Reducing your Mobile Phone Bill when Travelling Abroad
December 1, 2009 at 2:10 am | Posted in Uncategorized | 1 CommentTags: GSM, Hotspot @Home, international roaming, Prepaid, SIM, travel
Q: How do you travel internationally and use your mobile phone … without running up a huge bill?
It is possible to save 80% on your cell phone bills when traveling abroad and to limit your expenditures. People often ask about this, so I thought that I’d post the best practices, while supporting a variety of choices, from using your own phone and service plan to purchasing a phone abroad, international dialing, electrical adaptors for charging, and more. All of which you’ll need to know. My primary recommendation is to purchase service when you are there using a “Prepaid SIM.” While the simplest choice is to take your existing phone, the least expensive is to purchase Prepaid service abroad (that works for many countries).
Benefits: 80% Savings and Limit Your Cell Phone Charges
In addition to major savings, another major benefit of using this recommendation is that you can budget and control the amount of money spent on cell phone use when traveling. I’ll describe this for a hypothetical student/traveller who is traveling abroad for the first time, but the recommendations apply to anyone traveling abroad and who is calling locally or back to the U.S.
- Budget: The amount that you wish to allocate to spend calling home is entirely up to you. With a prepaid account, you can not accidentally run up a large cell phone bill when traveling. You can deposit a budgeted amount into your Prepaid account, and add to it if you wish.
- Savings: For example, if you send a text message a couple of times per day and makes a long phone call every other day or so, over a 3-week trip you’ll spend only $13 (and save $50 or more).
Simplest Plan: Take your existing phone
If you already have a cell phone, they you may be able to take your existing phone with you, but be prepared to pay very high rates for voice and text—over $1/minute and $0.35/text—since you will be Internationally Roaming and making International calls/texts. This is a great option to use if you expect that your son/daughter will hardly ever use the phone. This option is possible if you already have a GSM phone (the world standard for mobile phones, provided by AT&T, T-Mobile and others); if you have service from a CDMA carrier (Alltel, Sprint, Verizon) then your existing phone will not work abroad and you will have to get a new phone (your existing carrier offers special, WorldMode phones that can work abroad, but these phones are very expensive). If you are unsure whether you have a GSM phone and can use your existing phone, then please check out this post (with clear illustrations).
What to Do, Before You Depart
Just call your carrier’s Customer Care department (just dial 611 from your cell phone; it is a free call) and let them know that you want to use your phone when traveling internationally. Things to check on this call, before you depart:
- Is my phone capable of making calls on international networks?
(Your phone needs to support the international GSM frequencies, which are different from those used in the U.S. Your phone should be a “Quad band” phone that works on 900 MHz and 1800 MHz frequencies) - Does my service plan allow me to roam internationally and make international calls?
(To reduce fraud, most service plans have this option disabled, so you simply need to ask to turn it on. This will not incur a charge, but it allows you to make calls to the U.S. while roaming abroad)
Avoid Unwanted, Incoming Calls: To avoid unexpected charges from incoming calls while you are abroad, you may also wish to keep your phone turned off until you desire to use it to originate a call or text message. You would be surprised to find out, when you return, that you are charged international rates for calls that ring your phone—even those that you do not answer and that go to voice mail—for the amount of time that the caller is speaking.
Avoid Data Charges: To avoid exorbitant charges for mobile Internet (“data” charges, for web browsing, location-based services, email, etc.), you may wish to turn off data services on your phone or to simply avoid using the device for data services. International charges for data services are very costly and additional to your regular plan, and unwary travelers can incur bills of hundreds or even thousands of dollars.
Cheapest Plan: Take your existing phone and get Prepaid service there
The least expensive way to make calls abroad is to (a) take a phone that is compatible and (b) obtain prepaid service from a European mobile carrier. You will be able to call the U.S. for $0.07/minute and send text for $0.15—nearly as inexpensive as calling within the U.S.! Additionally, you can budget and control the amount spent on cell phone use (since the charges are quote different than those incurred at home, they can unexpectedly add up!).
What to Do, Before You Depart
If you have a compatible mobile phone, then you can take it with you and use the phone with a Prepaid account that you will obtain from a European carrier. The trick is that you will purchase your service from the European carrier when you arrive and that will provide you with the lowest possible rates. If you lack a compatible mobile phone (e.g., you have a CDMA phone or no phone), you can still use this option: you simply need to get a compatible phone when you land.
