Mobile network operators focus on the HetNet to deal with ten-fold mobile data traffic growth

Over the last three or four years industry commentators have been predicting that mobile networks would imminently be swamped by the growth in data traffic. Hyperbole-strewn language spoke of “the mobile data tsunami”, spurred by widespread adoption of mobile broadband dongles and increasingly powerful smartphones. It is easy to see how such a fever was whipped up. Many mobile network operators (MNOs) were reporting huge increases in data traffic. In August 2011 even the UK regulator Ofcom got in on the act reporting that mobile data traffic had increased 40-fold in the last three years. However, according to forthcoming research from Machina Research the picture is much less worrying than most MNOs imagine.

Take the example of Austria, which is a great test case for mobile broadband as it was, until recently, the leading market in the world. At the end of 2010 there were 1.6 million laptop mobile broadband connections for a population of just 8.4 million. Austria was replaced as number one world mobile broadband market by Finland in 2009 but prior to that it was the preeminent example of how successful mobile broadband could be. Mobile network operators in many other markets have looked to Austria as an indication of how their market may develop. Initially they did so with some excitement as penetration grew, but at the same time the amount of traffic on the network also surged with implications for network demand. For one major Austrian MNO mobile data traffic more or less trebled each year from 2006 to 2008, resulting in a 34-fold increase in traffic over those three years. Subscriber numbers increased only six-fold. At this point most MNOs would be fearful of a continuing growth swamping the network. However, over the next two years subscriber numbers and total traffic increased by only a further 50% each and the total amount of traffic seems to be plateauing rather than continuing to grow at an exponential rate. The evidence from Austria indicates that traffic growth is very rapid during the early adoption phase of mobile broadband but it slows as the market matures, rather than continuing to accelerate away.

By the end of 2011 Machina Research anticipates that globally there will be 2 billion 3G/LTE phones and almost 300 million datacards and tablets active. Between them these devices will generate 4 exabytes of data. By 2020 there will be 7.3 billion 3G+ handsets and 1.6 billion datacards and tablets, altogether accounting for 40 exabytes of data: a ten-fold increase in traffic over the next ten years. Of course that belies some significant variation between countries. Across developed markets the average growth is 8-fold over the ten years. Naturally, those markets that have very high mobile broadband penetration today will see the lowest growth. Austria, Australia and Finland will all see growth of less than 500% over the period. In contrast, growth will be much more rapid in emerging markets in Latin America, Africa and Asia. On average Machina Research expects countries in these regions will see a 14-fold increase in mobile data traffic over the period. The biggest growth will come in China, India, Pakistan and Peru which will all see data traffic increase by more than twenty times, albeit from a relatively low base today.

Of course MNOs must act to cope with the traffic growth. Even a 500% increase in traffic is substantial. However, the key figure for mobile networks is not the total amount of traffic but the peak traffic which the network must be provisioned to support in a particular location. Typically the busiest 10% of cells carry 50% of traffic. Traffic growth in traditionally quieter periods or less active cells will have little implication for capacity planning. The key for MNOs is to focus on shifting user behaviour to reduce the peak in the mobile broadband busy hour from 10-11pm and to deal with high localised traffic demand. With this in mind, MNOs should be focusing their attention on delivering localised capacity rather than simply pouring more money into the macro network. The implication is that the focus of MNOs should not be on acquiring additional spectrum or the widespread deployment of the latest technology. It should focus on using a variety of different technologies and access methods to provide the best coverage areas of high demand. Ultimately MNOs will be forced to adopt a varied approach including public WiFi, femtocells, small cells for localised capacity and the macro network for coverage. The main role of the MNO for the next five years will be stitching together all these varied technologies into what is becoming known as the HetNet or heterogeneous network.