses as well as Generation Z subscribers. The outcome being that Mobile broadband traffic has grown at more than 10 times the forecasted figures. This development is placing operators in a complex predicament; budgets which were originally allocated for use through a 5 year return on investment expectation are being utilized within the first 6-12 months of launch, with the result impacting operator cash flows, market credibility and customer satisfaction.
Of course it is easy to look at the Mobile operator and claim they should have simply anticipated for this, but you need only to look at the demands of Internet based service providers and they are clearly contributing to the challenge. The view of some Internet providers is that Mobile operators should provide open networks with no control on content OR utilization by any user, offers significant risks to viable commercial models. This is basically impossible, capacity is not infinite, and with this approach the costs for subscribers would go through the roof, because despite all the promise of advertising, content adaption the subscriber will ALWAYS pay.
Therefore it is necessary to completely reassess the model for internet usage for Mobile networks. Internet based providers need to understand that their relationship with Mobile operators is Symbiotic and the Operators as well as the internet based providers that are most likely to succeed will be those that embrace this relationship and seek to leverage off of each others strengths while trying to highlight their risks and challenges.
Operators should consider a positive re-enforcement model similar to that being used in some European countries in driving environmental policy. Consider an approach of penalty and reward to the environmental policy, if you drive a car which is generating pollution above a certain level then you will pay higher road tax, if however you  are driving a hybrid car which produces less than the average pollution per car then you will pay less tax. Similarly for utilities in the home, if you use less than the average for your household or make use of alternative energy sources such as Wind and Solar then you will receive credits back from the government through your utility bill.
A comparable model could be used for Mobile Broadband, if you are using the broadband connection on your mobile during peak hours (say from 8am to 9am and from 5pm to 7pm then you will pay a premium for excessive usage above a determined average, however if you use your mobile outside of these hours then you will receive credits to your mobile bill. Traffic across a mobile network is similar to any network in the world today, there are times of peak usage which stretches the capacity of the network and likewise times of utilization where there is minimal usage, the challenge that operators face today is how to encourage that balance without impacting the user experience. Business users for example would see the value in knowing they can access corporate applications, email and voice calls during peak hours and would most likely be willing to pay for it IF there was an SLA determining a certain performance (I know I would!). Likewise for the non-business users, if you knew you would pay less for using your mobile broadband outside of these peak hours and that the user experience would be better, hence it is likely you would be more willing to actually
New market competitors want “Free of Charge” open networks, whilst Operators want to charge for content and services which they feel they would traditionally have offered themselves. The needs of each group are unique BUT interdependent, Internet based providers can get greater access to the end user if they accept that there must be some revenue sharing on content and services provided through the operator. Likewise Operators need to recognize that through virtualization and increasingly through globalization, the physical distance between the provider of services and the consumer is less relevant and that in order to succeed an ecosystem of partners will be crucial to their future success.
Clearly there is no singular solution in balancing the demands of the various stakeholders in Mobile broadband. The first step however must be to communicate and engage with the ecosystem around you to ensure that the old formula of 1+1 really does equal more than 2, otherwise I fear that internet based Providers and Mobile Operators could be headed for a new Internet Bubble the likes of which we haven’t seen since the late 90’s and early 2000’s. If a balance cannot be found the result WILL be out of control network costs, Content increasingly inaccessible, and a disillusioned customer base, resulting in an increasing likelihood of some operators and internet based providers over stretching and facing acquisition or bankruptcy as investors realize their investments are increasingly at risk.
So Honey, yes they are Shrinking the Broadband, HOWEVER through partnership and acceptance of the need for positive reinforcement we can actually achieve an improved user experience and more importantly greater acceptance of Mobile broadband from the wider mobile demographic which MUST be the one goal which both Operators and Internet Providers can agree on … right?

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