Earlier this week I read about Vodafone’s 35% drop in six-monthly profit and what Chief Executive Vittorio Colao plans to do about it – “We will improve operational performance through customer value enhancement and cost efficiency, supported by a Euro 1 billion ($1.56 billion) cost reduction program,” he said in a statement.  He then went on to say that “Vodafone’s previous strategic plan, formulated in 2006, has served the firm well – However, a number of challenges have evolved”. As a consequence Vodafone’s newly formulated strategy calls for the firm to focus on four key objectives – “Drive operational performance, pursue growth opportunities in total communications, execute in emerging markets and strengthen capital discipline.”  

With traditional sources of (voice) revenue under constant pressure and competition for customers driving the widespread adoption of flat-rate tariffs – Colao’s message echoes a fundamental shift that has taken place in the mobile industry. With revenues now not tied to the number of customers and usage you have, the days of growth at any cost are gone – Delivering value for shareholders is now all about cutting costs and improving efficiency. There are many solutions to help the industry overcome these challenges and a key area where companies like Vodafone could benefit is by looking at the total cost of network ownership.  By focusing on initiatives to ensure they achieve the best possible return on their network investments, companies mobile operators could recover billions of dollars in stranded capacity from their networks – Helping them to reduce costs, improve revenue potential and maximize profits for shareholders – So why aren’t they doing this? 

With announcements like those of Vittorio Colao, Vodafone is clearly heading down the right path – But to maximize shareholder return it is critical for these companies to be aggressive in terms of changing their traditional way doing things.  This requires accelerated ‘outside the box’ thinking and the rapid adoption of new and innovative ways of doing things that will make them more efficient – The good news is there are plenty of solutions out there to help – The hard part is embracing change and moving quickly and effectively to adopt these new ideas before the competition beats you to it.

Talking to the people at the cutting edge of mobile broadband planning, it is quite clear that the rapid changes in end-user demand coupled with mobility related impacts are making it increasingly difficult to plan and optimize network capacity using traditional approaches. 

The rapid changes in demand for different broadband applications at a sector-level causes rapid changes in site capacity requirements, as well as backhaul bandwidth and RNC / SGSN/ switch capacity requirements – To avoid performance issues and network bottlenecks, all of these system elements need to be proactively upgraded as demand materializes. 

The trouble with the traditional approach to capacity planning is that it has typically been highly silo-based, with different groups having responsibility for site-level, capacity, backhaul, RNC, SGSN capacity and so on – These planning steps also typically run serially, making it very time consuming and because  there are lots of planning dependencies between each step – Very inefficient. 

In order to effectively plan capacity for mobile broadband, Operators need to do away with this silo-based approach and move quickly to adopt an integrated end-to-end approach to planning across all system elements. 

By using tools to automate the entire end-to-end process, the planning dependencies between each step can be streamlined – With fully integrated scenario analysis and the final solution being arrived at far faster, with better precision and with lower risk. 

This not only helps address the challenges of rapidly changing end-user demand, but also addresses the need to model and understand the impact of new marketing initiatives, which I have talked about previously on these pages.

I seem to have spent most of my time living on aircraft lately, with many visits to Operators in both Europe and North America – In spite of the economic news it’s great to hear from both sides of the pond though that mobile broadband usage is really taking off! 

This is a trend I can only see continuing with the arrival of new devices such as Blackberry’s Bold and Storm, Google’s G1 and HTC’s Touch – To some degree all these devices have borrowed from the iPhone’s innovation and it was interesting to hear this week that the iPhone had outsold the Blackberry during the July-September period – With Apple shipping 6.9m units versus RIM’s 6.1m.   With the Bold launched this week and the Storm set to arrive before Christmas this trend may well reverse – Although Apple seem to be way ahead of anybody else when it comes to tying-in a rich and exciting array of applications for end-users. 

Globally, Nokia is still leading overall smart-phone sales, although only by a couple of percent – And in spite of being focused on easy application access, I am not sure they have the same momentum as Apple in this space. Quite a few of the Operators I have been talking to have downgraded their original mobile broadband growth forecasts for 2009 – Partly in response to the economic downturn and partly because of revisions to projected growth, that had  ranged from 4 to 16 fold, quarter on quarter! 