If you already have a GSM phone, then you just have a couple of things to check with your carrier’s Customer Care (just dial 611 from your cell phone; it is a free call) before you depart:
- Is my phone capable of making calls on international networks?
(Your phone needs to support the international GSM frequencies, which are different from those used in the U.S. Your phone should be a “Quad band” phone that works on 900 MHz and 1800 MHz frequencies) - Is my phone “unlocked”?
Phones are typically locked—for use only with a specific carrier—when they are purchased in the U.S. with a service plan. Just ask your carrier to unlock the phone to allow you to use it abroad with another carrier’s service plan.
Budget your Spend: You can budget the amount that you will place in your prepaid account and spend while traveling. Just give your ambassador the amount that you desire to spend, and they can deposit his amount (in their Prepaid SIM account) when they land in Europe. Like a debit card, they can recharge or “top up” their account if they use up all of their account.
Any unused funds will not go to waste, as you can always use the additional minutes after (s)he returns to the U.S.! Naturally, it would be most convenient if you provide those funds in the local currency (British Pounds if you arrive in the UK, or Euros elsewhere)—just call your bank and they will happily provide foreign currency before your trip.
What to Do, When You Arrive
You have a single, simple transaction to complete, ideally in the airport after you get your luggage (Example: Vodafone retail store in London Heathrow Airport). In the airport, go to the Retail Store of a major mobile carrier (I recommend Vodafone since they provide the best coverage across Western Europe) and ask to purchase the combination of:
- a basic, prepaid SIM card
(allowing you to budget how much you wish to spend on calling and SMS, and you can add funds to it at any time, e.g. Vodafone’s “Pay As You Go” plan) - an international roaming option that provides the best roaming rates for mobile service outside of the country that you are buying your prepaid service
(e.g., Vodafone’s “Passport” is free) For example, to activate Vodafone’s “Passport” feature:- Dial 5555, Press the Green “Call” button, then
- Choose option 2 and then Option 1
- an international calling plan that provides the best international calling/texting rates
- (e.g., “Vodafone International”) For example, to activate the Vodafone International call plan:
- Dial 36888, Press the Green “Call” button, then
- Choose option 2 and then Option 1
You are ready to travel and call or text anywhere! Just remember to dial/text using International Dialing (see “Dialing an International Number”), which includes the country code, to avoid calling the wrong party.
What If I Lack a (compatible) Cell Phone?
If you do not have a compatible mobile phone (e.g., you have a CDMA phone or no phone), you can still use the lowest-cost option. You simply need to get a compatible phone first: before you travel (at an AT&T or T-Mobile store) or when you land (at the Retail Store for a European mobile provider, such as Vodafone). If you are unsure whether you have a compatible phone, please read this post “Can I use my existing phone?“. After you get your phone, go back and complete the following section “Cheapest Plan: Take your existing phone and get Prepaid service there.”
I have no cell phone and want to start using one
To get a phone before you leave, you could go to the local wireless store and sign up for a GSM service plan: monthly or prepaid. But be clear about your intent to use the phone with a different carrier’s prepaid account while abroad and insist that they unlock the phone before you purchase anything. Also, be sure that the phone is compatible for use on International networks (you’ll want a “Quad-band GSM phone” that operates on the standard, international frequencies).
- Prepaid Plan
This can be an excellent way to start using cellular service if you do not yet have a cell phone plan. You can start cellular service that you can use when you return and get a phone that you can use abroad. Your initial costs will be slightly higher as you are paying for the mobile phone up front (instead of paying for is over many months of a service plan). I strongly recommend prepaid service for early cell phone users, as it allows you to budget your expenditures and can be far less costly than a monthly plan. You will get a GSM phone (which comes with a SIM card representing your U.S. prepaid plan). I recommend T-Mobile as they offer the lowest rates and best customer service, although you’ll want to be sure that the carrier provides good service where you’ll use it—check their online coverage map before purchasing. - Monthly Plan
Your initial costs will be lower since you are paying for the cell phone in monthly installments as part of your monthly plan, which you are obligated to pay for many months.
I have no cell phone and do not want to start using one
You may avoid buying a phone for use internationally (avoiding a significant cost) and simply borrow a friend’s phone for a moment to make a call/text using her phone and your service plan—by placing your SIM card in her phone before you call/text and removing it after you are done. Simply follow the section “Cheapest Plan: Take your existing phone and get Prepaid service there” and purchase a Prepaid Service plan from a European mobile provider when you arrive and periodically use a friend’s phone (see “SIM card?” section, below, for details).
