Telco Dilemma Series 2: The implications of unlimited bandwidth.

Reports already suggest that the ARPU is falling and that the uptake in data is expected to fill the gap. So we know that Carriers are pinning their future on the update of data packages both capped and unlimited.

So we’ve reached the point where an unlimited service costs $99 and now following on from what I said in post 1 of the series, Sprint have launched a $89 deal. The upside is the carrier doesn’t have to operate value added services such as music and ring tone services if it doesn’t want. In other words there is considerable cost savings to be made by reducing or removing the poor value add services and just concentrating on the network. So the difference between the true cost of bandwidth and the $99 dollars should result in a healthy margin for the carrier.

The current implications of unlimited bandwidth are going to be seen in the network itself. We have already read about how the BBC’s iPlayer nukes all you can eat ISP business model, and impacts the broadband networks. There are already rumours of the iPlayer mobile, so we’ll see the mobile networks getting ‘nuked’ too.

So considerable investment is going to be required in the backbones of the ISP’s and wireless carriers networks to cope with the explosion in bandwidth. The problem becomes how do the carriers fund this investment based on failing ARPU’s. Phoneboy commented on Pat Phelan’s blog with how he thinks it could happen.

Let’s assume that in some parallel universe, a carrier decides to ditch all the expense and overhead of trying to “shape” traffic or provide actual content and focuses on being a fat, dumb pipe. What happens?

* All that overhead of dealing with content goes away. This includes backend servers, negotiations with content makers, and customer service reps who have to deal with customers who are purchasing this “content” and it doesn’t work right.

* All that time carriers spend “approving” handsets goes out the window. These devices? They adhere to standards. They’re called GSM, CDMA, WCDMA, HSDPA, etc. Let the goverments deal with that and quit trying to do a job someone else already does.

* That extra money “saved?” Pump it into making fatter pipes and improving customer service.

The carrier with the fattest, dumbest pipe and the best customer service will be sitting pretty.

Conclusion.

So the implications on the explosion of bandwidth is great for the consumer and we’re reaching a very interesting point in mobile computing, but it’s causing a headache for ISP’s, Carriers and Telco’s in general. What should be done, diverting the money from walled garden ‘value add’ services into the network sounds a good a place to start as any.

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