However, like every forecast, the VNI has its flaws — namely that it may overestimate the future demand for mobile data on cellular networks, while understating the need for additional unlicensed spectrum allocations.

Earlier predictions didn’t pan out

Last October, I wrote an article for GigaOm pointing out the dramatic slowdown in mobile data traffic seen in the CTIA’s semi-annual wireless industry survey and asking whether the supposed “spectrum crisis” was a myth. Of course, that didn’t go down well with some people, and CTIA executives lined up to proclaim that It is No Trick – There is a Spectrum Crisis, and asserting that “as Cisco’s data shows… there must be more spectrum to meet demands from consumers and businesses across the country.”

However, Cisco has now revealed its latest VNI mobile data forecast that instead of the originally projected 118 percent growth in North American mobile data traffic between December 2011 and December 2012, traffic grew by only 64 percent over that period – which is to say much slower than in 2011 and far below prior expectations.

So is that the end of the spectrum crisis? Not if you take Cisco’s projections of future growth at face value: They expect 10-fold growth in North American mobile data traffic between 2012 and 2017. Indeed, Cisco actually projects that growth in North American mobile data traffic will be even faster in 2013 (70 percent between December 2012 and December 2013) than the 64 percent it estimated for the last 12 months.

Conflicting data sources

There are reasons to be cautious about the weight that should be given to these forecasts. Cisco has retroactively revised its mobile data traffic estimates, reducing the total estimated global traffic in December 2011 by 13 percent (from 597PB/month in last year’s forecast to 520PB/month in the current model). This is largely due to 30 percent and 23 percent reductions in the European and Asia Pacific traffic estimates respectively, partially offset by a 14 percent increase in estimated North American mobile data traffic. The scale of these revisions indicates that there is considerable uncertainty in Cisco’s numbers, and highlights the difficulty of obtaining real traffic data from mobile network operators.

Nevertheless, at least in the U.S. we can attempt to validate Cisco’s numbers, given that CTIA’s mobile data traffic statistics are based on direct reporting by carriers accounting for 97 percent of wireless connections in the U.S.. In its latest forecast, Cisco estimates that mobile data traffic in the U.S. was 128PB/month in December 2011, and increased to 207PB/month by December 2012.

However, CTIA data indicates that 633PB were carried in the first six months of 2012, for an average of 105.5PB each month. Cisco’s estimate for the U.S. is clearly inconsistent with the CTIA statistics: It is hardly likely that monthly traffic declined significantly between December 2011 and June 2012, and equally implausible that total mobile data traffic in the U.S. then doubled in the second half of the year.

Based on the above analysis, it seems advisable to be rather cautious about the use of Cisco’s mobile data traffic statistics to make policy decisions about the U.S. wireless market structure. That has not been the case historically, with the FCC Chairman often citing Cisco’s projections to suggest that the “skeptics” about the so-called “looming spectrum crunch” were simply wrong. We now have a looming battle between advocates of making more unlicensed and shared spectrum available, and those insisting that all available spectrum (such as that freed up in the upcoming broadcast TV incentive auctions) must be auctioned.

But the most critical piece of data that should be used to inform this debate is how much mobile data traffic will be carried on traditional cellular networks, and how much will instead be able to use unlicensed Wi-Fi spectrum in the 2.4GHz, 5GHz and (potentially) the White Space frequency bands.

Offloading a crucial variable

In previous years Cisco’s forecasts substantially understated the impact of Wi-Fi “offloading” on mobile data traffic growth: Just last year, Cisco estimated that the proportion of data offloaded from smartphones and tablets in the U.S. would fall from 49 percent of their data usage in 2011 to 46 percent of their data usage in 2016. Instead, according to Cisco’s latest forecast, offload is already 60 percent of smartphone and tablet traffic.

Cisco remains relatively cautious about future use of Wi-Fi: the proportion of traffic offloaded from smartphones is only expected to grow by 1 percent per year between 2012 and 2017 – despite having expanded from 21 percent at the end of 2010 to 49 percent at the end of 2011 and as much as 59 percent today. If,  instead, as much as 80 percent of traffic were “offloaded” (which is in line with the traffic split for current users of Cisco’s Data Meter application), then the amount of data traffic carried on cellular networks might be nearly halved. That’s a major difference in outlook from what Cisco is predicting.

When policymakers consider an appropriate balance between future allocations for licensed and unlicensed spectrum, let’s hope they take into account the likelihood that Cisco’s estimates of a 10-fold increase in U.S. mobile data traffic over the next five years may not be realized, whether because of an overestimate of recent traffic growth or an underestimate of future Wi-Fi offload. But given the challenges of dispelling the myth of the “spectrum crisis” (and the carrot of those supposed billions of dollars in auction revenues), I’m not holding my breath.

