Mobile data surpasses voice

March 25, 2010 Written by James Middleton

Global mobile data traffic surpassed voice during December of 2009, after growing 280 per cent during each of the last two years. According to Swedish vendor Ericsson, which published the figures, global mobile data traffic is forecast to double annually over the next five years.

Ericsson said that the crossover occurred at approximately 140,000 Terabytes per month in both voice and data traffic, while traffic on 3G networks also surpassed that of 2G networks.

As discussed in our recent feature on the network capacity crunch, this stellar growth in mobile data is causing a major headache for operators both financially and technically. And from a technology angle, femtocell proponents are pushing their technology and the most effective solution.

This week the Femto Forum announced research into the use of femtocells in LTE and WiMAX networks, which found that “femtocells provide the best possible LTE user experience and improve the operator business case for the new networks while also offering alternative rollout models and supporting new services.”

The group claims that the addition of femtocells to the network allows users to consistently receive much closer to the headline LTE/WiMAX data rates than those connected to macrocells even when using the same channel as the macro network when suitable mitigation techniques are adopted.

The study also found that the MIMO (Multiple In Multiple Out) technology built into LTE and WiMAX performs well in an indoor environment with femtocells, improving the user experience yet further. By giving away free femtocells to early LTE/WiMAX subscribers, operators could provide the best possible experience indoors, which could be funded by implementing a delay in macrocell buildout by deferring 4 per cent to 10 per cent of the planned macrocell sites, depending upon the scenario.

“The vast majority of usage is going to be in homes and offices. Trying to service this need with the outdoor network is the equivalent of trying to improve the experience of reading in bed by making lampposts outside brighter instead of installing a bedside lamp,” said Simon Saunders, chairman of the Femto Forum.

In related news, the 3GPP2, CDG, and the Femto Forum also announced the formal publication of specifications for femtocell devices that incorporate CDMA2000R 1X and HRPD (EVDO) radio access technologies.

The CFO’s Role in Telecom Expense Management

Author: Kevin Donoghue

Telecom sits among the top four largest expenses for the enterprise. Large budgets for telecom usually contain opportunities for cost control and optimization.

Decentralized purchase decisions and limited oversight of these expenses can result in spending 10%-25% more than you need to on telecom expenses. Breakdowns in internal processes present yet another challenge in managing telecom expenses. Organizations rarely have effective systems for recording telecom contracts, service order move, add, change, and disconnect (MACD) activity, bill validation, and detailed expense reporting.

CFOs should ensure that IT and procurement work to centralize management of telecom expenses, leveraging economies of scale for purchasing decisions, procurement processes, and the operational costs to manage these expenses.

•TEM improves the bottom line with a positive return on investment.
•Having the CFO engaged ensures more favorable results when negotiating large audit refunds with telecom carriers.
•TEM helps CFOs exercise oversight and improve accountability with expense charge-backs to business units for consumption of services.
•TEM delivers with reporting on operating expenses by division, region, business unit, and employee.
•TEM aligns with Section 404 of the Sarbanes-Oxley (SOX) Act that requires CEOs and CFOs of publicly traded companies personally attest to the adequacy of their internal controls.

CFOs often push the enterprise to focus on cost cutting. CFOs play a central role in performing apples-to-apples financial comparisons of TEM suppliers. And, once the solution is selected, CFOs can help to expedite the project by clearing obstacles in locating information sources. Also, CFOs can help set the standards for dashboard reporting to monitor savings results.

It’s up to you to manage business transformation. This requires changes in core processes related to strategic sourcing, service order management, invoice processing, expense validation, optimization, allocation charge backs, usage management, and reporting.

Telkom set to sign roaming deal with MTN | TechCentral

Telkom, which will become SA’s fourth mobile network operator when it launches commercial wireless services later this year, will sign a national roaming agreement with MTN, multiple independent sources have said.

The apparent deal means Telkom mobile customers will roam on MTN’s network outside the big urban centres where Telkom hasn’t yet built infrastructure.

To read more click on the link above....

Telecoms prices take a tumble | TechCentral

[By Duncan McLeod] SA consumers, used to high prices for telecommunications, must be rubbing their hands in glee. The cost of broadband and voice telephony has begun falling, in some cases dramatically, as competition finally begins to take effect.

At the weekend, cellphone giant Vodacom announced it was effectively cutting its peak-time prepaid rates by as much as 40%. Vodacom customers who subscribe to a new prepaid offering, with a uniform all-day rate, will enjoy off-net call charges between 6 am and 8 pm on weekdays of R1,80/minute. That compares with R2,99/minute on the company’s 4U prepaid plan.

