Mobile data traffic will increase at 70 percent a year in developed markets between 2011 and 2015, but mobile data revenues will increase by only 17 percent, analysts at Research and Markets estmate. That isn’t news.
Neither is it news that average revenue per user from new data services is falling short of compensating for declining voice, and soon, messaging revenues. The issue is what mobile service providers can do about that situation.
The only way to sustain a profit model against this backdrop will be to reduce dramatically the cost of delivering mobile data and increase capacity, Research and Markets argues. Analysts estimate that upgrading to Long Term Evolution will provide about 20 percent of the solution.
Some might argue even that will be sufficient. The real long term problem is that capacity demand is growing much faster than service revenue.
That noted, it might be argued that Long Term Evolution will “fix” about a fifth of the problem of demand growth. The other elements will require, at minimum, management of demand.
The almost unavoidable conclusion might be that the additional 80 percent of the solutiion must come from managing the network demand and creating new revenue sources.
In order to retain the same level of customers and revenues, carriers will need to invest about $14 billion in new networks worldwide between 2011 and 2015. The major investment will be upgrading the air interface to HSPA+ and, especially, LTE (Advanced), but these upgrades alone will address only 20 percent of the estimated additional capacity that will be needed by 2016.
Networks also will have to b e built in a different way, both architecturally and in terms of cost, Research and Markets argues.
Smaller cells, offload to Wi-Fi networks and new backhaul also will parts of the ultimate solution.
But one might argue that no amount of network engineering decisions will fix the revenue problem.