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Wireless carriers look for new business models to support bandwidth demand

Smartphones are a double-edged sword in the mobile phone world. Smartphones are one of the few categories in the consumer electronics market that is having robust growth, but the devices lure users who consume lots of bandwidth which in turn causes problems for wireless carriers.

The problems caused by high bandwidth devices are the stuff of legend on the AT&T network as the wireless giant lays the blame for poor network performance squarely at the feet of iPhone users who consume much more bandwidth than the average phone user.

AT&T announced later the same month that it would turn to Wi-Fi to help is congested network rather than use tiered pricing to punish heavy downloaders. AT&T later apologized for the subpar condition of its network and promised to spend heavily on upgrades to support the bandwidth that its users demand.

Reuters reports that AT&T is not alone in facing bandwidth woes attributed to smartphone users. Vodafone CEO Vittorio Colao said during a keynote speech at Mobile World Congress in Spain that new business models need to be pursued to cope with the demand for bandwidth by wireless network users.

Colao's comments hinted that wireless device markers are seeing huge profits from sales of bandwidth gobbling smartphones while the wireless carriers are left to pay for the network upgrades needed to deal with the new devices and the appetite for bandwidth of smartphone users. Google CEO Eric Schmidt told attendees of his speech at MWC that carriers need to work with Google to meet the demand for bandwidth on their networks.

Schmidt said, "Find a way to say yes, not no is our thesis. We need them to go ahead and invest these enormous amounts of money at great risk and in return they need us to continue to build powerful new reasons to upgrade the connections and get a new phone."

RIM is aware of the bandwidth demands of smartphone users and has stated that phone makers need to focus on producing handsets that consume less bandwidth. RIM's Mike Lazardis said, "If we don't start conserving that bandwidth, in the next few years we are going to run into a capacity crunch. You are already experiencing the capacity crunch in the United States."

AppleInsider quotes Lazardis saying, "Manufacturers had better start building more efficient applications and more efficient services. There is no real way to get around this."

Colao had an interesting statement on how wireless carriers can pay for the bandwidth and upgrades needed to support the bandwidth demands of users. He said that the wireless carriers could charge content providers and guarantee the provider bandwidth as well as charging the user more for consuming more bandwidth.

Spanish wireless carrier Telefonica SA has also said that it was considering charging search engines for bandwidth consumed. Charging search engines for bandwidth makes some sense considering that traffic to search giants like Google make up a large portion of the bandwidth consumed by users. 

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By nafhan on 2/17/2010 4:17:41 PM , Rating: 2
Just a thought, but what kind data compression on internet traffic are cell carriers doing right now? It seems like a scheme similar to what Skyfire/Opera mini do might help with bandwidth problems.
At the cell carrier they could render and compress web pages to deliver pictures and video at a reduced resolution (and therefore bitrate) appropriate to the screen size and processing ability of the mobile device. It would require a bit of heavy lifting at the "home office" for the carrier, but could reduce bandwidth needs on the wireless side of things. Plus, there are other benefits such as not needing to install plugins for flash, silverlight, etc.

RE: Compression?
By HotFoot on 2/17/2010 4:35:14 PM , Rating: 2
That's a pretty cool idea - to scale video and images down. If I go to zoom in, then download the extra info for higher-res, but until then, less would be okay.

RE: Compression?
By StevoLincolnite on 2/18/2010 5:00:56 AM , Rating: 2
They do that here in Australia for those who are stuck on Dial-up (Depending on provider).
It basically goes through a proxy that compresses all images etc', basic web-surfing is actually rather decent on dial-up in such cases, then you just click the image for the full resolution version.

RE: Compression?
By Solandri on 2/17/2010 6:11:27 PM , Rating: 2
They already do this (though not dynamically for your screen size). I needed to check some photos I had put on my website while on the road, so I used my tethered Sprint phone to download it. Popped it into Photoshop and... it looked like crap. When I got a wi-fi connection I compared and the photo had been recompressed from a ~200k jpg original down to ~35k jpg over mobile broadband.

RE: Compression?
By CZroe on 2/17/2010 7:16:01 PM , Rating: 2
I did that and reported it on Anandtech's forums in 2003. I was tethering Sprint w/ my laptop.

RE: Compression?
By Aloonatic on 2/18/2010 5:39:23 AM , Rating: 1
I had to use my mobile phone for intarwebs for a while before the exchange was upgraded in the house that I moved to (rather stupidly without checking, assuming that everywhere in a very large town in the centre of the UK would have a service > 256k) and I found that some browsers supported an option where by it would download a compressed image bt default, but by pressing shit-A or shift-R you could download the all the images properly, or just the image to had the mouse over respectively.