For my part I believe we are just seeing the tip of the iceberg and I expect to see these downward revisions, blow-away within six to nine months – The reason for this is that mobile broadband device innovation and application usage is still in it’s infancy. Although Apple has done a great job of helping catalyze the transition to mobile broadband, the combination of hyper-competition between Operators and smart-phone manufacturers, combined with the rapidly increasing adoption of more and more mobile broadband applications can only help stimulate further accelerated growth.

As mobile broadband usage accelerates and wireless networks evolve to become wholly IP, mobile operators face an unprecedented challenge in terms of understanding how demand will materialize on their networks and how they should plan for this. 

Based on a history of delivering purely voice services, Mobile Operators have established processes for planning their networks based on concepts developed by mathematicians such as Erlang – But for mobile data these methods simply don’t work and a completely different approach is required. 

Nobody really how mobile users will use different mobile data applications and where and when associated demand for different services will materialize on the network – Also as demonstrated by recent iPhone campaigns, the launch of new end user devices can have a massive impact on uptake.

Whereas Operators used to plan their networks based on the peak or “busy hour” demand for voice services, they must now plan for a plethora of different data services all having different busy hours and different mobility profiles. As discussed previously, mobility is also an important factor because it creates signaling in the network that acts as a tax on overall revenue earning capacity. 

To overcome this challenge, mobile operators need to radically overhaul their traditional planning processes and replace them with new and more sophisticated capabilities that: 

§         Capture and characterize geographic and time-of-day variances in the demand for different mobile data applications and related mobility patterns as they appear on the network

§        Leverage this information to drive a more granular predictive forecasting process

§         Provides the ability to rapidly assess overall network impacts using a “what-if scenario analysis” engine before making a final decision on how to proceed. 

I am excited about this challenge, because the team at Cerion has been focused on providing a solution to it for some time – It is only relevantly recently however that Mobile Broadband uptake has really started accelerating and that Mobile Operators have recognized some of the major process changes they need to make in order tobe successful. During the last week or two we have put together several white papers that dig deeper into this topic – So look out for those appearing on our website!

Peter 

The biggest challenge facing Mobile Operators today is that of keeping their business alive – Faced with a combination of aggressive price erosion, increasing data demand and rising infrastructure costs – It is easy to see that they could cross the break even point for profitability and get into serious financial difficulties. While network infrastructure costs for voice are relatively straightforward to calculate, the cost of providing incremental network infrastructure to support mobile data is a lot more complex.  

Many factors come into play here, including the technologies, vendors and configuration of the existing network, geographic & daily variations in demand & mobility profiles and the Operators target QOS for the delivery of different services.  This problem is only exacerbated by dynamic hardware and software costs for RAN and Core Networks, which vary by vendor; and the associated ROI for different vendor products; whose estimated life is becoming ever shorter as technology innovation accelerates.  

From a revenue perspective, many Operators have been forced into offering ‘flat rate, all-you-can-eat’ voice and/or data plans, which mean that revenue remains flat as demand and network related CAPEX and OPEX skyrockets. To manage their profitability and associated business risks it is vitally important for Mobile Operators to understand the correlation between marketing led sales initiatives, the actual uptake and demand for new services and associated pricing options for planning and configuring the network. Without this they may well be unprofitable and ultimately be forced to merge with competitors or even go out of business altogether! 

Traditional methods for (voice service) network planning have relied on forecasts of product and service uptake that are prepared by marketing groups.  Historically, these forecasts have been fairly accurate, based on statistical models that have evolved and improved over time – For mobile broadband data applications however there is little if any statistical data from which to work, so accurate forecasting becomes a lot more difficult and involves a lot more risk.  

For this reason it is vitally important for network planners to adopt a more sophisticated planning process that is closely tied into mobile broadband marketing initiatives. In addition, the combined marketing and planning groups need to leverage more real world demand information to efficiently design, plan and implement the evolving network, so that end-to-end capacity is kept in lockstep with emerging demand, while ongoing investment is kept as lean as possible. Only in this can way can Mobile Operators be assured of predictable and sustainable profits.

As mobile networks evolve to deliver mobile broadband operators need to radically change way they do their network planning – In order to succeed in the mobile broadband business they must rapidly transform their businesses to have a much tighter relationship between the marketing and network groups.

The demand for mobile broadband services is growing exponentially and can have a significant impact on network costs. In many instances mobile operators are now competing with fixed broadband at the lowest flat-rate tariffs possible. While these rates may be realistic for fixed broadband, the infrastructure and operational costs for mobile broadband can be significantly higher, and the difference can drive the operator into make a loss.