Unlimited, Free Talk (using Wi-Fi)
An advanced option (that requires a bit more work, but well worth it if you want unlimited, free international calls) is to get a UMA-capable phone an duse any Wi-Fi hotspot to make free calls as if you were at home. Check out T-Mobile’s Hostpot @Home service, a $10/month option on top of your existing, monthly T-Mobile account (not applicable for prepaid users). T-Mobile lets you make/receive all of the calls that you want when you are connected to them via a W-Fi network. This includes international locations. So you could, for example, talk for an hour from a coffee shop in Rome to friends at home … for free. Or, if you are a business traveller, you could return all of your calls on your mobile for free when travelling abroad, avoiding thousands of dollars in roaming fees.
Purchasing “Prepaid SIM” service at the Airport
December 1, 2009 at 2:01 am | Posted in Uncategorized | 9 CommentsTags: GSM, international roaming, mobile service, Prepaid, travel
Purchasing “Prepaid SIM” service at the Airport
Example: London Heathrow
An easy way to obtain inexpensive cell phone service in a country is to obtain a prepaid card at your port of entry, such as the airport. At London Heathrow airport, Vodafone has an excellent retail shop in Terminal 5. Unfortunately, Heathrow is a sprawling airport and Terminal 5 can be a (short) train ride away from your arrival terminal. For example, if you arrive from the US in Terminal 1, you can take a free train to Terminal 5 by following the signs to the Heathrow Express and taking the free leg to Terminal 5.
Vodafone Shop at London Heathrow: Terminal 5
Location: Terminal 5, Before Security
Opening Hours: 07:00 – 22:00
Telephone: +44 (0)7826 952 062
The store is situated between the UK side of departures and customs and is therefore open to both air-side passengers and land-side airport staff and visitors. The Terminal 5 Vodafone store at Heathrow airport replaces the Vodafone store in Terminal 1 with an even more comprehensive line up of products and services.
Within Heathrow airport, the location of Terminal 5 is shown in the following diagram:
GSM Phone? SIM Card?? Can I use my existing phone abroad???
December 1, 2009 at 1:59 am | Posted in Uncategorized | Leave a commentTags: GSM, international roaming, Prepaid, SIM, travel
GSM phones are the dominant world standard and allow you to roam and make calls nearly anywhere on the globe (desert islands excluded). In the U.S., GSM is used by AT&T and T-Mobile (as well as many other, smaller companies), so if you are served by those companies, you are virtually certain to have a phone that can be used abroad.
Can I use my existing phone when traveling internationally?
You can tell that you have a GSM phone by removing the battery cover of your phone and looking for a SIM card that is about the size as your fingernail (see example). It is often in a slot under the battery of the cell phone and needs to be removed carefully. The SIM card contains your service subscription; the mobile phone is just a radio. By separating the subscription information and the phone, you can easily change service plans and devices: just select the SIM card and install it in the desired device!
You can change service subscriptions as easily as removing one SIM and replacing it with another SIM. The SIM card contains your service subscription information, including your telephone number and service information (a more detailed explanation is available in the Wiki article). So, when traveling internationally, you can remove your SIM card (representing your service plan with your U.S. carrier) and replace it with a low-cost, Prepaid SIM card from the country that you are visiting.
Traveling without a Cell Phone
If you wish, you can even travel without a cell phone of your own and simply borrow a friend’s phone for a moment to make a call using her phone and your service plan—by placing your SIM card in her phone before you call/text and removing it after you are done.
Note: Safely store your original SIM card, as you’ll need to reinstall it when you return to the U.S.!!GSM Phone? SIM Card??
Dialing an International Number (when travelling)
December 1, 2009 at 1:59 am | Posted in Uncategorized | Leave a commentTags: international roaming, mobile service, travel
Q: How do you dial local, international numbers as well as call back home?
Unlike dialing at home, as a world traveler you need to learn to indicate the country as well as the number that you wish to reach. Just dialing a 7- or 10-digit number like you do at home (e.g., 5025551212) will not work; you need to explicitly indicate the country or else you may end up communicating with someone new and unintended.
