Mobile Operators Struggle With Data Overload

Mobile data usage will continue to grow exponentially in Western Europe and North America, as smartphones are adopted into the mainstream and 3G technology spreads globally – but operators are still facing trouble growing their revenues.

According to a report by ABI Research, mobile data use in Western Europe is expected to increase at a compound annual growth rate of 42 percent from 2009 to 2015. Meanwhile, usage in North America will grow 55 percent during the period, with the the average user expected to consume 159MB of data in 2010.

“Mobile voice has already been surpassed by mobile data traffic on some networks, and this trend will only accelerate,” said ABI Research wireless analyst Bhavya Khanna. “This boom in usage is driven by the rapid adoption of smartphones in these markets.”

Revenues capped

However, the explosion in data traffic does not mean a corresponding rise in data revenues for mobile operators, warned ABI, as the popularity of unlimited or fixed price plans puts a limit revenue even as usage grows. This presents a challenge for operators as they look to manage the demands on their networks without a corresponding increase in income.

UK mobile networks have already been struggling with this problem, with many being forced to scrap their unlimited data plans, in the face of traffic overload from bandwidth-hungry smartphones. Mobile operator 3 was the latest to scrap its unlimited data plan in July, following similar moves by O2 and Vodafone.

According to 3 chief executive, Kevin Russell, use of the term “unlimited” to describe data packages is misleading, as it does not reflect the reality of the market place. “One of the dumbest things I’ve done is talk about ‘unlimited’ data when it’s not,” he said.

O2 also claimed that its new capped data plans, announced in June, were more “transparent” and reflected changes in people’s behaviour. However, some O2 customers were disinclined to agree, staging a mass protest encouraging users to consume all of their mobile data allowance on a single day, to express their anger at the change.

Managing data traffic

The risk of mobile data outages has been well publicised over the last year. Analyst firm Informa warned in October 2009 that mobile data traffic is set to increase 25 fold by 2012, and said that mobile operators needed to take action in order to prevent imminent data traffic jams.

O2 is only too aware of the problem of network overload, after it suffered embarrassing network failures in London over the Christmas period. The operator was forced to admit that the crash was caused by the bandwidth strain from the increasing use of smartphones.

Commenting on the news, Steven van Zanen, SVP marketing for mobile broadband at Acision, said that additional revenues for mobile data and related services are essential for the sustainability of the mobile broadband business model.

“To truly win the data versus revenue race, operators need to control cost through targeted data compression and by setting rules and policies for managing peak traffic,” he said. “Quality of experience for the consumer should be addressed through optimising media by device or bandwidth and prioritising cell traffic. Offering differentiated services for subscriber needs, such as roaming or family packages can also address APRU.”

ABI’s report also found that, as data traffic grows, minutes of voice usage are on the decline in developed markets. However, there is still room for voice usage growth in emerging markets, such as Africa. Minutes of use per user grew by 9 percent between 2009 and 2010, due to increasing competition in the market.