At the end of October, Real Wireless hosted a breakfast meeting with Bloomberg to discuss what the future holds for the mobile industry.
Around 40 Bloomberg subscribers from across a number of sectors, including financial institutions, telecom vendors, analysts and operators attended the event. The morning’s talk featured a presentation from Real Wireless’s director of technology, Professor Simon Saunders, who provided a compelling overview of what the future shape of the mobile industry will be — and what the implications of this are for operators.
The challenge at hand
In particular, the presentation highlighted how MNOs now face the dual challenge of delivering major capacity increases and improving their earnings while avoiding customer churn through price increases and data caps. This challenge is set against a backdrop of increased competitive pressures from disruptive new-style players — like Uber and Netflix — that are adopting completely new technology and business models to attract customers away from established competitors.
Growth in mobile demand over the next 15 years is a given, even if the exact rate of growth varies widely between forecasts. Ambitious predictions state that mobile demand will grow to 30 times present levels by 2030, while conservative estimates place growth at 23 times. Whatever the exact rise, meeting demand will depend on many factors — particularly how efficiently mobile operators can supply capacity.
But as growth continues to increase exponentially, revenues remain largely static, squeezing operator margins and in turn impacting capital available for investment.
Facing up to the task
To address these challenges, Simon outlined several potential options available to operators who wish to maintain current standards of mobile connectivity while keeping pace with demand.
One option available is for operators to try and reduce demand themselves by increasing prices and capping data volumes, which would almost certainly prove unpopular with consumers. Operators could also charge differentially according to need through daily or hourly ‘pay-as-you-use’ fees, or attempt to compress data to ease capacity strains.
The ideal option though would be to reduce the cost of delivery while increasing quality. This approach would involve operators combining different spectrum bands, technology (for example enhanced modulation and coding, carrier aggregation and antennae techniques) and topology (for example small and macro cells) in certain ways and to varying degrees to meet the varying levels and patterns of demand.
The importance of small cells
Small cells in particular could play a vital role in the future of the mobile industry. By offloading subscribers from macro cells in busy areas, they can offer a better throughput and quality of experience at a significantly lower cost than macro cells. Operators will find they are able to keep their tariff prices low, whilst touting the benefits of their enhanced service to subscribers.
Past Real Wireless projects have demonstrated how the benefits of small cells align with market drivers and, when rolled out intelligently by operators, can deliver a positive return on investment. Capacity-driven projects in urban areas can yield benefits of up to $48.6m, with a total cost of ownership of $29.8m and a return on investment of 136%. Coverage-driven projects, meanwhile, can save operators who lack low-frequency spectrum between $2.8m–$7.2m while achieving equivalent coverage as expensive macro cells.
Automated Wi-Fi systems for better QoE
Operators can also save money and reduce mobile capacity strains by taking advantage of automated Wi-Fi. Our calculations across 10 global cities show that operators could be $17.9 billion better off in a mixture of cost savings and additional revenues by using automated systems to enhance Wi-Fi quality of experience. This approach enables operators to offer seamless hand off to Wi-Fi and back on to the network given certain signal strength, capacity and optimisation metrics. However, the operation support system (OSS) and the business support system (BSS) must be set up to manage the traffic across the different networks.
For example, a mobile operator in New York that has 25% mobile market share could save $71m. Using those savings, the operator can reinvest in expanding capacity without having to increase prices for consumers. It’s a win-win situation.
There’s no doubt that MNOs have some stern challenges ahead — and it’s all being driven by insatiable consumer demand. Operators need to act now if they’re to make life easier for themselves in the next few years and avoid a public backlash on price increases.