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Like Facebook or Google, Wireless Carriers Need to Scale

Most in the technology world think about scaling in relation to web sites and data centers, but the carriers operating the world’s wireless networks are worried about scale as well. As they transition to fourth generation (4G) wireless networks, they’re not just thinking about increasing data speeds; they’re also trying to figure out how to deliver more data-consuming new services over their networks in a way that generates more money for them. Otherwise they’re planning to sell your personal data to advertisers to boost their bottom lines.

Currently, a huge number of data-using subscribers can drive up costs over the traditional packet-switched networks in use today. By moving to an all-IP network like LTE or WiMAX it’s possible for carriers to offer IP services like unified communications, with lowered costs, to an increasing number of users. Estimates from Analysys Research assume that carriers will be able to deliver more data for less: about 1,800 terabytes per month for 1 euro cents on an LTE network, compared to delivering 500 TB per month for 6 euro cents on a UMTS network.

The lowered cost per bit and the ever-increasing need for data services delivered over a mobile network will eventually drive carriers to choose an all-IP network structure, posits a Deutsche Bank report out today. From the report:

Operators we spoke with also pointed out that a flat packet core infrastructure diverts the focus of their capex dollars from upgrading legacy equipment to ‘revenue-generating’ middleware platforms for offering value-add Telecom 2.0 and Web 2.0 mashup services (refer to our recent ‘Telecom 2.0’ report). … Several operators we spoke with mention that it is increasingly important to upgrade to network equipment that scales logarithmically to user traffic demand, given the decoupling that operators are witnessing between data traffic growth and services revenues.

However, even though they know the benefits of moving to 4G networks, carriers are still moving slowly. Alcatel-Lucent (s ALU), Ericsson (s ERIC), Nokia Siemens Networks (s NOK) and Motorola (s MOT) certainly would love for carriers to start on their all-IP equipment buying sprees, but issues around voice quality and spending on new equipment are one of the biggest hurdles.

But, as IP wireless networks deliver more data, carriers can offer new, revenue-generating IP-based services and deliver that data for less. Perhaps then equipment vendors will get the all-IP networks they’ve been pitching.

9 Responses to “Like Facebook or Google, Wireless Carriers Need to Scale”

  1. I completeley agree that the carriers need to scale up to reduce costs but why restrict this to data only, even voice can benefit from scale. They can also emmulate the experience of Indian carriers that are able to offer voice at 2 cents/min and are still able to make 40% EBIDTA margin. I have written an article on the Indian case study on this subject at

    Hope you would enjoy this article. Would love to get your comments on this article.

  2. Hi Stacey – I think that the sooner we get to all-ip the better off we will be. I also think that operators should concentrate on their core strength, which is building and maintaining very large networks and refrain from drinking their own koolaide about content. The type of culture and mindset that creates good content is very different from the culture and mindset that builds good networks. If someone knows about queueing theory or what an Erlang is you probably don’t want that person in charge of entertainment, for example. This is going to be hard for the operators to grasp as they still want to get those extra dollars and in fact would love to keep everyone inside those walled gardens.