To avoid this situation and manage ongoing competitive and technology dynamics, mobile operators must implement business processes to ensure that marketing initiatives are in absolute lockstep with network design and planning.  Only by ensuring that network costs are clearly understood in relation to planned marketing initiatives and revenue, can mobile operators be certain that they are going to remain profitable.

To achieve this, traditional processes for network design and planning must be radically overhauled – Only by proactively understanding the detailed network impacts of a given marketing initiative and feeding associated budgets back into marketing, can the operator be confident of making the right network investments.

Related to this, the actual demand materializing on the network for a given marketing initiative can be quite different from what was forecast, having a significant impact on budget – So it is critical for mobile operators to transform the planning and budgeting process, to be driven by measurements of real world uptake and demand.

Traditional planning methods, including spreadsheet tools have done a great job for voice but planning for mobile broadband involves a lot more dynamics, is far more complex and requires a much more sophisticated capability. 

This is where the development effort at Cerion has focused since inception and we are very excited to be involved at the cutting edge – Helping mobile operators to transform their businesses, sustain profits and realize success in the new broadband economy.

More on this topic next time.

Peter

The era of wireless broadband is upon us and is gaining momentum fast. I expect the launch of Apple’s 3G iPhone in July will accelerate the use of wireless broadband applications considerably and no doubt the arrival of this device in the marketplace will stimulate a slew of other competitive devices adding fuel to the fire. 

All this means that subscribers are going to expect to be able to use more and more applications with different bandwidth and quality of service requirements on a broader and broader scale.  

The trouble is that mobile service providers have not geared up for this demand and nowhere is this more true than in the ‘backhaul’ part of the network – Meaning the connections from the radio base stations back to the control equipment in the network such as Radio Network Controllers (RNC’s) 

The main problem for most service providers is that their backhaul infrastructure was not designed to support wireless broadband usage and does not provide adequate bandwidth – In fact the majority of existing connections to the base stations are made over (T1 and E1) copper circuits, many of which are leased from third parties.  

The service providers short term response to providing adequate bandwidth to base stations is to add more T1 or E1 circuits – But when you apply this over thousands of sites it means that leasing costs go through the roof and it is not a viable long term solution.  

Furthermore, different wireless broadband applications have different bandwidth and quality of service requirements that copper infrastructure simply wasn’t designed to support – Video for example requires more real time bandwidth than e-mails, which use less bandwidth and can be queued without degrading the quality of the service.  

The combination of these factors means that in order to meet customer expectations and of ‘carrier grade quality of service performance’ for wireless broadband – Service providers need to migrate their backhaul networks towards wholly IP infrastructure immediately! 

But how can they plan for this migration, when there is no historical demand information for wireless broadband from which to work – To plan you need to understand where and when demand is appearing. And to exacerbate this problem, the demand appearing at the base stations and on the backhaul network needs mapping into the core network infrastructure, to ensure there is adequate end to end capacity – Otherwise capacity bottlenecks will occur and again end user quality of service will suffer.

 To maintain a competitive advantage, keep costs under control and have the right bandwidth available at the right time, throughout the network – It is imperative that service providers move quickly to deploy solutions for optimal bandwidth to the base station – Short term solutions include deploying edge routers to compress traffic over copper. But there is no doubt that these will have a limited life before moving to wholly IP solutions such as Metro Ethernet, X-DSL and Cable for example. 

In tandem with this they must quickly evolve their traditional planning processes to leverage more real time demand information into smart tools that enable them to make rapid planning decisions on ‘what if’ design scenarios. 

If they do not do this, they run a serious risk of losing customers because of inadequate network performance and quality of service, backhaul and other costs skyrocketing out of control, or at worst a combination of both!

During the last few weeks I have spent a lot of time talking to and visiting with people involved with the Mobile industry in Europe, where a shift to flat rate data plans has stimulated a very fast adoption of mobile data by far more users. One person that I was talking to said that mobile data usage at one of the UK Operators had grown eight fold since Christmas – Similar growth is happening in the US, while demand in many of the Asian markets is already a long way ahead of both.

The challenge for Mobile Operators with all of this data growth is to make sure that network capacity keeps pace with ‘hockey stick’ bandwidth demand, while managing costs that can very easily skyrocket – Nowhere is this more important than in mobile network access / backhaul planning, where Operators must move quickly to deploy innovative access solutions that balance low cost, with easily scalable bandwidth to the base station.

