Nomadic user experiences with WiFi sets the stage for mobile broadband access, but significant CAPEX will be required
The Nomadic Virtual Lifestyle
We have read quite a lot lately about nomadic workers and virtual offices. Armed with notebook PCs and seeking WiFi hot spots, many employees are leaving their cubicles and using coffee shops, pool decks, and friends’ homes as their new “anywhere” offices.
An article in today’s Washington Post truly captures this trend – Digital nomads ditch cubicles for diners and pool decks. Marilyn Moysey, an employee of Ezenia who sells virtual collaboration software, often works at Panera Bread near her home in Alexandria, Va., even though she has an office in the "boondocks." Asked where her co-workers were, Ms. Moysey said, "I don’t know, because it doesn’t matter anymore." Clearly, nomadic Internet access is becoming a way of life for many people – not only for business use, but for entertainment and education as well.
The key takeaway from this phenomenon is that more and more people are using WiFi and (when affordable and available) 3G data cards to access the Internet. AT&T and Verizon have accepted this fact – both are now offering free WiFi hotspots to premium wireline Internet customers along with 3G data cards for laptops (HSPDA and EVDO respectively).
As a result, mobile broadband is expected to grow much faster than wireline broadband (even with FTTP/ FTTH solutions such as Verizon’s FiOS).
A recent Cisco study is even more optimistic about mobile Internet traffic growth:
Here are a few of Cisco’s predictions:
- Globally, mobile data traffic will double every year through 2013, increasing 66 times between 2008 and 2013. Mobile data traffic will grow at a CAGR of 131 percent between 2008 and 2013, reaching over 2 exabytes per month by 2013.
- Mobile data traffic will grow from 1 petabyte per month to 1 exabyte per month in half the time it took fixed data traffic to do so. In the 7 years from 2005 to 2012, mobile data traffic will have increased a thousand-fold. The Internet grew from 1 petabyte per month to 1 exabyte per month in 14 years.
- Almost 64 percent of the world’s mobile traffic will be video by 2013. Mobile video will grow at a CAGR of 150 percent between 2008 and 2013. Mobile video has the highest growth rate of any application category measured within the Cisco VNI Forecast at this time.
However, there are several reasons why the current mobile Internet solutions (WiFi and 3G) won’t scale to higher speeds and larger number of subscribers:
- WiFi hot spots are not available everywhere and often are not free, e.g. airports
- A WiFi network collapses when many users send or receive heavy traffic loads, e.g. ppt presentations, videos, photos, etc.
- 3G pricing is too high for the small amounts of bandwidth given to each user.
- Low cost per bit is hard to achieve on a cellular network because its design was based on carrying TDM voice. 3G data is an overlay and a stop-gap solution for mobile carriers.
- Cellular operators have imposed data caps on 3G data traffic. (Typical 3G data pricing is $60 per month with a data cap of 2G to 5G bytes transferred per month. Additional data transferred is usually priced in 1G byte increments.)
- 3G networks are already getting saturated from iPhone traffic, according to the CEO of AT&T. Cellular network infrastructure (possibly augmented by femtocells) will need to be significantly upgraded to support the coming mobile data bandwidth explosion.
- Data rate needs will increase with time. Many more people are expected to use smart phones and data cards for mobile broadband Internet access. Video will be the primary bandwidth driver, as it has been for the last several years since You Tube became popular. Neither 3G or WiFi will be able to keep up with this increase in data (non-voice) traffic.
Many experts predict a minimum of 100% per year growth in mobile data, but that won’t be achievable without huge increases in CAPEX – both in the RAN and backhaul networks, including new network management and maintenance software. What’s the solution for true mobile broadband Internet access- Mobile WiMAX or LTE?
We are not going to comment about the seemingly never-ending WiMAX vs LTE comparisons. This is because WiMAX is available now and LTE is not and might not be for a long time (much longer than most think).
Our main theme here is that mobile traffic continues to grow exponentially and that growth is unsustainable. There are a lot of variables and feedback loops that will impact the trajectory of mobile broadband traffic and subscriber growth. Here’s one view:
Unless carriers significantly upgrade their network infrastructure they will have to resort to more data caps and blocking of high throughput traffic (e.g. AT&T currently blocks Sling box video on its 3G network). That would lead to many dissatisfied users and the promise and potential of mobile broadband will not be realized.
Pico-cells, more cell towers, self –organizing- networks (SONs), and other network topology tricks have been proposed to alleviate the mobile bandwidth crunch. We don’t believe any of those will be cost effective (although we do like femto-cells as a way of getting traffic off cellular networks and onto the wireline broadband network at home or a small office).
The bottom line: mobile data growth will slow down much more than forecasts indicate, unless 4G- like technologies (Mobile WiMAX and LTE) are deployed in a very significant way. If and when that happens is anyone’s guess. So take the forecasts with a grain of salt and don’t bet the ranch on them.