Vodacom’s move came just one week after MTN introduced a similar all-day package for prepaid customers. And both operators were probably reacting to lower all-day prepaid tariffs introduced by their smaller rival, Cell C, late last year. The recent reduction in interconnection rates — the fees the operators charge each other to carry calls on their networks — probably also helped.

It’s hard to know if prices will come down further in the next few months. The operators have tended to shy away from competing on price, though as the market matures and growth slows, they may be more tempted to undercut each other.

Without an aggressive third player in Cell C, voice tariffs probably wouldn’t have come down. Cell C has less to lose than its two bigger rivals in cutting prices. Also, the company, which lacks a 3G network (for now), has fewer value-added options to keep customers sweet. So it has to compete more on price.

An apparent move by Cell C to sell its national network of base stations could make the market more competitive still. The company is said to be in talks with wireless tower operators Eaton Telecom and American Tower Corp to dispose of them in an effort to defray its crippling long-term debt. If the deal goes ahead, and assuming Cell C doesn’t negotiate an exclusive leaseback, then new players will be able to enter the market, leasing infrastructure on the base stations.

Since the market is wide open to competition, anyone could enter as a fourth mobile operator. ECN Telecommunications has already expressed an interest in doing so.

It seems inevitable that competition will drive down prepaid and contract rates further in the next few years.

It’s not only voice calls where prices are falling. In fixed-line broadband, bandwidth costs have plummeted in the past 12 months. Triggered by smaller Internet service providers, the cost of fixed-line broadband — especially for high-end users — has fallen off a cliff in recent months. And the prices are continuing to drop.

Whereas the average selling price of bandwidth on Telkom’s digital subscriber lines was about R70/GB a year ago, it’s now available for less than R10/GB on certain packages from smaller providers.

The bigger service providers haven’t yet followed suit, but I’ll bet Telkom and Dimension Data’s Internet Solutions, the country’s two largest suppliers of bandwidth, will slash their prices within months. It’s inevitable, given the rapid decline in the cost of international bandwidth.

Seacom, the new undersea cable on the east coast, has already brought about a sharp reduction in prices. New cable systems, coupled with investments in national fibre infrastructure, will surely result in bandwidth prices continuing to nosedive.

With the regulator, Icasa, set to begin tackling the last vestiges of Telkom’s monopoly, especially its control over the local loop, telecoms prices in SA could fall to levels enjoyed by consumers in competitive markets in Europe and Asia in the next few years. Now that’d be a turn-up for the books.

SA’s broadband Wild West | TechCentral

[By Jannie van Zyl]

It’s like a movie about America’s Old West. Except this is SA, and it’s not a gripping story on the silver screen where actors get shot, dust themselves off, have a good laugh, and head back to their trailers.

No, in the Wild West we’re heading into, it’s SA consumers who’ll be in the crossfire, and the damage to them will be very real.

Who’s going to be doing the shooting? A bunch of cowboy Internet service providers (ISPs) and several big landowner operators wanting to hold on to what they’ve taken.

When the dust settles and the fighting is over in two or three years, many of these guys are not going to be left standing. And many innocents will be injured.

It’s the story of the good, the bad and the ugly in SA broadband.

How did we get here?

Anyone who’s spent any time in SA’s Internet or telecommunications industry is familiar with our history — Telkom, minister Ivy, the monopoly issue. The story is all about deregulation, how badly government managed it, and the mess it got us into.

The good

Let’s start by focusing on the good parts, the positives. Broadband penetration is rising — in the home, in small and medium enterprises, and in large businesses. Everyone has access to a growing panoply of bandwidth options.

There are also many new players. Competition is growing by the day and innovators are coming out with new offerings all the time.

There are ecosystems being set up comprising complementary service providers that can take advantage of more readily available bandwidth.

This applies at the high end, where vendor-neutral data centres and new peering points allow companies to pick and choose more freely. And it applies to the low-end, to small ISPs that can create niche products to address particular customers’ needs.

So, that’s all very nice. But it’s not good enough.

The bad

We’re paying through the nose for broadband. In the real Wild West, high prices were due to gouging by monopoly railways and ruthless robber barons. In modern SA telecoms … well, it’s not much different.

Realistically, prices have only come down marginally in the last few years. How can this be, you ask? ISPs are advertising great connections for less than a hundred bucks a month — unthinkable a few years back. But there is one cost that is never talked about. It’s assumed, glossed over, unmentioned — the access cost.