Oddly, Fire Fox seemed to be the most consistent in allowing this, but chrome later offered it as an option. Not sure about IE.

RE: Compression?
By CZroe on 2/17/2010 7:21:25 PM , Rating: 2
The concern isn't their bandwidth at the head-end, it's the bandwidth being relayed at the individual towers. There, a few users casually loading webpages aren't doing much (mostly idle between pages)... it's the few users streaming video and downloading music/apps that are consuming it.

Compressing web traffic through a proxy can only help a little.

3G data plans are too cheap
By gcor on 2/17/2010 6:41:50 PM , Rating: 3
From 1998 onwards I helped develop the 3G phone network equipment and have watched the 3G network roll out for years.

I think the problem today stems from when 3G first rolled out. Back then there were no "killer" apps. At the same time, 3G phone battery life and network coverage took a step backwards. So, the telcos around the world found it hard to attract users to move to 3G.

Having invested a huge amount of money in the 3G network (including massive government licensing fees), they desperately needed to get users to switch in order to get a return on heavily borrowed investment. Also, they wanted to stop increased usage on the old networks that they were planning to decommission as increased usage on the old networks required "dead end" investment to boost capacity.

The incentive to switch was simple; Make 3G data plans incredibly cheap. Why not, especially when no one was using the data bandwidth anyway?

Roll forward to today and now they have a problem. Thanks to their incentives, smart phones, apps development and a user base, they finally have healthy data demand. However, the incentive 3G data plans mean the sale price of data is way below the cost of providing it. I.e. their plans (business model) don't match the market demand.

I think it is obvious the telcos will have to alter their plans, but no telco wants to be the first to put prices up and scare off customers. Once the plans reflect the market usage and cost of providing it, they will have the income streams to justify upgrading the network to meet the usage. Until then, it's hard to invest further.

RE: 3G data plans are too cheap
By TheSpaniard on 2/17/2010 10:36:11 PM , Rating: 4
I still think its stupid for all these companys to REQUIRE smartphone users to purchase data plans and then turn around and complain that they are actually using it

RE: 3G data plans are too cheap
By gcor on 2/18/2010 1:10:51 AM , Rating: 2
I agree they shouldn't complain about users using smart phones, they sold badly designed plans, not the users.

I think it's stupid that they sell something they can lose money on. No one remains in business by making a loss!

RE: 3G data plans are too cheap
By rudy on 2/18/2010 1:58:25 AM , Rating: 2
You think yet half the companies in America run this very model. Seems to be wildly successful to me. The sad part is it always ends up with unhappy customers. Buy cheap printer, get ripped off on ink, buy cheap phone service get ripped off if you go over anything. How many companies like facebook, myspace, all of googles products except search never turn a profit yet sell for hundreds of millions.

Mobile web redesign
By daniyarm on 2/17/2010 5:10:56 PM , Rating: 2
There needs to be a major effort to redesign mobile web pages and apps.

Navigation apps - caching should not only be allowed, but required. 8GB SD card can hold a lot of high res maps.

Webpages - download only small low res images and put a cap on video and audio streams, if media providers want their stuff to be heard/seen they will resize and compress accordingly.

Lots of other ways to bring bandwidth usage down, telco along with the likes of Google need to get together and draw up some sort of standards for mobile web that everybody can agree on.

RE: Mobile web redesign
By omnicronx on 2/17/2010 5:24:17 PM , Rating: 3
I completely disagree, thats would be going backwards. We should be getting to the point where mobile browsing is as seamless as desktop browsing.

Apps like Google Maps already cache to a point, and once again I completely disagree here. Even with an 8GB SD card, you can't really do more than make the cache amount user customizable. Otherwise what happens to all the users wondering why they are out of space, you can't expect more than a small percentage of people to know this kind of thing. Also, once you fill up your storage what then? Back to square one..

Its pretty clear what these wireless providers need to do. Get to 4G as fast as possible! They've expanded too quickly and even though we pick on AT&T day in day out, its not all their fault. You can only expand a 3g network so much before its not possible to have anymore towers within a certain area. If you have a huge amount of users in one area, and there is no space to build towers or they would be too close to each other, the carrier is basically SOL.

They need to plan their networks better, and think about increased bandwidth usage, as if its available, users will take advantage of it. You can't just assume you are going to have a steady growth. If they don't, history will repeat itself..

RE: Mobile web redesign
By Jalek on 2/17/2010 7:09:12 PM , Rating: 2
They already have the low-res versions on many pages, but not all websites offer a mobile version and the ability to browse the full version websites is something they've been marketing.

