Mobile operators are being warned not to overreach themselves on mobile broadband offerings as user allowances continue to skyrocket at the same time as prices tumble.
While it's good news for consumers that mobile broadband data allowances are now an average of 3.9GB, up from 1.8GB a year ago, the growth in flat-rate data packages could pose problems for operators, according to a report by Tariff Consultancy.
Margrit Sessions, MD of Tariff Consultancy, said operators need to make sure they have the network capacity to meet ballooning demand fuelled by flat-rate pricing and make sure to protect themselves against over-selling services.
The report found flat rate bundles are now the norm across Europe and are the most common form of price package.
While flat-rate pricing is driving subscribers, the consultancy believes operators could have trouble turning a profit in light of such growth.
Pricing in 2008 has fallen by an average of four per cent across all countries surveyed since 2007, despite user allowances more than doubling.
In the United Kingdom, the average price has fallen by 35 per cent since last year.
"The key to long-term success is for the mobile broadband operator to develop a segmented approach to its offer with the emphasis on improving its network coverage (for example by offering a Wi-Fi bundle as well) together with a more transparent pricing scheme," Sessions said in a statement.
Disruptive Analysis' Dean Bubley also points to a discrepancy between data revenues and traffic growth. Writing in a recent blog post, he said: "There is a mismatch. While operator data revenues might have risen 50 per cent or 100 per cent, 3G traffic has gone up by 500 per cent or 1,000 per cent."
The analyst predicts 2009 will be the year when operators seek to offload some of this traffic elsewhere to ensure their networks do not get swamped.
Bubley says: "While some networks will be more robust than others, that doesn't mask a simple fact--the macrocell capacity of 3G--or even WiMax or LTE [long term evolution/4G]--is not unlimited. While it can be tweaked and optimized, with more spectrum and Mimo [X] and improved coding and other tricks, the laws of physics start to intervene…
"The only answer I can see [to] this is offload. Take the traffic off the macro network and off the existing backhaul and core as far and as fast as possible."
Bubley adds there are several options for operators which could be used to help--including femtocells, more Wi-Fi and dual-mode devices, and optimizing backhaul.
"There will be a rise of smarter connection managers and APIs, that will allow [mobile] apps to pick the appropriate bearer and adjust their traffic profile to suit it. They'll monitor congestion, latency and packet loss. They'll actively look for their own offload channels, especially via Wi-Fi," he said.
The Tariff Consultancy report, which looked at more than 97 mobile operators in 33 countries across Europe, adds that as more operators deploy HSDPA (high speed downlink packet access--or 3.5G) the demand for data will continue to rise.
In Germany, Ireland, Spain and Sweden average mobile broadband prices are significantly lower than the most popular fixed line DSL broadband service, which the report said is driving customers to choose mobile broadband over fixed.
Analyst house Analysys recently predicted around one-quarter of broadband homes in the United Kingdom will pull the plug on DSL in favour of connecting over 3G by 2013.
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