To realize the best possible solution to this problem, Operators need to characterize the emerging demand for data from a mobility perspective – Because different mobile customers use different data applications at different times in different places.  These dynamics result in variable demand for bandwidth not only at the base station and for back haul but also at each layer of the network between the base station and application server(s) that provide the service(s) – When planning for optimal end-to-end bandwidth and quality of service, there are many engineering dependencies between each layer of the network that if not addressed properly can result in capacity bottlenecks that result in poor service performance.

For this reason it is vitally important that Mobile Operators plan bandwidth requirements holistically across their networks, leveraging real world demand information. To ensure that backhaul bandwidth meets emerging ‘hockey stick’ demand it’s easy to see that Operators need to deploy fiber to the base stations sooner rather than later – And in the interests of reducing costs, give serious consideration to the business case for RAN sharing – Including backhaul infrastructure sharing that may well drive a decision to share more base station sites and ultimately perhaps the entire network.

The pace of both wireless network and device evolution is accelerating exponentially and it is clear that within the next few years the wireless broadband Internet will have a tremendous impact the way that people live their lives. The changes taking place today will make the mobile Internet faster but perhaps more importantly it will be far less frustrating to use than it is today – In the same way that broadband fixed access has replaced dial up connections, to create a far better experience for end users. 

This fundamental shift in wireless bandwidth availability combined with ever lower flat-rate pricing, will inevitably stimulate far broader adoption of broadband applications such as Youtube and peer to peer video, by wireless users. Given what has happened in the fixed world, where competition between new entrants and traditional phone companies means it is virtually imperative for them to provide fiber rather than copper to the home – It is easy to see that mobile access will have to make a quantum leap to deliver the largest bandwidth available, sooner rather than later. 

This is an important factor that Mobile Operators must rapidly assimilate in their overall network evolution strategy. Without careful planning they run the risk of excessive or premature investment in new technologies that may be rapidly superseded – Or else not having enough bandwidth soon enough and thereby losing customers onto competing networks.  The Cerion team is excited to be working on the cutting edge in addressing these challenges and helping Mobile Operators to characterize and better understand, where and when mobile IP demand will appear on their networks.  

Using a broad array of network data combined with sophisticated predictive modeling techniques we are able to proactively plan lean network investments that deliver the right bandwidth in the right place at the right time – While simultaneously minimizing ongoing incremental investments. The benefit for our customers is that it helps them to improve their profitability, ultimately enabling them to be more successful in the face of the enormous lifestyle, business and technology changes occurring around us and in which they of course play a pivotal role. 

As mobile networks evolve to deliver the broadband mobile Internet, Mobile Service Providers face fierce challenges of retaining and growing their margins in an arena of ruthless competition, flat rate tariffs and massive investment in new network technologies. To make this problem worse, margins are being further impacted by the erosion of network capacity associated with hidden bottlenecks beyond the air interface.  These unforeseen challenges can increase 3G deployment costs by as much as 30% while simultaneously having a significant negative impact on revenues. The true cost of supporting mobile IP demand across multiple technology systems with complex radio protocols is far higher than initially expected, due to dynamic processing bottlenecks that occur at various core network elements including RNC, SGSN/PDSN and switching/gateway components. 

The interplay between these bottlenecks and the bandwidth provisioned in the access network make optimizing for cost and performance in 3G and 2G/3G hybrid networks a real challenge.  As demand for mobile data services accelerates the bandwidth requirements at the base station level will skyrocket – But geographic demand by time of day for different IP applications will vary enormously. So the traditional approach for planning access bandwidth based on fairly high level assumptions such as population density will not be adequate.  There are no historic statistics for IP demand so the only way to dimension the network is to monitor demand in real time and plan accordingly. The problem with this is that there is a relationship between access demand, bottlenecks in the core and cost.  As IP demand increases, this problem will only get worse and optimizing the end-to-end network to keep costs to a minimum, while ensuring that sufficient capacity is available where and when it is needed, becomes a mission critical aspect of the mobile carriers business. 

The team at Cerion is very excited by these challenges because we have developed ground-breaking solutions for overcoming them, using all of the things that I have talked about in my previous blogs.

Leveraging the artificial intelligence embedded our solutions Network Designers are able to pro-actively overcome the real time challenges associated with mobile network bandwidth management, associated bottlenecks and redundancy requirements. Using these techniques mobile carriers can make more money and save more money – Reducing system costs by up to one third, while at the same time removing localized bottlenecks that impact the end user and erode revenues.