If marketing's ahead of engineering, that's far from a new thing, and if it results in a more robust national wireless map instead of stagnation, consumers win. The next question is what can we do to compel other providers to upgrade their wired networks...

RE: Mobile web redesign
By rudy on 2/18/2010 1:54:03 AM , Rating: 2
Not only that but the mobile version of nearly all websites sucks. I can hardly think of any websites I use that I do not immediately scroll to the bottom of the page and switch to standard view on my phone. This ends up nailing the network for 2x the web page every time. If their mobile web sites didnt suck it would not be a problem.

Also they should just charge for traffic but do so at reasonable rates. The problem with all US phone providers is they always offer a plan they cannot afford to honor then they try to screw you with fees or ultra high minute or bandwidth usage. Honestly what is the point in charging people 40 cents per minute? If they charged a reasonable rate per use people would not use the internet in excess for nothing as most iphone users do who have tons of useless apps feeding them everything they cant possibly have any use for.

Mobile Net Neutrality
By ThePooBurner on 2/18/2010 10:40:51 AM , Rating: 2
Colao had an interesting statement on how wireless carriers can pay for the bandwidth and upgrades needed to support the bandwidth demands of users. He said that the wireless carriers could charge content providers and guarantee the provider bandwidth as well as charging the user more for consuming more bandwidth.

This is nothing but a ploy to help bring about net non-neutrality. This man in the middle crap is ridiculous.

"On top of charging you, the end user, more for the service of accessing the internet, we are going to charge "the internet" money to be allowed to access you. If they don't pay, then you won't be able to access them regardless of the fact that we are charging you money. So essentially, i will be charging you more money for no service rendered, also known as stealing, if the people you want to hook up with won't also pay me."

RE: Mobile Net Neutrality
By Kary on 2/19/2010 11:53:18 AM , Rating: 2
Yeh, I think my cable company is also going to start charging my local channels for bandwidth use since they are what people watch the majority of the time and it is only fair that the local channels should have to pay for the excessive bandwidth use they cause after all.

It's only fair that search engines, which appear to be the major reason people pay phone companies extra for Mobile Data in the first place, be held responsible for adding all that extra profit to the phone companies. Heck, without the search engines the phone companies could probably have all that money tied up in those towers completely free of paying customers to waste bandwidth all together.

RE: Mobile Net Neutrality
By ThePooBurner on 2/19/2010 5:11:09 PM , Rating: 2
it is only fair that the local channels should have to pay for the excessive bandwidth use they cause after all

They already do that. They have to pay for an internet connection just like everyone else. They have to pay for hosting like everyone else. And, i don't know if you've ever looked at the pricing schemes for hosting, but all of them center around a set amount of bandwidth in transfers per month. So you can buy 1GB of transfer bandwidth for X amount of money, and 50GB of transfer each month for Y amount of money.

Come one people: Ignorance is allowing these companies to get away with murder. It needs to end.

RE: Mobile Net Neutrality
By Kary on 2/22/2010 10:11:28 AM , Rating: 2
(guess I wasn't to clear there)
Not Local TV Stations web sites...Local TV stations actually get PAID to attract more customers to Cable TV and thus get more people to pay for Cable TV...isn't that just weird paying content providers for producing the product that gets you customers instead of charging the content providers for eating up bandwidth?

net neutrality again.
By GruntboyX on 2/17/2010 4:09:45 PM , Rating: 2
So, wireless operators solution is charge search engines for delivery the data to there website. They want to charge both ends for delivering the data.

Now i see why Google is getting into the ISP business.

However, It was my understanding we need more spectrum not because of bandwidth limitations, but because we need more channels to support the number of devices.

RE: net neutrality again.
By Snow01 on 2/18/2010 1:28:42 AM , Rating: 3
When AT&T and Verizon are generating $13-16 billion/year in INCOME, that's revenues minus expenses, from their wireless operations alone, the last thing I want to hear is whining.

The amount of money that we pump into these companies is ludicrous. How many people have cell phones in the US? ~260 million. What's the average monthly bill? Say $40 conservatively. That's $10,000,000,000 in revenue, monthly. There's no reason that kind of money can't buy decent service. They need to figure it out before the mobile revolution takes place over the next 48 months.

RE: net neutrality again.
By gcor on 2/18/2010 2:01:41 AM , Rating: 2
I don't know how true it still is, but at about 2005 the VAST majority of ALL telco revenues (i.e. not just mobile) went to pay for servicing massive debt. The debt came from loans to pay for the government 3G spectrum fees and 3G equipment vendors. I know the 3G equipment vendors weren't making profits (I was in the line of fire of redundancies in the 3G development area at this time, while working the the biggest and most most profitable vendor). Back then the balance sheet for 3G squarely was in the red almost entirely due to the government fees. I hated those fees. The only way they could ever be paid back was by phone users, therefore the fees were really a tax, with interested added on top!

