Speaking Engagements & Private Workshops - Get Dean Bubley to present or chair your event

Need an experienced, provocative & influential telecoms keynote speaker, moderator/chair or workshop facilitator?
To discuss Dean Bubley's appearance at a specific event, contact information AT disruptive-analysis DOT com

Thursday, November 13, 2008

Mobile Broadband - the cracks are starting to show

Over the last 2 weeks, I've encountered a steady stream of indicators to suggest that the mobile broadband market, and especially 3G USB dongles, might be starting to overheat.

The problem is that operator and retailer marketing departments have suddenly found a new source of revenue, and are engaging in a massive land-grab to sign up new customers, roll out new propositions, and offset declining voice revenues as we go into recession.

But I'm starting to hear some creaks. I initially missed this article, about an increase in the return rate for 3G dongles which had been sold "over-enthusiastically". I've noticed a distinct uptick in marketing hype, especially around headline speeds for HSDPA. I've also noticed a distinct lack of warnings about the fact that coverage is patchy, especially indoors.

I suspect what's happening is that the market has shifted from people like me, who already have ADSL and use their mobile service as an adjunct when they're out (and typically out in areas with good coverage like airports or cafes with big windows). The customers coming onboard now are those who want to use the products at home - perhaps instead of ADSL/cable, and perhaps in buildings with a couple of walls between their room and the outside world. Unsurprisingly this makes for unhappy results with 3G at 2.1GHz.

I've also noticed slowing speeds on 3's network in central London - although whether that's because of capacity limitations or throttling of certain apps (I really notice it on streamed audio) is hard to tell.

But above all, the alarm bells have started to ring with the rate at which network capacity is being apparently used up. It was only about 6 months ago that I heard a presentation refer to an operator that had "fired up a second carrier", ie had filled up the initial 5MHz chunk of their 3G spectrum, and had started using another. Then I spoke to a large vendor a few weeks back, who said they knew of a few places where people were on their 3rd carrier.  And then another last week who mentioned somewhere they had heard about a 4th carrier - which is apparently outside the original UMTS specifications.

So given that most operators only have 10MHz or 15MHz paired allocations for 3G, it's no surprise to see the panicked interest in femtocells, 900MHz refarming, 2.6GHz auctions and various approaches to adding or splitting cells. LTE offers the chance of some more headroom too - but only if you've got convenient 10MHz or 20MHz chunks of decent spectrum spare. As if. The problem is that none of these is going to be ready for prime-time in most markets in 2009. And anyway, the backhual is still another bottleneck for many operators.

I'm predicting that next year is going to see some fairly ugly examples of mobile broadband "capacity crunch". And given that capex budgets are going to be a bit thin, I reckon we'll see quite a few more dissatisfied customers. The problem is that the €10 flatrate genie is out of the bottle, and it's going to be very hard to step up the prices now.

Another open question is how this will start to impact the useability of all those nice new smartphones & broswer/widget frameworks that are starting to get traction as well.....

Last point to raise, that I'll tackle in another post soon..... what does all this mean for upcoming spectrum auctions in 2.6GHz next year? Lots of capacity, but auctions at exactly the wrong time (hmm, shades of 2001 again?). Will the auction-tuned game theorists controlling the bidding remember that 2.6GHz and bricks/concrete don't always make a happy combination, I wonder?

14 comments:

vinnie said...

Dean, the hyped up 3G US market

http://dealarchitect.typepad.com/deal_architect/2008/11/telco-bait-and-switch.html

Davide said...

I do not understand the point of this article.

It is not a surprise that the existing spectrum will not suffice to mobile broadband needs. That is why LTE has been designed to operate in new frequency ranges, up to 2.6GHz and 20MHz bandwidth.

Also, it is not a surprise that the backhaul needs to be upgraded. Operators knows that. If the average cell throughput increases, then the backhaul capacity needs to be upgraded.

I would not call this "cracks", it is not something that was not foreseen.

Dean Bubley said...

Davide

The "surprise" is that supply of capacity is outstripping demand now and in 2009. The current 3G networks have gone from empty to almost-full in just over a year.

LTE is not ready for deployment yet. Spare frequency bands are not currently available in most countries. Femtocells still have teething problems, and obviously need fixed broadband anyway.

And based on the current curves, even LTE and new frequency bands won't help that much anyway - maybe another year or two of traffic growth at the current rates.