Tim Farrar is president of Telecom, Media and Finance Associates, a consulting and research firm in Menlo Park, Calif., which specializes in technical and financial analysis across the satellite and telecom sectors. Follow him on Twitter @TMFAssociates.

Photo courtesy of Alex Garaev/Shutterstock.com

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I’ve always been more of a networks and technology guy than a gadget guy, so the new device launches don’t excite me the way they do my peers. What I like about CTIA is that it brings together a bunch of smart people from interesting companies who are excited by the future of wireless networking.

At CTIA I can sit down with Kyocera to discuss how ceramics can transform phone audio. Then 30 minutes later I’m chatting with the original Symbian creator Psion about its new efforts in open-source hardware, followed by a conversation with startup Mesaplexx about how a tired old cell site component–the radio frequency filter–can be transformed through advanced mathematics (more on those two in a later post).

CTIA is also a great show for measuring the progress of the industry. This year, U.S. operators started discussing small cells and the heterogeneous network in earnest, dragging it out of the labs and demo booths and into the cold light of their network roadmaps. AT&T revealed it will begin rollouts of small cells later this year, but Sprint was even more aggressive, detailing specific plans to install tens of thousands of picocells in buildings and high-traffic outdoor areas in the next two years.

Those small cells will eventually be woven into operators’ macro networks and Wi-Fi networks, creating complex HetNets that allow our devices to connect to multiple nodes – in some cases simultaneously. I don’t want to oversell the concept, but this marks a true transformation in network design, moving away from network topologies focused primarily on coverage to topologies that supply enormous sums of capacity. There are still plenty of obstacles to hurdle before mall cells and HetNet will work, but the important thing is that the operators are now actively trying to overcome them – and technologies like these make CTIA Wireless truly great.

The dark side of CTIA

But there was also plenty about the show that wasn’t so great, namely the politics and the backbiting. AT&T’s very public fight with the Federal Communications Commission carried over into the conference with FCC Chairman Julius Genachowski lashing back at Ma Bell’s accusations that the denial of AT&T-Mo forced AT&T to raise prices (check out Bloomberg Businessweek’s priceless sendup of the argument here.)

The operators took any opportunity they could to foretell the doom of the impending capacity crunch in order to justify their consolidation ambitions. And even some pettiness came out as their CEOs bickered onstage about whose network was fastest and what technologies truly constitute 4G.

While the issues behind those debates are important – the proper allocation of spectrum resources, the effectiveness and performance of different technologies –this was hardly the most elevated forum for discussing them. Trust me, not much was done to further the dialogue.

The problem is the carriers

The biggest problem with CTIA Wireless isn’t its placement on the calendar. Rather, it’s the carriers. CTIA is the trade and lobbying organization for the largest U.S. operators, so those carriers have always set the agenda of their show. That may have worked fine 10 years ago when the carriers were the be-all-end-all of mobile – when they controlled all services and revenue and were largely responsible for mobile innovation. But in recent years, the mobile industry has outgrown the operators.

Third-party developers, big Internet companies like Google and Facebook and device hardware makers like Apple are now just as important as the operators — many would argue more important. Yet CTIA hasn’t evolved to reflect that reality. That’s why the GSM Association – which has a much broader membership and mission – has managed to turn Mobile World Congress into an event of far more importance to the overall U.S. wireless industry. It’s much more inclusive.

CTIA has tweaked the show to give it the appearance of a broader tent. This year it extended keynote slots to companies like Spotify, Mozilla and Electronic Arts, but you get the impression they were being summoned to the feet of kings. Many of the biggest mobile players in Silicon Valley don’t feel they have a place at CTIA, and some long-time CTIA loyalists have decided they no longer need the event: Microsoft, Samsung and Nokia weren’t entirely absent, but none of them exhibited.

I’m not saying the operators have no place at their own show.  The dialogue about small cells and  the launch of new services like AT&T’s Digital Home initiative make the show far more significant than any mere gadget showcase. But the carriers need to lay off their agenda. They need to start talking with the larger mobile industry instead of talking at it. It would help if CTIA would eliminate the self-aggrandizing keynotes the carriers deliver every year.