Every connection in SA has two cost components, namely the access cost, and the service provider cost, often known as the data rate. The access cost is not coming down. Telkom still has a monopoly on the last-mile copper loop. You’re still paying R600 to have a Telkom phone line installed and a R152, R326 or R413 monthly broadband line fee. And don’t forget the R130 basic line rental.

Before you’ve even begun to access the Internet, you’ve already paid more for your connection than people in Europe, America, Asia and even other countries in Africa pay in total.

So, having a fixed-line Internet connection is exceptionally expensive, and the solution, local-loop unbundling, is still a distant prospect. Even when unbundling happens, it’ll be expensive for other operators to install the necessary equipment in Telkom’s exchanges.

What about the alternatives? Over the past decade, various wireless operators have set up wireless alternatives to Telkom’s local loop.

But these players have not had a big impact on access layer pricing either. There are a few reasons for this. Limited licences were granted, and even more limited frequency spectrum was issued. There are only a few players — Telkom, Neotel, Vodacom, MTN, Sentech and iBurst parent Wireless Business Solutions.

The problem is that some of these players are not coming to the party when it comes to delivering connectivity to South Africans.

Building a wireline or wireless network is what we in the industry call “very expensive”. This means the vast majority of new licence holders will not be building networks anytime soon. Even the good Marshall Altech announced he will not be building his own network after taking down the bad sheriff who tried to stop him from doing exactly that.

This means, even with deregulation, we will probably still see the existing players dominating the industry. And some of them are just not doing what’s necessary.

Worse, spectrum is exceedingly limited. Though some providers are using this spectrum to connect broadband customers as fast as they can, some are doing nothing at all.

Those doing nothing should lose their spectrum. The question is, how can we tell if a licensee deserves to keep its allocation?

iBurst has developed a simple ratio that provides an intuitive feel for who is using spectrum efficiently, and who isn’t. It’s a bit rough and ready, and it ignores some finer details, but it provides a quick way of determining whether a licensee is doing SA a service or not.

We call it the “Paris Principle”, in honour of the man we hope will use it.

This is how it works: we take the number of base stations an operator has built, divide this by the spectrum it has been allocated, and look at the number of “Bs/MHz”.

Why base stations? With wireless networks, the number of base stations an operator has built tells us how many users it could possibly serve, as well as whether it is operationally capable of the logistical and technical challenges of building a wireless network.

For example, let’s take the Wireless Business Solutions network that powers iBurst Wireless. We have 5MHz of bandwidth, and have built 263 base stations in the past four years. That means we have a “spectrum usage ratio” of 52,6Bs/MHz.

Now, let’s look at the WiMax technology and which operators have spectrum. Our WiMax network has a ratio of 17,3Bs/MHz (260 towers and 15MHz). Sentech’s ratio is 0Bs/MHz (0 towers and 106MHz); Telkom’s ratio is 1Bs/MHz (57 towers and 56MHz); and Neotel’s is 1,3Bs/MHz (75 towers and 56MHz).

Are Sentech, Telkom and Neotel doing enough to keep their spectrum?

We’d like the Independent Communications Authority of SA (Icasa) to use this simple but effective “Paris Principle” to regulate frequency spectrum allocation to ensure the country benefits as fully as possible. It’s a strategic national asset.

However, the lack of effective spectrum usage in SA is only part of the problem.

The other challenge is that only a few players can provide a comprehensive national wireless service. Base stations are expensive, and the high sites to build them are hard to secure.

Operators need hundreds of millions of rand for capital investment. Their shareholders want a return on investment, but competition in the wireless access provision space is limited to a small handful of carriers. A red warning light is already flashing. Many of the operators are holding onto the wireless “last mile” for all they are worth, meaning that other service providers can’t buy wholesale access from them to create innovative services. This is keeping wireless broadband prices higher than they should be.

What is Wireless Business Solutions doing differently? A few months ago, we made a strategic decision to adopt an “open access” policy. If you’re a service provider, you can buy access to our network at wholesale prices. We believe Icasa should compel the other wireless operators to do the same.

The bottom line is this: the last-mile access network is the biggest component of the cost of broadband, and it’s not getting any less expensive. Addressing this problem should be a top priority for Sheriff Mashile.

SA needs local-loop unbundling as soon as possible; Icasa must enforce open access on wireless networks; and operators who are not making efficient use of spectrum should lose it.

