Back To The Future

Last week, we wrote about the Second Generation Data Boom. This week, we want to focus more specifically on where this data boom is causing inefficiencies for mobile operators and how they are trying to fix them.

Mobile operators not only have to deal with the meeting ever-increasing demand for data, but also with monetizing the process. And here, things are all out of wack. The heaviest users of data are not the best paying users. The top 0.1% of data users have a flat fee tariff and bog down the network 50-60%. That is over half the network devoted to an incredibly small group of people whose payments have leveled off gigabytes ago. That is certainly not efficient. The best paying users are actually business users and professionals, who buy the latest iPhone and keep everything upgraded. They don’t use that much data but they use many services, always paying to stay cutting-edge, so their worth is also disproportional to their data use.

Data traffic is not dispersed efficiently either. Despite the flexibility offered data users by their mobile devices, the peak usage times are still clear -- they are the same “peak hours” you might remember from earlier cell phone plans you signed up for. Mostly gone are the days of peak hour pricing plans, but they are making a comeback. This is one of the ways in which mobile operators are looking to the past to help them survive in the future.

Operators are responding to the Second Generation Data Boom in a few time-tested ways. Some are looking to the past and pruning it. There are new operators willing to skip any focus on 2G and devote all their resources to building their 3G network. Some are borrowing from the past, imposing tariffs or tiered subscriptions pulled out of the playbook from last decade. They are recreating peak hour differential by placing data restrictions on those hours. Some are also hoping to better manage that top 0.1% of data users by limiting P2P during busy usage hours, while opening up unlimited data usage for P2P at night.

Most importantly however, mobile operators are looking to technology such as Wi-Fi and femtocells for data offloading. At least the intelligent ones are. The knock on Wi-Fi has traditionally been that it is more expensive (vis-à-vis data costs) to build a Wi-Fi network than to deploy a cellular network. Sure it works better, but it is more expensive! However, this is only true until a certain point - a point we are well past. At a certain amount of data, the cost to deploy a commensurate cellular network skyrockets past the cost of the Wi-Fi network. Those who have not put in place plans for intelligent mobile data offloading are now facing serious problems because of this oversight.

Oversight is one of the main stories in the mobile industry right now. Some operators were caught unprepared for the Second Generation Data Boom, both its size and its makeup. The industry must continue to look back for answers, look forward for answers and ultimately find lasting, comprehensive solutions to meet and monetize today’s data requirements.