Last year’s keynote panel of the big carrier CEOs was a big hit because AT&T had just announced its plans to acquire T-Mobile – antics ensued as CNBC’s Mad Money host Jim Cramer pressed them on the merger’s implications. But this year the session returned to its usual lackluster format: Canned questions from Cramer and contrived answers from four guys talking down to the rest of the industry. I didn’t write up the keynotes because there wasn’t any content to cover, but in case you’re wondering, here’s my (rather loose) interpretation of the affair (for a more detailed play-by-play check out Ina Fried’s live blog on AllThingsD):

• T-Mo’s Philipp Humm: I’m the fastest!
• AT&T’s Ralph de la Vega: No, I’m the fastest!
• Verizon’s Dan Mead: Guess how much I can bench press?
• Sprint’s Dan Hesse: LTE Rocks! [winks for the ladies]
• Jim Cramer: Everyone in the Arab Spring used cellphones to text and tweet, ergo cellphones caused the Arab Spring, ergo cellphones create democracy (ignore China). Dan Hesse, how many cellphones are necessary to create democracy in North Korea?
• Hesse: LTE Rocks! [winks for the ladies]

It’s the carriers’ party; they can cry, complain or strut if they want to. But the best parties are those where the hosts don’t make themselves the center of attention.

Blame image courtesy of Flickr user Simone Lovati

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Kyocera thinks the old audio speaker in your mobile phone is passé. There are just too many steps: a diaphragm vibrates to produce sound waves that travel through the air down your ear canal, where they resonate off your eardrum. Kyocera would rather just skip all of those steps and funnel sound directly into your inner ear.

Kyocera has dug deep into its applied material roots – the company’s name is a shortening of Kyoto Ceramics – to create a ceramic transducer that replaces the speaker in a phone. The transducer generates vibrations on the phones face plate itself, which sends sound waves into the air: but if you touch the phone directly to your ear those vibrations travel through the tissues in your skull to your eardrum.

At CTIA Wireless, Kyocera director of corporate communications John Chier said that by passing sound waves through the flesh, not the air, the communication path remains unpolluted by outside noise, and he’s not lying. I tried out the demo phone, donning noise-cancelling headphones that drowned out normal air-conducted sound waves emanating from the phone. But as soon as I pressed the phone to my ear lobe or even the side of the headphones the audio came through clear as day.

“As long as you can block out ambient noise by blocking the path to your ear, you’re essentially alone with the phone,” Chier said. “That’s a perfect for a device like a smartphone, which naturally blocks your ear.”

Chier said the technology was originally designed for the sophisticated hearing aides, but Kyocera has gotten the cost of the technology down to a point that it can be used in smartphones. The first device using the technology will come out in Japan “very shortly,” Chier said, but Kyocera smartphones with the tech will make their way to the U.S. soon after.

Kyocera also added two new Android smartphones to its U.S. line. The first is called the Hydro, its first waterproofed smartphone intended for a mass consumer audience. While Kyocera has sold many waterproofed and water resistant smartphones in the U.S. they’ve all been ruggedized devices built to military specifications. Chier said Kyocera believes there’s a pent up demand for such phones among consumers given how easily phones become water damaged.

The second is called the Rise, which attacks another market Chier said is underserved in the U.S.: smartphones with Qwerty keyboards. Both are Android 4.0 devices with modest specs and CDMA radios. Kyocera typically sells to Sprint and several regional carriers, though Chier said it isn’t yet announcing carrier partners for the devices.

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Performing a few mental calculations during his keynote at CTIA Wireless on Tuesday, Federal Communications Commission Chairman Julius Genachowski quickly concluded that the same amount of mobile spectrum exists in the U.S. today as existed before the FCC slapped down AT&T’s merger with T-Mobile. Given that the sums are the same, where did this sudden capacity crisis come from that somehow forced AT&T to hike mobile data prices?

“Some have argued that transactions, let’s be frank — one transaction — is somehow causing a shortage and causing a price change,” Genachowski said, according to the Washington Post. “But the overall amount of spectrum hasn’t changed, except for the amount we’ve added to it.”

Ever since the merger died, AT&T has been battering regulators, trying to pin the blame on the Commission for its recent consumer data plan rate hike. As I have pointed out before, AT&T is simply scapegoating the FCC for it’s own decision to raise prices. It still has plenty of spectrum it can use to add capacity before it faces a mobile data crisis. And while it may have raised prices, it’s actually selling bigger buckets of data at lower rates, encouraging its customers to consume more, not less, bandwidth. But it’s good to see that Genachowski and the FCC are fighting back.

AT&T, however, is still sticking to its math, saying that the merger would have somehow magically created additional capacity for the wireless industry. “Basic economics, and the law of supply and demand, apply to the wireless industry as to all others,” Jim Cicconi, AT&T Senior EVP of External and Legislative Affairs, wrote on AT&T’s blog after the speech. “In the case of wireless, without additional capacity, which would have been created by our transaction, prices rise.”

