Mobile Data Growth, and Offload

Without a doubt, there is a growing problem of data consumption vs. revenue: perhaps 100X growth of aggregate data vs. 2X growth of revenue (in the next 5 years). This growth in data consumption is reflected in operators’ measurements as well as analysts’ forecasts, and this trend is based on clear drivers that we can observe today.

data-traffic-vs-revenue1

This problem is so severe that it must be addressed with multiple solutions. Since the growth in cost is 100X and no single fix can deliver that reduction in total cost of data delivery. LTE is not a silver bullet that can magically solve this problem: LTE offers, perhaps a 6X cost reduction against a tide of 100X growth in use (and therefore marginal cost). Analysys recently examined the business case for LTE and found that it could cut the cost of delivering a MB of data to 1/6 of its current level: from Euro 0.60 to Euro 0.10. Since the delivery of data service is composed of many components, each component will have to be scrutinized and cost-reduced for the system to reach the necessary cost reduction.

Femtocells, it seems to me, represent an excellent method for MNOs to offload this data use onto networks where they get free backhaul, relieving them of a dominant OPEX cost of business. Femtocells may also represent a more efficient CAPEX solution for delivering radio resources where people consume it (perhaps 75% of use in their Home and Campus/Office environments).

Operators recognize this threat to future Mobile Internet service profitability, and therefore MNO profitability (as revenue shift inexorably from voice to data revenues). If your Cost Of Goods Sold (COGS) increased 100X, what would you do? Find ways to cut out fat! Assuming that the forecasts are in the neighborhood, then Femtocells are but one of many ways for MNOs to cut costs.

Data growth is expanding due to (a) broad adoption of data services by subs (espec. on flat data plans that encourage use), (b) better devices (such as the iPhone and imitators), and (c) more, attractive data services (such as YouTube, LBS, Social networking, IM, Mobile TV, and thousands of downloadable Apps).

Do you perceive the same urgency of the problem (and business case for Femtocells)? It seems that that data growth vs. cost is a major, growing issue for MNOs and for our industry to address. To further describe the situation and further the discussion, To get the discussion flowing, I have detailed the problem and some potential solutions (follow these links):

Problem: Data Consumption Far Outpacing Revenue Growth
Threat to MNO Profitability: 100X Data Growth vs. 2X Revenue Growth
Solutions for Expanding Data Usage
Femtocells: A Key Cost Reduction, via Offload

Please check out these analyses and share your comments!

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