When Steve Jobs proudly took the wraps off the highly anticipated iPad at the end of January in San Francisco, the reaction wasn't quite what he'd experienced almost three years before at the launch of the original iPhone.
Today's fickle consumer is demanding more for less, which makes things much more complicated for providers.
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Sure, a tablet computer based on the Mac with a huge screen for watching video, the ability to run anything from the App Store and present books in many more colors than you currently get on Amazon's Kindle or the Sony Reader sounds really cool, but it's really just the other shoe dropping for beleaguered service providers gearing up to finance upgrades to wireless broadband networks designed to handle mobile data traffic.
The first shoe was the original iPhone. It may have been the most anticipated electronic device ever -- and certainly, with millions of users, it's perhaps the most widely adopted -- but the consequence of so many of the phones (and other smartphones from Nokia, Samsung, Google and others) is a strain on the world's mobile data networks.
People in San Francisco, New York, London and other cities complain about slow data service to their smartphones -- or, in some cases, a lack of coverage -- but this is just a drop in the bucket. Until very recently, the iPhone has been the exclusive property of a few lucky providers. But that luck has been a double-edged sword. With today's unlimited, all-you-can-eat data packages, customers aren't afraid to leave their phones on and burn through as much bandwidth as they can manage.
So while the likes of AT&T in the U.S. and pan-European wireless provider O2 have enjoyed exclusivity with the popular iPhone, they have also had to frantically upgrade their networks to accommodate the huge swell in data traffic.
The iPad will only exacerbate the issue as it will put further pressure on 3G networks. And over the next year, as the iPhone and most likely the iPad, become available to more service providers, it really ups the ante.
Smart device mobile data traffic hastens operator moves to 4G wireless
As providers feel the heat from various smart devices and their networks buckle under the data pressure, they'll be forced to migrate to the next generation of wireless broadband networks. Whether it's under the moniker of Long-Term Evolution (LTE) or WiMAX, 4G is being researched, planned, trialed and soon actually deployed in markets around the world.
But while providers will spend billions to add access point base stations and otherwise upgrade their network or create an entirely new infrastructure, this won't necessarily translate to a huge boost in revenue. Quite the contrary, today's fickle consumer is demanding more for less, which makes things much more complicated for providers. In a chicken-and-egg scenario, they are forced to spend a hefty amount of capital to upgrade their networks but are not guaranteed that existing customers will stick around, or that new ones will flock to them.
Partnerships for mobile network sharing address new challenges
It's going to be an interesting rollercoaster ride, and one that will get even more interesting if some recent partnerships in the provider world are any indication. In the UK, O2 announced that it would move its network operations to BT's much-hyped 21st Century Network (21CN) network. This is a really significant move, because we're talking about both fixed and mobile traffic -- not just the backhaul.
Also in the UK, Vodafone and T-Mobile have agreed to network sharing, and in Australia, Vodafone and three other operators agreed to a similar mobile network-sharing deal. The bottom line is that providers are taking radical measures to cope with flat overall revenues coupled with the massive increase in bandwidth demand by customers.
Unfortunately, the cavalry isn't coming over the hill. The only certainty is cutting costs, but this should have happened already rather than waiting and making changes and adjustments as a reactionary move to the bandwidth crunch.
For providers that waited, everything they have will have to go into the network unless they can outsource network operations and focus on running their business. It's a real gamble, and it's the choices mobile operators have made in the past year and will continue to make this year that will decide if they make it out of 2010 in one piece.
About the author: Keith Willetts is recognized as one of the world's leading authorities on communications management. As co-founder and chairman of the TM Forum, he has been the driving force behind its continuous evolution. Currently managing partner at Mandarin Associates Ltd. in the U.K., Willetts consults with companies on a wide variety of business development issues. He previously held executive positions at BT and TCSI. A regular presenter and writer, he co-authored the highly influential book The Lean Communications Provider.
This was first published in March 2010