Business is too good...
By HotFoot on 2/17/2010 4:09:17 PM , Rating: 2
I know it basically makes sense because the carriers hadn't anticipated as sharp of an increase in demand, but there are few industries where increased demand causes the suppliers so very much trouble.

They should be ecstatic.

RE: Business is too good...
By DEredita on 2/18/2010 12:48:57 AM , Rating: 3
First step: Raise the early termination fees to obscene unaffordable levels.
Step Two: Lead customers to believe in some artificial shortage.
Finally: Raise customer rates and profit even more.

Bad Business Practice
By EyesWideOpen on 2/17/2010 5:19:48 PM , Rating: 2
I pay as much a month for data access on my cell phone as I do for broadband at home, which is too much. Phone company’s make you pay a large monthly service fees just for the right to access this data feature. What are they expecting for the whole customer base to get in line and wait for bandwidth slot to prevent overloading the back-haul network? The high price for cellular data should mean that the carrier is investing in their infrastructure to insure quality of service; otherwise they are just fleecing the consumer. Some carriers have gone as far as blame the customer for the problems just for using what they have already paid for.

RE: Bad Business Practice
By JediJeb on 2/17/2010 6:09:20 PM , Rating: 2
If the price for service would all go to paying for the infrastructure and operating costs then it could grow better with less price increases. Instead a lot of the price goes to subsidize the phones. If the carriers would only handle service and leave the hardware sales and support to the hardware companies then there would be plenty of money to improve the bandwidth.

Of course most people using the smartphones would hate this as they would then be paying full price for the phones upfront, but just think about it, do you get a free or low cost PC for signing up with Comcast or Verizon or AT&T wired broadband at home? This would work at improving the wireless infrastructure in two ways, the cost of the phones would be they would be purchased and added to the network at a slower pace, and free up more money to invest in the network infrastructure. It isn't a popular idea, because everyone wants the shiney new phone and superb service for next to no money.

RE: Bad Business Practice
By mcnabney on 2/17/2010 11:58:41 PM , Rating: 1
The Telecom market is too competitive. Consumers will always blame the carrier and threaten to cancel service if the carrier doesn't fix the problem immediately. Besides, modern mobile devices are all unreliable POS. They are designed to last a few years at best.
And the wireless infrastructure is a whole lot more than those towers with the antennaes. The switches, fiber, and microwaves aren't cheap and the spectrum that the carriers have to purchase at auction cost tens of billions for only little slices.

By crystal clear on 2/18/2010 8:06:17 AM , Rating: 2
Schmidt said, "Find a way to say yes, not no is our thesis. We need them to go ahead and invest these enormous amounts of money at great risk and in return they need us to continue to build powerful new reasons to upgrade the connections and get a new phone."

Yes when 30% of the USA population does NOT use/have any internet connection- not at home or work—no Facebook, no texting, no tweets, no e-mail, nothing .

Over a third of people in the United States do not access broadband at home, and nearly the same percentage "do not use the Internet anywhere," according to a new survey released by the Department of Commerce's National Telecommunications and Information Administration. That's "not anywhere" as in not at home or work—no Facebook, no texting, no tweets, no e-mail, nothing. It's a six percent drop from two years ago, but still a big chunk of America.

"The report confirms that at the end of the first decade of the 21st Century, too many Americans still rely on slow, narrowband Internet access or do not use the Internet at all," said NTIA chief Lawrence Strickling in the report's foreward. "Although life without high speed Internet service seems unimaginable for many Americans, for too many others, broadband is still unattainable."

Despite the growing importance of the Internet in American life, over 30 percent of households and 35 percent of persons do not use the Internet at home, and 30 percent of all persons do not use the Internet anywhere. Those with no broadband access at home amount to more than 35 percent of all households and approximately 40 percent of all persons, with a larger proportion in rural areas in both categories.

Overall, the two most important reasons given by survey respondents for not having broadband access at home are “don’t need” and “too expensive.”1 Inadequate or no computer is also a major reason given for no home broadband adoption.

In rural America, lack of availability is a much more important reason for non-adoption than in urban areas.

YES - "Find a way to say yes, not no is our thesis".

By DEredita on 2/18/10, Rating: 0
RE: Horsesh*t
By gcor on 2/18/2010 1:42:18 AM , Rating: 1
Yeah, I'm with you. You got to hate capitalism.

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