And in any case, upgrading to new technologies, bidding for new spectrum etc. is really not ideal in the current economic climate.

There will be some interesting meetings between CFOs and CTOs in the next 12 months.

Dean

Dan said...

I wonder if Vinnie would have been so annoyed if his Vz mobile station had simply (and seamlessly) connected to the local Wi-Fi, provided a satisfactory connection, and then seamlessly connected back to the Vz network when out of the Wi-Fi range.

There is lots of wireless broadband capacity out there, and there are standard methods for securing communications between the handset and the serving operator. Do we really care if it's Vz's EV-DO or the coffee shop Wi-Fi that connects us to services and to the Internet? Give me the best available wireless service - right here, right now - and leave it the operators argue over cross charging.

Having continuous coverage, indoors and out, for any location from one operator? That is a service worth paying for.

vinnie said...

Dan I would love for it to be seamless - and for telcos to not "slice the bologna" - charge to the 3G and wi-fi and modem access and more services and fees

also yes, when folks are paying more for 3G moving them down to the commoditized wi-fi is as the title of my blog said - bait and switch.

Davide said...

Dean,

Network traffic due to mobile broadband is strongly growing, yes.

Operators know they have to upgrade their networks, but they have to start promoting the new services now to get market share, before and while capacity is being upgraded. They are going in this direction. In this while, they limit capacity usage with the customers hated limit of X Gigabytes/month.

Could you please point me out the reports that state that:

"The current 3G networks have gone from empty to almost-full in just over a year."
"And based on the current curves, even LTE and new frequency bands won't help that much anyway - maybe another year or two of traffic growth at the current rates.
"

Martin said...

Hi Dean,

I am not quite as pessimistic concerning the current load of 3G networks. In the past 4 weeks I entirely used 3G as my sole Internet access for PC and mobile for all applications including VoIP over Skype and SIP. I am on the phone using VoIP between 3 and 4 hours every day and my weekly data use is about 1GB (both uplink and downlink). In those weeks, I have used the O2 and Vodafone networks in Germany, A1 in Austria and Wind in Italy in both big and small cities. I am connected day and night but under no circumstances have I yet experienced a shortage of available bandwidth. In many cases it is quite obvious that the base station is only upgraded to 1.8 MBit/s or the backhaul is not dimensioned for full air interface speed. Looks like they don't need it yet. I have also noticed that some core networks at times are a bit unstable. But capacity at the base station itself is still o.k. Especially Italy and Austria are very developed 3G countries with lots of data users so when the cracks appear (and I have no doubt they will at some time) I think they will appear here first.

There is only one 3G network I know which has a very bad performance over many months now, and that is 3 in the UK. I've been in London several times over the past several months and whenever I tried their network was abysmally bad. Also, their "free" roaming in other 3 networks (e.g. Italy) is not worth a dime, delay times and packet loss times make you wonder how they could possibly and consistently screw up so badly.

Concerning the 4th carrier I find that a bit odd. Most operators in Europe have only been able to secure 2 carriers in auctions, some 3 but I haven't seen one that has gotten 4. Which one have I overlooked?

I'd really be interested in the percentage of base stations that have been equipped with a second carrier. I would bet it's only a small number.

Based on some numbers from Sweden, I've made some ballpack estimates myself on when I think we might see things getting tight:

http://tinyurl.com/688dbl

So both based on my experience in many networks over Europe and some calculations I don't think we will see cracks in 2008 and 2009 in networks of operators who take their job seriously.

Cheers,
Martin

Ram said...

Martin,

Your post on mobile broadband in Sweden (which followed my original post) assumes that all traffic is distributed equally amongst all the base stations (which is not quite true). I am assuming more a 80 to 20 rule. 80% of traffic goes through 20% of base stations. I am not sure how your conclusions would change in this case.

Martin said...

I Ram,

I accounted for this in a way by doubling the calculated value. It would be really nice to find out what the traffic distribution is in reality, because as you say, is is surely not equally distributed. But for those areas with higher traffic, as Dean pointed out, you can deploy a second and potentially even a third carrier and you can also densify the network itself by putting more base stations in areas of higher traffic. So all in all I think my rough assumptions based on the experiences I collect every day by using several 3G networks in hot spot areas are quite o.k.

Cheers,
Martin

Dean Bubley said...

(Sorry for the delay in responding to commenters - I've been travelling & hectically busy the last few days)

Davide: "Could you please point me out the reports that state that: The current 3G networks have gone from empty to almost-full in just over a year."

