Operators suffer data network indigestion

For years, mobile operators have been attempting to migrate users to new revenue-generating data services. It is an irony, therefore, that many of those that have been successful are now suddenly faced with mobile data networks that are approaching full capacity. One of the most high-profile firms to admit to the problem is US number-two AT&T, which earlier this month said that mobile data usage was at such a high-level that it was beginning to affect network performance. Telefonica’s O2 UK was another to announce recently that unprecedented mobile data usage had driven it to embark on a network upgrade worth "hundreds of millions of pounds" to meet demand. To demonstrate the new scale of bandwidth required, O2 noted that watching a YouTube video on a smartphone can use the same capacity as sending 500,000 text messages simultaneously.

In both cases, the operators pointed to users of top-end devices such as the iPhone as being responsible for the explosion in usage; although it didn't note any specific devices, AT&T - the exclusive iPhone distributor in the US - said that 40 percent of AT&T's data traffic came from just 3 percent of its smartphone customers. What is gradually being acknowledged by mobile operators in such positions is that the current prevalence of "all you can eat" mobile data models is largely responsible. Therefore, in 2010 we forecast that operators in highly advanced markets will begin to return to some form of per-megabyte or capped mobile data pricing in a bid to curb what they deem as "excessive" usage. In markets where consumers are well-used to "all you can eat" tariffs, a return to metered usage will prove controversial.

Meanwhile 2010 will be another year of poor 3G network coverage in developed countries as rural areas will largely remain unconnected and the relevancy of 3G as a mass market solution will be questioned. Large operator groups will feel the heat as competition from new local 3G entrants will increase and we can expect more network sharing agreements to settle some of those challenges. In contrast, fast growing markets (especially India and China) will drive overall 3G growth as operators are investing in attracting demand and developing users’ appetite for data consumption.

(This article is part of a series of predictions for 2010 from the GSMA Intelligence team.)