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Growth in Mobile Broadband

Following many false dawns, in 2007 the factors required to deliver the long awaited inflection point in wireless data growth have finally coalesced in many markets. Gross downlink data rates of wireless technologies can now deliver a user experience that customers value and are prepared to pay for. Pricing has been adjusted to near flat rate pricing, thus making it easy for customers to understand pricing and removing usage inhibitions. During 2008 the take-up of data optimised devices accelerated substantially. The combination of applications and handsets provided the ingredient that lead to the take-off for mobile data usage by consumers, notably among younger segments of the population. Content and Web 2.0 applications are stimulating interest and usage and the mobile phone business is morphing from an "ears business" into an "eyes business".

Where technology, tariffs, devices and content have come together non-SMS data spend by customers has responded. Many operators with stable or declining voice revenue now rely exclusively on data to deliver top-line growth. In many mature markets mobile packet data is the only ARPU growth factor, with voice and SMS having reached maturity.

Higher data speeds and capacity on 3G networks have led to the growth of a new market segment: mobile broadband connectivity for PCs. The emergence of low flat rate pricing lead to a rapid growth in data traffic driving incremental capital expenditure, in RAN, backhaul and backbone capacity.

The growth in mobile data is a certainty. Demand, revenue and mobile packet data traffic will grow substantially in developed and emerging markets. However, uncertainty remains over timing and the data traffic volume. In short, mobile operators are with regards to data at the point where they were with voice when GSM started to take off. Mobile operators now have to invest to capture the data revenues. Often the business case includes preventing the loss of the highest ARPU voice customers to competitors.

Technology choice and timing is difficult and are complicated by the refarming of GSM spectrum. Operators must ensure that they evolve with the technology eco-system. The multiplication of bands (700 MHz, 850MHz, 900 MHz, 1800 MHz, 1900 MHz, 1700-2100 MHz, 2500 MHz etc), with different versions in different regions and technologies within bands (EDGE, UMTS, HSPA, HSPA+, LTE) complicates the choice as to which technology to deploy when and in which band. Not only does it matter what spectrum is acquired but also whether the block sizes are wide enough (wider than 5 MHz) to take full advantage of the capabilities of LTE. There are commercial implications with regards to handset ranges to attract customers and headline access speeds (fastest speed claim), freeing up spectrum for technology migration (e.g. refarming to deploy HSPA in 900 MHz), roaming and of course the network cost per bit.

Given the growth in mobile broadband traffic, a small percentage of cell sites will encounter capacity issues. Coleago’s research and modelling of forecast mobile data traffic indicates that the need for spectrum is driven by a limited percentage of mobile base station sites. These are sites which are located in in the most dense traffic areas. In a congested mobile broadband world "capacity is to data what coverage was to voice”. Market congestion transforms the mobile broadband industry from a buyer’s market to a seller’s market and spectrum is king.

• Will mobile broadband adoption and usage continue to grow at current rates?
• When, if at all, will the market become capacity constrained?
• Is lower-band spectrum needed to enhance in-building coverage and/or to extend the geographic footprint?
• What will happen to existing GSM spectrum holdings?
• What about future spectrum awards / auctions?

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Title: Author: Date:	The Growth of Mobile Broadband Stefan Zehle 07/2009