Recommended: Universal, Cell Phone method
From a mobile phone, you can unambiguously dial any phone number by using the “+” character before the destination Country Code. Since the Country Code for the U.S. is “1”, dialing U.S. numbers from your cell phone simply requires that you first dial “+1” and then the 10-digit U.S. number (e.g., +1 5025551212). From a cell phone, the most difficult part is finding the “+” symbol on your cell phone keypad. This usually involves pressing or holding the “*”, “0″ or “#” key multiple times.
Cell Phone Example: to dial the USA number +1 (502) 555-1212, from a Nokia cell phone, press the “*” key twice to get the “+” symbol, enter the rest of the number to get 15025551212, and then hit “Send”.
This universal method is simpler than the following method since you do not have to remember or use any country-specific access codes to indicate that you are dialing an international number.
International Direct Dialing (uses country-specific International Access Codes)
Alternatively, you can also dial an international number from any phone (fixed or mobile) using that country’s International Access Code. Unfortunately—since the access codes vary by country—the number that you dial depends on the country that you are in! From Western Europe, you can dial U.S. numbers from any phone by first dial “00 1” and then the 10-digit U.S. number (e.g., +00 1 5025551212).
Example: Example: Dialing the U.S. from a phone in Europe
Using this method to dial a U.S. number from the UK,
you would dial 00 1 5025551212:
How the number is composed:
| Number | Comments |
| 00 | 00 is the International Access Code used to dial outside of the UK. |
| 1 | 1 is the international Country Code used to dial to U.S.A.. |
| 502 | 502 is the local area or city code used to dial to Louisville. |
| 5551212 | 555-1212 is the local number you desire to reach. |
To practice this method of dialing, try this site that clearly explains international dialing and provides the dialing instructions from anywhere to anywhere.
Mobile handsets with Wi-Fi are popular, generating more Traffic
October 30, 2009 at 4:59 am | Posted in Uncategorized | 1 CommentAs expected, Wi-Fi is catching on as a feature of mobile phones, and is generating a significant fraction of the data traffic from those devices. Taking advantage of the widspread availability of Wi-Fi benefits End User and Mobile Operator (as discussed here, and this is similar to the busines case for femtocells). Wireless Week reported today that more than 5 of top 10 devices accessing Mobile Internet content have touch screens, Wi-Fi or an App store: up from only 1 in 10 last year. Although this does not explicitly define the amount of increase in the use of Wi-Fi alone, it is clear from the report that each of these features are major contributors to the increase in data use. [AdMob's September Mobile Metrics Report]. Smartphones and their users are consuming a lot of mobile data, and these features are making it possible.
Top Femtocell Vendor: Ubiquisys [ABI Research]
March 18, 2009 at 5:57 pm | Posted in Uncategorized | Leave a commentTags: Femtocell
Ubiquisys is rated #1 Femtocell vendor – again – by ABI Research in the latest vendor assessment.
To view the ABI rankings of Femtocell vendors, please check out ABI’s “Femtocell Vendor Matrix” ( http://www.abiresearch.com/products/vendor_matrix/Femtocell_Equipment_Vendor_Matrix). Please note that access is free, but registration on the ABI Research website is required. Close behind are vendors ip.access and Airvana. I think that Huawei is a strong competitor, too, as they are leading the market in higher-capacity Femtocells (for enterprise deployments) and have some major trials in action.
“Ubiquisys comes out on top of the vendor matrix yet again both in terms of innovation and implementation.” reports Senior Analyst Aditya Kaul. “Ubiquisys has the momentum going for it at the moment with multiple operator trials and rollouts across the world. ip.access has seen its partnership and close relationship with Cisco bear fruit. The firm has built upon its innovation and R&D expertise and is now in close competition with Ubiquisys. Closely following ip.access is Airvana, which has risen two positions from last year. Its modular approach allows it to integrate with multiple form factors and is one of the leading femto module suppliers to broadband gateway vendors.”
For additional detail on Femtocell vendors, please see my previous report, “Femtocell Product Scorecard.” that describes the overall Femtocell market maturity and vendor rankings.
Problem: Data Traffic Growing Faster Than Revenues
February 26, 2009 at 4:00 am | Posted in Uncategorized | 9 CommentsTags: Femtocell, Mobile Internet profitability
Without a doubt, there is a growing problem of mobile data consumption vs. revenue: perhaps 100X growth of aggregate data vs. 2X growth of revenue (in the next 5 years). This growth in data consumption is reflected in operators’ measurements as well as analysts’ forecasts, and this trend is based on clear drivers that we can observe today. Operators recognize this threat to future Mobile Internet service profitability, and therefore Mobile Network Operator (MNO) profitability (as revenues shift inexorably from voice to data revenues).