And the ugly

But there’s another component to the big broadband mess SA finds itself in.

In the Wild West, it was the shoot-from-the-hip cowboys, the cattle rustlers and the bandits. In SA, it’s the irresponsible, foolish and sometimes downright dangerous ISPs. A whole gang of them have ridden into town, and they’re spoiling for a fight.

The concern is that some of these ISPs are offering data rates at well below market prices. There are cowboys and gamblers who buy wholesale bandwidth, and resell it at below cost, betting the farm their cost prices will continue to drop so that they get a nice big bunch of contracted customers on their books so that they can then make profit on them later.

At first glance this seems to be a consumer paradise. But many of these guys are also shaping traffic and bumping up contention ratios. This means users are getting cheaper rates but lower-quality connections.

In order for the market to stabilise, consumers must understand that they need to pay a fair price for their data so that ISPs can be sustainable and provide acceptable service.

Even though international data prices will continue to drop as more undersea cables come on-stream, this cost is becoming a smaller portion of the total cost of delivering broadband.

The gunfight between the ISPs will continue. We just have to take our medicine and wait for the dust and smoke to settle, and then drag off the bodies of the cowboys that were not fast enough or strong enough to survive.

Consumers and business owners need to have their wits about them and steer clear of the ISPs with tattered boots on mangy horses. Their promises of a broadband Eldorado may be empty.

Bain warns consumers not to expect cellular price cuts | TechCentral

— Duncan McLeod, TechCentral

Consumers should not expect lower retail tariffs to flow from the recent reduction in mobile interconnection rates, as there is “no correlation” between the two concepts.

That’s the view of Vittorio Massone (pictured), newly appointed managing partner in SA at management consulting firm Bain & Company.

Mobile operators Vodacom, MTN and Cell C recently agreed to reduce the interconnection fee, the money they charge each other and other operators to carry calls on their networks. The rate fell from R1,25/minute to 89c/minute during peak times on 1 March.

Massone, who specialises in consulting to companies in the technology, telecommunications and media sectors, says regulators elsewhere in the world have pushed down interconnection fees to facilitate new entrants into the market rather than to bring down retail tariffs.

SA’s incumbent mobile operators have been accused by some industry players of using high interconnection fees as an crude anticompetitive club to keep new players from emerging. Because new players have few customers at first, most calls on their networks will be to networks of other operators. High interconnection fees make it difficult for them to enter the market.

In SA, the reduction in interconnection fees should help facilitate Telkom’s entry into the mobile market and could also assist Cell C in gaining market share from bigger rivals Vodacom and MTN, Massone says.

In saturated mobile markets like SA’s, where customer churn rates are also relatively high, a new entrant like Telkom could put downward pressure on retail pricing.

However, Massone says it’s unlikely the operators will engage in a price war. Rather, he says, they should focus on differentiating themselves by introducing segmented products and services designed to increase customer loyalty.

“In a country which is so complex and heterogeneous, you can find many ways to segment the customer base,” he says.

In the consumer space, for example, operators should consider introducing packages tailored to the millions of Zimbabweans working in the country. These consumers have specific needs, including the ability to transfer money electronically to their families back home and to home call relatively cheaply.

Another example on an area not well addressed by the mobile operators is small and medium enterprises, Massone says.

And experience in Europe suggests people who play videogames respond well to packages aimed at them.

Offerings aimed at specific religious groups also work well.

By introducing value-added services and offerings tailored to specific consumer segments, operators are able to increase loyalty and spend and reduce churn.

Despite political pressure for interconnection rates to come down substantially, Massone warns that industry regulator, the Independent Communications Authority of SA, should be careful not to reduce them too much.

If the cuts are too deep, the operators will stop investing in new infrastructure, he says.

“If I were the regulator, I would want the operators to build high-quality infrastructure in areas where it’s not so financially sustainable to do so,” he says. “If you cut interconnection too much, they won’t go into the rural areas.”

Turning to Telkom’s plans in the mobile market, Massone says the company should play to its strengths in the corporate and small and medium enterprise markets.

Telkom ought to offer integrated offerings to business customers, including fixed-line and mobile services, coupled with Internet access, outsourcing and network management.

He says Telkom shouldn’t be too aggressive in its retail pricing in cellular.

“Anyone can reduce prices,” he says. “The day after you do it, everyone will be out with an offer that is like yours or even slightly cheaper.

“Also, you’d be educating your customers to buy on price and telling them you don’t have anything else to offer other than price.”