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Wi-Fi Alliance marketing director Kelly Davis-Felner said the Alliance isn’t expecting vendors to submit just new smartphones, tablets and access points to its labs for Passpoint certification, but also the huge body of existing devices and equipment already in the market – upgraded with new Hotspot 2.0 software. Once that old gear receives certification, vendors can push that software out to millions of access points and Wi-Fi enabled handsets.

That means unlike the usual wireless network cycles, we won’t have to wait for next-generation equipment and new gadgets to gradually make their way into the market. “There are millions of access points out there,” Davis-Felner said. “Hopefully they upgrade sooner rather than later.”

The Alliance has already pre-certified a core set of access points and handsets that will serve as a testbed against which the Alliance will compare submissions. The handsets that emerge from the Alliance’s labs will be able to seamlessly authenticate to Passpoint-compliant hotspots without futzing about with network IDs and passwords.

Don’t expect your phone to start automatically logging into every access point in sight though. Essentially Passpoint and Hotspot 2.0 will make it easy to log in to carrier-owned and-managed access points, and right now there aren’t a heck of a lot of them. AT&T has been the most aggressive deploying its own hotspots, but most of the other U.S. operators only use them for spot coverage.

But Davis-Felner said Passpoint certification may well provide the extra push for U.S. operators to get more aggressive about Wi-Fi. The big thing holding back large-scale carrier Wi-Fi adoption is the login issue. Once Hotspot 2.0 solves that problem, they will have the incentive to expand their own Wi-Fi networks and sign deals hotspot providers like Boingo or Time Warner Cable.

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Ruckus vice president of corporate marketing David Callisch confirmed the deal in an interview, saying that NSN planned to announce the tie-up in the coming days. The deal is particularly significant for NSN because archrival Ericsson recently rounded out its own HetNet portfolio by acquiring BelAir Networks, Ruckus’s primary competitor in the carrier Wi-Fi space. NSN and fellow big wireless vendor Alcatel-Lucent either needed to partner with a Wi-Fi company or buy one outright, and Ruckus was the prime candidate.

“When Ericsson took BelAir off the playing field, a lot of people came to us,” Callisch said. “NSN was the most aggressive, but it’s not an exclusive agreement.”

As mobile operators get Wi-Fi religion, the handful of infrastructure vendors specializing in outdoor metro-Wi-Fi gear have started getting a lot of attention, and lately Ruckus has been separating itself from the pack. The Sunnyvale, Calif.,-based vendor has landed one of the single-largest mobile offload contracts to date, a 120,000-access point network with KDDI in Japan, and U.K. hotspot provider The Cloud is using Ruckus gear to blanket London with Wi-Fi ahead of the 2012 Summer Olympics.

What’s more, Ruckus’s profile seems to be increasing at the expense of BelAir/Ericsson. Its London deployment supersedes an existing BelAir rollout. On Tuesday Ruckus plans to announce at CTIA that it has become Time Warner Cable’s second wireless vendor, which until recently built its public Wi-Fi hotspots solely with BelAir gear. Callisch said it will supply Time Warner with its strand-mounted access points, which connect directly to the cable lines from which they’re hung. He added that Time Warner will also use Ruckus gear to expand its hotspot network into indoor public spaces like malls and stadiums, a market Callisch said Ericsson doesn’t currently serve.

Ruckus is exploring IPO options and just closed a $21.7 million funding round, but those may just be diversions. NSN’s partnership may be just the first step to an acquisition. If NSN isn’t interested, its competitors may well be: independent metro-Wi-Fi vendors are becoming scarce, given that Israeli mobile broadband vendor Alvarion bought up Wavion in November.

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Clearing, or refarming, spectrum for HSPA is no easy task because operators need a lot of unencumbered frequencies to launch the most bare-bones network  — 5 MHz on the downlink and 5 MHz on the uplink. Meanwhile GSM networks use tiny 200 kHz channels. That means an operator would normally have to shut down a whole bunch of GSM before they can turn up a new HSPA network.

The German-Finnish equipment maker is solving that problem by creating smaller HSPA channels — as small as 3.8 MHz — and it’s making those channels flexible so that operators can add capacity to the network in 200 kHz increments. The end result is that an operator can start out small, shutting down a portion of its 2G capacity in order to deploy more an initial modest HSPA system. And as customers gravitate from 2G to more efficient 3G voice, it can gradually shift that capacity from GSM to HSPA.