Growth is Real, and Exploding
The rapid growth of data consumption is real, has been observed by many operators. Vodafone, for example, exemplifies the rapid growth in the last, two years, from a trickle to a volume that exceeds their voice traffic in European markets that they serve (see figure). This growth has been driven by many factors, including flat-rate and modestly-priced data plans.
Over time, this becomes problematic, as forecasts anticipate 100X traffic levels that threaten to overwhelm current networks. Current forecasts-based on observed MNO data traffic growth-anticipate at least a 2X growth per year over the next 5 years [Cisco, 2008], and perhaps growth of 300X to 500X over 10 years (from 2007-2017) [3Gamericas, 2008]. A recent Cisco study combined actual MNO traffic with analysts’ forecasts for mobile internet growth, and concluded that this trend would continue for at least the 5-year planning horizon, with data traffic more than doubling each year (see figure).
An independent assessment came to the same conclusion (data traffic doubling each year), while tracking the growth over a longer time frame (10 years, 2007-2018). The 3GAmericas study expects this trend to continue through 2018 (based on observed traffic and trends in service usage), as illustrated below.
Recent traffic increases have exceeded this estimate: “six to fourteen times more data is being used on mobile broadband networks today than in the previous year.” Frost & Sullivan recently reported [April 2009] – with “average users downloading more than 5GB per month.”
Isn’t Increasing Data Use “A Good Problem to Have”?
Yes, increasing consumption of data services is a good problem to have … up to a point. Operators have been trying for a decade to entice subscribers with data services, recognizing that this is their future, as voice usage eventually reaches a peak and pricing becomes commoditized. However, there is a dark side that is emerging: the rapid growth of data consumption is increasingly a concern to the degree that is expands faster than revenues; if costs increase without a similar increase in revenues, then the business is at risk, and something must be done to reduce overall costs to maintain profitability. Essentially, “data traffic is growing much faster than data revenues,” [Mike Roberts, Informa, 6/2008]
Why Is Data Consumption Rapidly Increasing?
Data growth is expanding due to (a) broad adoption of data services by subs (espec. on flat data plans that encourage use), (b) better devices (such as the iPhone and imitators), and (c) more, attractive data services (such as YouTube, Location-Based Services, Social networking, IM, Mobile TV, and thousands of downloadable Apps).
A) More Subscribers on Mobile Internet Data Plans
Developed markets will easily see 40% of subscribers on a data plan by 2012, most on a “Flat Rate” plan that encourages use (without a penalty of incremental cost for incremental use) [Forrester, 2008]. This trend is so strong that mobile Internet subscribers are expected to outnumber fixed Internet subscribers in 2011 (see figure).
B) More Capable Internet Devices
“The iPhone.” Need I say more? OK, the IPhone has redefined how subscribers can use the mobile Internet, and established that the masses can and will browse, use Location-Based Services, watch YouTube video, download and install applications, and more. iPhone users consume many times more data than average consumers, even those with media capabilities (see figure). Consequently, everyone is rushing to achieve similar success, and more. The network effect is a radical leap in data consumption by End Users-exactly what the MNOs desired, as this establishes that consumers will use data services, if they are simple, fun, and useful. Smartphone users consume car more data than the average subscriber. And smartphones are becoming a common purchase of consumers (although business users led the adoption). By 2011, 30% of the handsets sold in developed markets will be smartphones [Gartner, 2008].
C) More Services Used
End Users are consuming more services as a result of better devices and a wider variety of applications. Apple’s App Store, for example, has defined a model of data services on demand that is widely appealing, with 500 M downloads in less than a year of operation [Apple, 2008], establishing that there is a large market for data services [Piper Jaffray, 2008].
Summary: Data Growth Based on Strong Fundamentals
MNOs have a serious problem on their hand-data consumption growing out of control and out of synch with revenues-that is based on strong fundamentals. We see it already in current use, and the future certainly holds far greater growth due to all of the drivers: more data subscribers, flat rate plans, more capable devices, and more attractive services. We will discuss this business problem in greater depth in the next section, “100X Data Growth vs. 2X Revenue Growth.”
