Bandwidth to Grow 15 Times, Operating Expense 2 Times, Next 5 Years

The good news for mobile service providers is that consumer spending on mobile broadband is growing fast. The bad news is that bandwidth demands that threaten to outrun revenue while boosting capital spending and operating expense as well.

In Germany, Solon expects a 15-fold increase in data demand over the next five years. The additional network capacity required would almost double network operating expense from 12 per cent of revenues in 2011 to 23 per cent of revenues in 2016.

In terms of remedies, a move to Long Term Evolution fourth generation networks will help, as LTE is more spectrally efficient by seven to 12 times. Also, new spectrum allocations for LTE are incremental to existing 3G spectrum allocations, so LTE will add net spectrum.

But that will take some time. Analysts at Solon assume that by 2016, not more than 25 to 35 percent of the total Western European data traffic will be handled by 4G networks.

Handling of video streams also might be important. More than half of all video sessions are abandoned before the viewer reaches midpoint, Solon says.

That means “downloading” complete videos is wasteful, if half of all those videos are terminated about half way through.

In some cases, service providers might be able to changing video resolution and compression ratios, or lower the bit-rate of a video, at least when those actions can be taken without damaging user experience.

And though some object, traffic shaping can be used in ways that change user behavior or otherwise match revenue to data consumption while lessening network congestion. Usage caps, time-based tariffs, or rate-limiting after a certain download volume is reached are some basic tools for “steering user behavior” and managing traffic loads at peak usage periods.

Solon also estimates that only about 30 percent of today’s mobile usage actually takes place at locations without access to fixed-line services. So Wi-Fi offload can help, as well.