Mobile's Coming Costs Put CFOs on the Spot

Mobile's Coming Costs Put CFOs on the Spot

Cisco's warnings about new charges looming ahead show that contingency planning is a must.

The iPad/iPhone-driven BYOD trend means demand for mobile bandwidth is expanding exponentially. That's interesting as a reflection of the boom in mobile devices across consumer and enterprise markets, but means problems for carriers. And CFOs need to think today about how the movement to bring-your-own-device may impact their bottom line tomorrow.

The most recent Cisco Visual Networking Index Global Mobile Data Traffic Forecast draws a picture of growing demand for bandwidth in the post-PC era, setting the scene for carriers to develop new pricing tiers and new demand-based services as they attempt to monetize this demand while attempting to be as frugal as they are able when it comes to infrastructure investment.

Cisco says last year's mobile data traffic alone was three times the size of the entire global Internet in 2000, and this is set to grow: mobile data traffic is expected to grow to 6.3 exabytes per month by 2015, a 26-fold increase over 2010.

Carriers Are Businesses

Sure, you can look at booming data as an excuse to spend, spend, spend on infrastructure. But carriers are businesses, not public-sector service providers. Motivated by profit, they'll be looking to offload as many data requests as possible onto fem-to-cell, fixed-line broadband and Wi-Fi networks.

It's also true they are relatively unwilling to spend as much as it would cost to satiate peak demand levels, preferring instead to manage traffic in such a way as to deliver the best possible service levels at the lowest possible levels of infrastructure investment. That's the business scenario.

Balancing carrier business needs with customer data demands is going to become increasingly challenging in the months and years ahead. Enterprise users should heed this, and prepare themselves for future service level and quality of service contract discussions with their chosen carrier(s), who will be attempting to secure new types of tiered deals with business and consumer users.

New Data Charges Ahead

"The rapid increase in data usage presents a challenge to service providers who have implemented tiers defined solely in terms of usage limits," Cisco warns. "Mobile data caps that fall too far behind usage volumes may create opportunities for competitors in the market. For this reason, many service providers are creating more nuanced tiers and data add-ons, such as a separate charge for tethering and hotspot functionality."

Such separate charges for tethering and hotspot functions are already the path of the course in many markets, including in the UK. However, the future of mobile bandwidth provision will extend far beyond this.

The signs were clear as early as last year, when I wrote this article for Vanilla Plus, including a comment from Amos Sivan, CEO, FTS: "By offering packages based on the service or application, service providers can increase revenues beyond anything that a flat rate usage policy can offer...the provider will be able to offer subscribers packages such as 'YouTube subscription', or 'Online Gaming subscription,' or 'regular surfing and email subscription'."

Those anticipated service-delivery charging models easily translate into business markets. Here are three notional examples of how carriers could offer enterprise users perceived added value while also boosting their own profitability:

The 100% Uptime Model: Traffic from mobile devices registered to your business is prioritized and carried free of any data cap. This means you and your employee devices will be able to secure your virtualized network or other back-end services at optimal levels, even in cells or at times in which peak data traffic is taking place.

Business Class: Data traffic for email, social networks and document exchange is prioritized in a similar way to the 100% uptime model above, though other less essential traffic is handled in the same way as any other mobile device on that network in that space and time.

The Management Module: In exchange for an additional fee, the carrier will offer you security and mobile device management services. You can see first sights of these models emerging within business class services from multiple operators, who are preparing to bring such solutions to market, if they haven't already.

Also consider services such as bolt-on, immediately served bandwidth-on-demand options, designed to help users overcome data caps; priority video calling services for video conferences and backbone services designed to support Unified Communications services, and its clear operators will be looking to split data demands into various packages for different kinds of traffic. For carriers, transparent and easily controlled billing systems are key to such service provision.

'Intelligent Billing'

Arantech CEO Brian Carroll notes: "The operator could extract data analysis of the quality and consumption of network services, broken down by service, subscriber and device." This data could be matched with intelligent billing systems designed to "match individual customer usage and to improve their overall experience," he says.

These are the discussions carriers are already deeply immersed in as they consider how to make good business from their existing services.

CFOs will find it wise to spend a little time in contingency planning, with a focus on which portions of your existing mobile telecoms package are the most essential to your business expansion plans and profitability targets. Because when your friendly carrier approaches your office for "a conversation" about service levels and data bandwidth caps, you won't get what you need unless you have already defined what it is you require.

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