I'm not not quite sure what sort of "reports" you are referring to. The comments were made based on my own discussions with various people in the industry, coupled to my expectations of future demand growth for mobile broadband capacity.

Martin - I agree that at the moment, networks are still relatively robust, most of the time, in most locations. My reference to "the cracks showing" is somewhat forward-looking, given that demand growth from laptops, iPhones and so forth is showing no signs of flattening.

The issue is that the projecting out the current seeming exponential growth in traffic gets very uncomfortable. I'd expect that the 2nd carrier will take less time to fill up on most networks than the first. And the 3rd to take less time than the second. Add in the risk of sudden spikes because of new applications, and I think the best word is perhaps "fragile" rather than "cracked".

The 4th-carrier network is in Japan, not Europe.

Another variable is femtocells - which could certainly help to add capacity in the long term, but which may require use of a dedicated carrier in some scenarios.

I think your Swedish example is interesting but may be an underestimating "busy hour" at 233 MB / base station / hour. My own experience with (say) sitting in cafe listening to streamed Internet radio while I work, draws about 50-80MB per hour on my own. And in a couple of others doing the same (or worse, watching BBC iPlayer), others on FaceBook/YouTube, plus a bunch of iPhone users with Google Maps, and I can quite easily imagine hitting 500-1000MB per hour per base station.

I agree with the 80/20 split on base stations vs. traffic. But the problem is that also probably maps to 80% of the customers living in the 20% of congested cells. Worse case is probably going to be central urban areas with lots of students, plus lots of cafes & business visitors. I live in central London within 500m of Westminster University & London Business School, so I suspect I'm close to the worst-case scenario!

Dean

BBusyB said...

Well, It was to be expected, if you paid attention to the Massive oversell of 3G dongles over the last few months.

A lot of the People pushing them were not only had little knowledge, but were more often then not making unrealistic promises.

After all, In most parts of the uk, the Slowest Broadband speed nowadays is close to 2MBps, and while the actual may be slower, 3G coverage in most areas can barely provide half or a third of that speed.

In areas where you don't have the fastest broadband speeds, you also probably don't have a good 3G coverage, if at all.

Also, from the looks of it Networks were not actually expecting people to actually use the bandwidth, perhaps expecting usage patten to be similar to those of DSL or Cable, where most people don't really make much use of it. They may have ignored the fats that most people who may get a 3G dongle will probably be young and Media Savy to a certain extent, and while perhaps not very technical will use Online resources like You Tube, facebook, etc which can use up a surprising amount of bandwidth

Davide said...

Dean: "I'm not not quite sure what sort of "reports you are referring to. The comments were made based on my own discussions with various people in the industry, coupled to my expectations of future demand growth for mobile broadband capacity.

Martin - I agree that at the moment, networks are still relatively robust, most of the time, in most locations. My reference to "the cracks showing" is somewhat forward-looking, given that demand growth from laptops, iPhones and so forth is showing no signs of flattening."

Given the motto of your blog "don't assume", I was just trying to challenge you (in positive and constructive way) to know whether your opinion was based on objective or subjective data.

Based on my discussions with operators, my impression is that they are happy to see traffic in their network growing after so many years of under-utilization. Discussions to upgrade capacity is ongoing as they update their traffic forecast.

Again, this is the result of limited amount of discussions. Actually, It would be good to have an objective study about the current utilization status of operators' data networks.

Martin said...

Dean,

Thanks for the reply. Another piece of interesting data in the report from Sweden is that they expect that less 3G dongles will be sold in the next year compared to the year of their study. Looks like they predict the early phase of saturation.

The unknowns then are if current users will over time user more data (I'd say yes, that's likely) and if the user type will slowly change over time. With prices falling, more people will get 3G access as with a lower price it makes sense to use it even if only required sporadically. So in effect these new users might use less data than the early adopters.

On the other hand, the new users could also be students, etc. who could not afford 3G so far, now can and bring higher bandwidth demands with them.

We'll see :-)

Cheers,
Martin

Dean Bubley said...

Yes, there are loads of variables in play - new dongle sales, embedded-3G notebooks, iPhones and other devices with good data applications, new customers, old customers using more data for new applications, upgrades of existing dongle users to higher speeds or larger bundles.....

I suspect as people get more familiar with mobile broadband, they'll start using it for more applications, or new "optimised" ones will spring up.

Should be interesting in 2009....

Dean