100X Data Growth vs. 2X Revenue Growth
February 26, 2009 at 3:59 am | Posted in Uncategorized | Leave a commentTags: Femtocell, Mobile Internet profitability
Having established that data traffic is expanding rapidly (see the previous post, Data Traffic Growing Faster Than Revenues) for fundamental, long-term reasons, let’s explore the central business problem: high growth in costs vs. modest revenue growth.
MNOs have turned to data services for revenue growth, recognizing that End Users have largely satisfied their demand for voice communication. As prices fell for a voice minute of use (just as with Long Distance before that), subscribers could afford to purchase more minutes for their dollar, but at a point their demand was sated and they had no desire to consume more. SMS has certainly provided an unexpectedly large increase in data use, but that is, like voice, largely played out. What next? Since 2001, with the introduction of the Mobile Internet, MNOs have focused on increasing revenue (APRU) by creating attractive data services: browsing, information, entertainment, and new communication services. Now, almost 10 years later, it appears that they have succeeded … and their problem has become, ironically, too much demand.
Data traffic is growing out of pace with revenues. Data is growing at a torrid pace since the introduction of high-speed and high-capacity, 3G networks a few years ago. Many operators have reported aggregate increases in data traffic far exceeding the 100% growth rate that is anticipated for the next 5 years. Revenue has certainly increased significantly, but only incrementally. No consumer is willing to pay 10X their current monthly bill, so the revenue increase is measured in a fractional increase of the current revenue, not multiples, and certainly not tens or hundreds of multiples.
The Danger of Flat-Rate (Unlimited) Service Plans
The main culprit in unrestrained usage is unrestrained service plans: flat rate pricing. Although (like prepaid) these plans are simple for subscribers to understand, and very attractive in avoiding unpleasant surprises, they invite unrestrained use with no marginal revenues. Although consumers are attracted to unlimited plans, the operator is then stuck with a subscriber that is not generating any additional revenue. Eventually, flat rate plans will have to go, or at least be modified and restricted to manage costs and maintain profitability. We can already see caps emerging in mature, fixed, broadband networks, where the access cost is quite low (relative to mobile Internet): Comcast (in the U.S.) has imposed usage caps on high-speed Cable Internet service customers to limit excessive use and eliminate abuse, and ensure that costs do not balloon, so that service and pricing is maintained for normal customers. Flat-rate pricing is unsustainable, leading to unrestrained usage with no incremental compensation.
Flat-rate plans have been very popular with subscribers; Operators have successfully employed flat-rate plans to sign up a wave of new users to 3G data plans.
- Significant adoption:
“Vodafone says it signed up 2 million consumer customers to its flat-rate mobile Internet plans in 2007.” ["Mobile traffic boom to revive base station market, Mike Roberts, Informa, 7 July 2008] - Mobile Internet is included:
Vodafone UK includes access to the internet and email on their mobile as an integral part of the monthly price plan. “Every plan will automatically include internet access”(Note: for post-paid customers, not pre-paid) ["Unlimited Internet on New Voda Plans," Mobile Business Magazine, 7 May 2008] - Many operators employing Flat-rate Data Plans:
“The best examples for flat, mobile broadband offerings can be found in the Austrian market. T-Mobile has launched Fairclick for €25 which includes 10GB data volume on HSDPA. When it comes to content flat fee, again H3G sets currently the top benchmarks. The X-Series which has been launched in the European H3G countries as well as in Australia and Hong Kong, comprises of a wide range of value added services, such as unlimited instant messaging, Skype calls, web surfing and mobile TV via Slingbox streaming.” [Arthur D Little "The World is Becoming Flat," Technology & Media INSIGHT, 2008]
Whither Flat-Rate Plans?
Flat-rate plans have proven very popular with subscribers, and so they will be difficult for Operators to give up. I suspect that they will be slowly morphed and restricted to allow Operators to charge for some services, especially content and bandwidth-intensive services such as Mobile TV, or person-person video.
