Telecommunications Predictions - TMT Trends 2008 - Part 2

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Getting Mobile Indoors May Spur Network Sharing

Many countries in the developed world boast up to five mobile network operators. Each may have two complementary networks, one based on 2G technology, the other based on 3G. The fixed cost of licensing and building each network can be tens of billions of dollars56.

The operational costs are significant. Since the turn of the decade, mobile operators have undertaken numerous upgrades to their network, adding not just 3G but a range of other network enhancements, most recently HSDPA. While the pace of network upgrades has been steady, revenue growth in developed markets has slowed57. At the same time competition has generally intensified, further straining margins58 .

In the last few years, mobile has steadily evolved from an outdoor network into an indoor network. In 2008, 70 percent of mobile voice calls59 and a similar proportion of mobile data usage are expected to originate inside a building60 . During the course of the year, operators are likely to evaluate various ways to attain indoor coverage.

One is using femto cells, which are base stations small enough to dedicate to a home61. However this entails an approach that some operators may consider challenging. Femto cells would most likely be connected to fixed broadband networks, requiring mobile operators to own or have a close alliance with a fixed broadband operator62. There may also be issues relating to call hand-off, interference and backhaul63.

Operators may also consider single handset solutions, known as FMC. This approach is based on a handset that could work with both internal WiFi networks and cellular networks elsewhere. The challenges for FMC in 2008, however, would be the cost of the handset, the need to deploy voice-quality WiFi networks within buildings, and the technical complexity of managing cellular to WiFi handoff64. Concerns over the commercial attractiveness of FMC, from the perspective of customers and suppliers may also cause operators to pause for thought65.

In 2008 the combination of these trends, and the lack of viable alternatives, may cause some operators to contemplate, and in some cases undertake, network sharing as the best way to reduce network-related overheads and boost indoor coverage66. Partial network-sharing activities are already in place in Australia67, the United Kingdom68, Italy69, Spain70, and India71, and other agreements are in the process of being drawn up. The move to network sharing would recognize the growing belief that in 2008 the business model for cellular mobile that has prevailed until now may no longer be viable72 .

While sharing has attractive economic benefits, regulators and customers may worry about its impact on independence, innovation and quality. The experience of the fixed broadband market, where a number of regulators have required the dominant player to open its network, has suggested that the customer experience can suffer, particularly if cooperation between operators is lacking73.

While sharing mobile networks would more typically be on equal terms, with networks of equivalent size being combined, there may still be scope for politics and the practicalities of sharing to affect service quality. As a result, the success or failure of mobile network sharing may depend on the amount of management time and attention it receives.

Bottom Line

The need for improved indoor mobile network coverage is likely to be increasingly important for operators. With an increasing proportion of traffic moving indoors as the process of fixed displacement takes hold74, mobile operators are likely to have to act rapidly.

As with any major strategic decision, the quality of execution is likely to be fundamental to the success. Network sharing can reduce capital expenditure and operating overheads. But it has many pitfalls.

Operators entering into network sharing should table comprehensive agreements that have considered a wide range of eventualities. Operators should consider how best to create shared departments for network strategy and planning to minimize the potential for disagreement. Any agreement should therefore include clear processes for dispute resolution.

Operators should also consider longer term strategic issues, such as investment in emerging or as yet unknown technologies. Each operator may have a different view as to the viability, timing, source and coverage requirements for each. They should manage and monitor network sharing arrangements at the highest level possible.

Lobbying regulators is likely to be important. Operators should be able to demonstrate that network sharing will directly benefit the customer, in terms of total network coverage and also quality of service.

Regulators should take network sharing requests seriously. While the strategy is a break with the past, it may prove an essential evolution for the mobile industry.

Operators should also consider partial network sharing, initially in limited geographic areas or for individual services such as WiFi hotspots. The experience of partial sharing could provide the basis for more fundamental network sharing.

Gray Is Good: The Return On Investment From Making Telecommunications Accessible To All

Three years ago, there were already more people over 50 than under 20 in North America. In Europe, it is forecast that by 2010, those over 60 will outnumber the under-20s. And by 2020, there will be 75 percent more over-50s in North America and Europe than those under 2075.

Many readers will be familiar with these trends. But knowledge of where personal wealth is concentrated often appears to be overlooked: the over-45s already hold a far greater share of the wealth of the world's most developed nations than the under-45s76.

Yet, despite this, the telecommunications industry can appear too focused on serving the youth market. In 2008, this oversight is likely to continue, even though this may be damaging to the sector's bottom line.

At many telecommunications industry conferences, almost every panel seems to highlight one common line of thought: look at what the young are doing and serve their needs. This discussion may well continue through 2008. Go to a store specializing in telecommunications products and services, from mobile phones to broadband, and the emphasis again appears to be on serving 'twentysomethings'.

This can result in products and services that while looking good may be daunting to use for the cash rich, but visually challenged over- 45s77, due to their small font sizes. Indeed tiny buttons and minuscule fonts may make some devices unusable for some people, perhaps unnecessarily restricting the product's target market.

The focus on younger customers can also cause the industry to design only for those who have grown up with technology. Yet anyone born before the 1970s is unlikely to have learned about technology in high school, while anyone born before the 1980s may have learned only a token amount of IT. Creating products and services that do not take into account older age groups' lack of familiarity with technology could restrict, unnecessarily, their available market.

Online content - a key reason for using the Internet - also appears skewed to a younger audience. Social networks, for example, appear designed for the young. But given the underlying need that social networks are addressing - communication with peers - they are as relevant for 50-year-olds as for 15-year-olds. The few cases of social networks aimed at older age groups appear to have been a success78.

There are around 500 million disabled people around the world, many of whom appear to have been poorly served by the telecommunications sector79. Given that some products and services designed to be accessible to the disabled have become mass market successes, the potential of this...