Home > Telecom > Day 3 – Mobile Web Congress, 2011, Barcelona: Operator Angst

Day 3 – Mobile Web Congress, 2011, Barcelona: Operator Angst

February 19, 2011 Leave a comment Go to comments

The weather gods were not kind to the thousands of us at the MWC this year – it was cold and rainy almost every day this week.  It dampened spirits somewhat but not as much as what operators seem to be feeling about the rise of mobile data.  I spent some time to figure out what if anything was developing in the networks since their showing this week had been upstaged by the action around devices, apps and content.

Fortunately, I spent some quality time with CXOs of network equipment makers and operators and a few things I learned:

  • Networks evolving slowly: 3G and 4G rollouts are well on their way but LTE is what keeps operators busy.   I found no surprises in their plans for spectrum, radio or base station equipment plans.
  • Continued focus on cost reductions: There was more of the usual talk about cost reduction in low ARPU countries (South Asia, Africa) where diesel continues to be over 25% of the opex per base station.   I met several companies that offer towers supported by solar or fuel cells
  • Networks are getting choked: a surge in mobile data traffic has sent capacity planners into a tizzy. Bandwidth consumption is up 4x or more over the past two years now and the network core is now being upgraded to 40G in a hurry.  One Indian operator told me that key trunks in India are also being upgraded to 40G, something I had assumed would not happen until 2014.
  • Data traffic presents a conundrum: the operators are not entirely excited about the traffic increase because the bandwidth consumption boom has not been accompanied by a corresponding increase in revenues or contribution margins.
  • Operators are fighting to stay relevant: they are struggling for ideas amid a new reality where their ownership of the customer is being questioned.  Most transactions originating on the phone get closed off-deck when consumers buy music, apps, or in-game consumables directly from Apple or a third-party.
  • Payments is the next battlefront: operators have long held the belief that mobile payments was their game to lose and this year they expressed renewed optimism about it.  However, they seem to be losing their grip on that too as banks, Visa, Amex and handset makers have all demonstrated workarounds which would cut out the operators completely.  Although there is much excitement around NFC, I think there is a battle brewing for control of the secure element in it which will be similar to what we saw when the first smartcard based payment systems were launched.   Back then, issuing banks, Visa, Mastercard, Amex, and operators all wanted to make this piece of real estate their own and refused to cede control to others for running multiple applications.  A business model for all to win did not emerge back then and that is a great challenge again now.   As a positive, the chicken-and-egg run around of mobile payment infrastructure to interoperate with mobile payment enabled devices will likely end this year or next as more devices ship with NFC built in.
  • For now operators are a bit-pipe: one thing seems to be certain, unlimited data plans are out of favor in the US and Europe and definitely headed that way in other parts of the world.
Categories: Telecom
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