Editor’s Note: Welcome to our weekly Reality Check column where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
Several years ago, when smartphones were beginning to gain popularity, major carriers like AT&T Mobility, Verizon Wireless and Sprint were actively promoting unlimited data plans to entice business and consumer customers. These days however, they’ve changed their tune. Lowell McAdam, the CEO of Verizon Communicatons, sees the unlimited data plan as unsustainable under rising customer demand; saying: “Eventually, unlimited has to go away.”
Unfortunately for McAdam, competing mobile carriers do not necessarily share his opinion, as Sprint, T-Mobile US and AT&T Mobility still offer various types of unlimited data plans to their customers. One reason for McAdam’s prognosis, at least as far as national carriers are concerned, is that they simply can’t keep up. Users demand faster connections and fatter pipes when working remotely to support their enterprise’s use of the cloud and their personal use of video streaming services like Netflix, HBO GO and Amazon Prime Instant Video. Both of these scenarios tax current network infrastructure to a point where it can no longer handle the growing bandwidth demands without a serious overhaul.
But who should be responsible for feeding the ever-increasing appetite for mobile bandwidth – the carriers, app developers or the customers themselves?
Mobile industry trade group, CTIA, made the decision to place the responsibility of consumption on the consumer, launching a website called KnowMyApp, which tracks the amount of bandwidth mobile applications use in order to help users choose mobile apps that consume less data. However, changing consumer behavior is difficult, and unless the penalties for data overage become considerably harsher on the wallet, it’s unlikely that either businesses or consumer customers will feel the need to change their behavior.
Another approach is to work directly with mobile app developers to promote the creation of low-bandwidth apps. These apps would lessen the strain on networks by limiting the repeat downloading of static data that is a common occurrence on mobile devices. This approach is problematic, however, because mobile app developers also have no incentive to start making apps that minimize bandwidth consumption. On the contrary, since business customers as well as consumers demand high-quality apps that have a range of features, developers are incentivized to continue creating applications that are both more appealing and more data-intensive. Additionally, the logistics of reaching out to every app developer make this an unrealistic goal.
The only party that has both the financial incentive and the ability to foster wide-ranging change when it comes to bandwidth demand are undoubtedly the carriers themselves. Carriers face conflicting requirements: deliver the best and fastest network for their users while also getting as many users as possible onto the existing network infrastructure. These two objectives are in direct conflict with each other. The biggest challenge is logistics.
Countries like Japan and South Korea have sidestepped this issue with a combination of government intervention and market factors. Their governments have invested heavily in infrastructure and continue to provide material support as their telecommunication networks grow. However, since the United States is geographically a much larger market that relies considerably less on government involvement, mobile carriers cannot rely on public-funded upgrades to their networks and must finance any bandwidth expansions themselves. As many of the major carriers don’t employ business models that allow for proactive infrastructure investment, they will face the challenge of raising the necessary funds to make these network improvements. Here are three alternatives that mobile carriers may want to consider:
–Raising prices on everyone’s data plan.
–Increasing contract length to retain customers for longer.
–Rent out bandwidth to local carriers or mobile virtual network operators.
Although carriers have options besides upgrading their infrastructure, these alternatives usually pass the costs to their customers. Increased costs and contract lengths make switching to smaller carriers like T-Mobile US, especially when they offer to pay account termination fees, considerably more attractive. However, improving services is the key to success for any carrier that wants to continue competing in today’s aggressive telecommunications market. As their new and existing customers continue to use more bandwidth, long-term infrastructure improvements, with some new outside-the-box thinking, are critical for carriers that are serious about providing top-notch telecommunication network services to both consumers and enterprise customers. The question is, are they up to the task?
Phillip Mustain has over 25 years of experience managing operations, sales and marketing for companies in the Internet, wireless and video markets. Mustain was a founder and CEO of FrontBridge Technologies, where he led the company from its inception and created the basis for the company to be acquired by Microsoft in 2005. Prior to FrontBridge, Mustain served as the COO for Wireless Holdings, Inc. where he developed the company as a high-speed wireless Internet access provider, leading to its acquisition by Sprint.