This kind of configurable bandwidth technology is widely supported in LTE, which uses frequency swaths as small as 1.4 MHz and as large as 20 MHz, but it hasn’t been an option on HSPA. Instead vendors have been trying to find ways to make HSPA transmissions bigger, not smaller, as in the dual-carrier technology used by T-Mobile USA and other global operators.

T-Mobile is probably exactly the company NSN is trying to court by unveiling the enhancement to its Liquid Radio base stations at CTIA, North America’s biggest wireless industry trade show. T-Mobile plans to sunset big portions of GSM network in order to make room for more HSPA+ and its eventual LTE network. NSN is one of T-Mobile’s primary network vendors, along with Ericsson, so it’s probably no coincidence that this configurable bandwidth upgrade will be available in the second half of 2012, right when T-Mobile will begin turning on its HSPA networks in the PCS band (and hopefully get the iPhone in the process).

NSN is also coupling the configurable bandwidth software with new GSM enhancements that can double the voice capacity over a 2G network, which would in turn clear more spectrum for HSPA. But T-Mobile and other developed-world carriers are probably less interested in such super-GSM technology. Rather than invest money in making 2G more powerful, they would rather just ride out their usefulness and spend the money for mobile broadband.

This post was updated Monday evening to clarify a point on HSPA channels. The configurable bandwidth technology doesn’t create smaller HSPA+ carriers. Rather, they allow an operator to incrementally increase the size of a single normal sized HSPA+ carrier, allowing it to grow beyond the confines of its guard band.

Image courtesy of Flickr user fsse8info

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AT&T is starting out with seven applications: security cameras; window/door sensors; smoke, carbon monoxide, motion and glass break detectors; remote door lock controls; remote thermostat access; moisture detection sensors; and remote home appliance controls. The devices all connect back to a home control hub through Wi-Fi or Z-Wave radios. The home broadband connection supplies the link back to AT&T’s security monitoring center and customers can access the connected home service through a Web portal or smartphone app.

Though AT&T is initially trialing the service in two of its U-Verse markets, Ma Bell said it would be ISP agnostic. AT&T also won’t require customers to sign up for it’s mobile service to use the smartphone and tablet apps (it didn’t say which smartphone platforms would be supported).

AT&T certainly isn’t the only company looking to tap into the home automation trend, and not even the first operator. Verizon started a smart home pilot with Z-Wave last year, launching the service commercially in June. Time Warner Cable and Comcast have their own home-energy management services as well. AT&T’s smart home plans seem particular ambitious, though. Instead of reselling M2M devices and providing raw connectivity, AT&T is trying to tie all of these disparate sensors and devices together to create a more intelligent connected home platform.

At Mobile World Congress, AT&T first demoed Digital Life’s capabilities, showing off the ability to create home profiles that could group automation functions together. For instance, when the front door is unlocked the thermostat could immediately turn on and the blinds automatically open. Or if an oven warning sensor goes off, the platform not only ships an SMS warning message to the homeowner’s smartphone but a link to a live video feed from the kitchen camera.

AT&T also made the odd move of licensing its smart home technology to other operators internationally before it started offering it to its own customers back home. AT&T apparently isn’t just content to just sell smart home service. It wants to compete with iControl and other platform providers in connected home management as well.

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From the release:

To put the wireless data traffic of 2010 compared with 2011 into perspective, if you were walking and listening to five songs per mile and each song lasted for four minutes:

• In 2010, you would walk 77,601,961,033 miles, or the equivalent of 3,116,419 times around the world for 2,952,890 years and listen to 97 billion songs.
• In 2011, you would walk 173,364,056,929 miles, or the equivalent of 6,962,132 times around the world for 6,596,806 years and listen to 216.7 billion songs.

Wait, what? If you were confused about your data usage when it was measured in megabytes (how many emails can I send?) wait till CTIA puts it into song. All mocking of the CTIA’s efforts here aside, it does include valuable stats about the industry, including the fact that average monthly wireless bills dropped to $47 in 2011 from $47.21 in 2010. Other stats include the fact that the industry has achieved a penetration rate of 104.6 percent when it comes to wireless connections, suggesting that tablets, cellular hotspots and other devices are still picking up users. CTIA notes there are now 20.2 million wireless-enabled tablets, laptops and modems, a 49 percent increase from 2010.

The number of active smartphones also rose significantly (43 percent) to 111.5 million up from 78.2 million. And despite worries about a loss of texting revenue, folks still increased their texting by 12 percent, sending 2.304 trillion texts and 52.8 billion MMS messages. In fact, the number of MMS (picture) messages actually dropped by 3.8 billion suggesting that online photo-sharing services such as Instagram are also cutting into carriers’ revenue.

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