Data Revenue Doubling (over 5 years)
Now that the data services are becoming more popular, operators are striving for significant increases in ARPU-perhaps a doubling of average revenue per customer-as demonstrated by the excellent revenue/user of iPhone subscribers. Forecasts suggest that MNOs may see roughly a doubling in mobile data revenues over the next 5 years:
- “Global mobile data revenues will increase 77% from 2007 to 2012″ [Informa, 2008]
“The traffic boom will be driven by a dramatic increase in the use of advanced applications such as mobile browsing and video-for example mobile video traffic will grow more than thirty-fold by 2012, according to Mobile Networks Forecasts.” ["Mobile traffic boom to revive base station market, Mike Roberts, Informa, 7 July 2008] Annual data services will more than double from $148 billion dollars in 2007 to $347 billion dollars in 2013 [Informa Telecoms & Media, 2008]. - “Mobile data revenue will double by 2012″ [Pyramid, 2008]
“By our estimates, mobile data will account for 29% of the global mobile service revenue in 2012, up from 19% in 2007. Clearly, the mobile data opportunity is soaring: the 2007 mobile data revenue was more than double what it was in 2004, and we expect it to double again to US$300bn by 2012.” … and 20% of this is SMS in developed markets, 45% in Emerging markets. ["Mobile data revenue will double by 2012," Dan Locke, Analyst Insight, Pyramid, 4/2008]
Note that this increase in revenue is largely due to IP-based services, not SMS (see figure). “In 2012, in emerging markets, SMS will still comprise 45% of data ARPS in contrast to less than a quarter in developed markets.”
Operator Solution: Cut Costs
Rampant data use without commensurate compensation? Better cut the cost of the data use, right? That’s exactly what is happening. Operators are looking to reduce the cost of delivering each bit. This problem will not be solved with a single, silver bullet, but will require cost efficiencies in many areas, which is the topic of our next analysis: “Solutions for Expanding Data Usage.”
Solutions for Expanding Data Usage
February 26, 2009 at 3:58 am | Posted in Uncategorized | 1 CommentTags: Femtocell, Mobile Internet profitability, UMA
Q: What would you do if your business costs were forecast to increase 100X?
A: Find ways to cut costs!
Operators In Search of Solutions
Having established the long-term trend of exploding data growth (see previous analysis “Problem: Data Traffic Growing Faster than Revenues“) and the consequent threat to profitability (see previous analysis “100X Data Growth vs. 2X Revenue Growth“), Operators are already looking for ways to offload or eliminate cost, and multiple solutions will be required. The problem represents a severe threat to mobile network operators (MNOs): perhaps 100X growth of aggregate data vs. 2X growth of revenue (in the next 5 years). This unrestrained growth in cost is not just a threat to the nascent mobile internet business, but to the entire industry, since the MNOs rely on mobile Internet services for revenue growth. If your Cost Of Goods Sold (COGS) increased 100X, what would you do? Find ways to cut out fat!
This problem is so severe that it must be addressed systemically, with multiple solutions. Since the growth in cost is 100X, no single fix can deliver that reduction in total cost of data delivery. LTE is not a silver bullet that can magically solve this problem: LTE offers, perhaps a 6X cost reduction against a tide of 100X growth in use (and therefore marginal cost). Analysys recently examined the business case for LTE and found that LTE could cut the cost of delivering a MB of data to 1/6 of its current level: from € 0.60 to € 0.10 pr MB. Since the delivery of data service is composed of many components, each component will have to be scrutinized and cost-reduced for the system to reach the necessary cost reduction.
Where is the greatest amount of CAPEX and OPEX in the value chain, and what are the greatest opportunities for cost reductions? Here is a list of promising candidates for reducing the cost of a segment of the data value chain, listed from high-level applications to low-level bit transport (not in order to total, potential cost reduction):
- Elimination of Handset Subsidy
Operators seek to eliminate handset subsidy since it represents a large, initial, per-subscriber cost. Some markets already have migrated to this model. In the U.S., for example, Clearwire is pioneering this model by focusing on the End User benefit of using any compatible device to their network.
- Handset OS standardization
The current handset market is filled with many competitors-too many competitors-that split the effort in developing an delivering handsets and applications. Competition will cull the field to a smaller number. Operators have made this concern known and have already started to implement this, within their own domain. Unfortunately, when each carrier reduces the number of handset OSs used, it does not effectively reduce the total number of OSs in the industry, as each operator may have a favorite. This reduction will, therefore, take time to play out, as the industry slowly reaches a consensus and pares down the list of providers.
- Prioritization & Content-specific Billing, Policy-Based Control & Enforcement, Subscriber-awareness, and Fair Use Enforcement
Operators can be more efficient in delivering traffic by smoothing out demand (reducing peaks demand) by prioritizing usage into classes (e.g., conversational VoIP traffic has stringent delivery requirements, whereas email can be delivered using whatever remaining capacity is available, as “best effort” delivery). Overall data traffic can be intelligently managed, so that congestion is reduced. In particular, fair use enforcement is likely to be invoked to avoid a few users hogging the available bandwidth. In some fixed broadband networks, 5% of users consume 80% of the bandwidth. By significantly reducing peak demand, less network capacity is required, reducing network cost.
- Flat, Enhanced Packet Core (EPC), Architecture
In LTE, the IP access architecture is flattened and simplified, allowing the architecture to be delivered in fewer components and connections to be achieved with fewer hops. This significantly reduces the cost and increases the scalability.
- IP Backhaul (e.g., via Metro Ethernet)
This is the single, greatest opportunity for reducing Operating Expenses (OPEX), since transport costs represent as much as 45% of OPEX. High-speed IP backhaul is becoming available in metro areas, and can replace the use of costly and cumbersome dedicated circuits (e.g., E1/T1) and point-to-point microwave when connecting hundreds of cell sites back to the mobile network.
- RAN Sharing
Where allowed by regulation, multiple MNOs can share a single, common RAN, avoid duplication of capital and operational resources. This can save perhaps 30% of RAN costs for each operator.
- Monitor Resource Usage
Available bandwidth can be efficiently shared by use of active monitoring and policy control.
- Femtocell and UMA
These techniques promise to radically reduce the capital and operating expense of delivering mobile broadband, by (a) offloading traffic from the existing, macrocellular network to small cell sites installed in the Home and Workplace of End Users. MNOs not only offload traffic, but they also obtain significant cost reduction by obtaining free use of End User resources. Femtocells obtain free backhaul from the End User; UMA obtains free backhaul, radio (Wi-Fi) and spectrum (Wi-Fi).
- Increase RAN Capacity (e.g., Spectral Efficiency via LTE)
By delivering more bits to more users over the same spectrum, the cost of radio spectrum (a large, initial investment that can be $1 Billion or more) is reduced. Ongoing improvements in radio techniques continue to provide greater and greater efficiencies, delivering 10X capacity improvements from current to planned systems (i.e., recent advances included in HSPA+ and LTE, such as OFDMA and MIMO).
Only by relentlessly and systemically reducing the cost of each of the components can we hope to maintain profitability as traffic (and cost) continues to increase dramatically. Femtocells, especially, hold a great deal of promise as they can simultaneously cut away the major CAPEX and OPEX costs-as described separately in “Femtocells: A Key Cost Reduction, via Offload.”
Femtocells: A Key Cost Reduction, via Offload
February 26, 2009 at 3:57 am | Posted in Uncategorized | 1 CommentTags: Femtocell, Mobile Internet profitability, UMA
Femtocells, in particular, represent an excellent method for MNOs to offload this expanding data use onto End Users’ networks-completely relieving the MNO of major CAPEX and OPEX costs! When an End User installs a femtocell in their home, the MNO obtains:
- free or reduced cost radio access network (RAN),
a major CAPEX and OPEX cost
- free backhaul (from RAN to network) and site rental,
the major OPEX cost
This solution may revolutionize the way that MNOs deploy their radio networks: instead of purchasing and installing very expensive “macro” cell sites to cover large areas, the MNO partners with the End User to deploy many, cheap, femtocells to deliver capacity where the End User needs it. Certainly, femtocells can efficiently divert/offload traffic (from the MNOs) by delivering excellent coverage and high capacity access where people consume it (perhaps 75% of use in their Home and Campus/Office environments).
Operators need major cost reduction in the delivery of radio access, as the current method is extremely costly, so they will drive Femtocell technology to a successful outcome and deploy them wherever mobile internet is available for free backhaul. Without femtocells, MNOs are forced to deploy more radios, leading to costly RAN enhancements. And MNOs are increasing their spending on radio networks, reflecting their reliance on adding macrocellular capacity. ["Mobile Networks Forecasts: Future Mobile Traffic, Base Stations & Revenues," Informa, www.informatm.com/networks, 7/2008]
In a very short time, femtocells may become the dominant method of delivering coverage and capacity to subscribers. Operators are just starting to deliver service with femtocells costing $200, but the Cost Of Goods (COGS) will undoubtedly drop quickly as Femto deployments expand from thousands to millions.
Although Femtocells are an excellent way for MNOs to reduce or eliminate some of their largest cost components, femtocells are but one of many ways that MNOs will cut costs in delivering data services (enumerated in a previous analysis, “Solutions for Expanding Data Usage“).
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