Smartphone data explosion will force operators to drop flat tariffs

1 Jul 2010

Apparently, only 5pc of mobile phone users are accounting for as much as 80pc of the data that is exploding across cellular networks – causing operators like O2 in the UK and AT&T in the States to abandon their unlimited data plans.

The iPhone is already putting a strain on current mobile networks, but with the new iPhone 4 the increased traffic will force operators to abandon flat-rate service plans, an analyst has warned.

Not only that, but at the launch of the DROID X by Motorola last week, Google’s president of engineering, Andy Rubins, revealed that its
Android-based smartphones are now shipping at the rate of 160,000 per day. With people downloading videos, doing video conferencing on their mobiles and social networking, the data capacity will morph – creating a challenge and an opportunity for operators.

New features may mean more wireless data consumption

Informa Telecoms & Media principal analyst, Malik Kamal-Saadi, praised the new iPhone 4 but said data-intensive new features will allow users to consume more wireless data through application downloads and video streaming. Add this to the 3 million iPad tablet computers that have been sold in the past three months.

“The iPhone is already putting a strain on current cellular networks, but with the new version the traffic is most likely to explode,” said Kamal-Saadi.

“Apple seems to encourage applications and services over Wi-Fi – ie, Netflix, FaceTime – this will encourage operators to be more aggressive towards Wi-Fi services and add this access to their service plans.”

At a recent 3 Ireland press conference, Ari Kynäslahti, head of controller product management for Nokia-Siemens Networks, confirmed the level of strain the iPhone has put on traditional cellular networks.

“Smartphones have created a new type of challenge to the mobile network. Traditionally, nobody paid any attention to the signalling traffic, but worldwide, as soon as the iPhone was introduced, signalling traffic doubled within two weeks,” Kynäslahti confirmed.

Accommodating increased traffic

Recently, 3 announced that it has installed an i-HSPA network, designed to anticipate and accommodate this explosion in signalling traffic.

Three weeks ago in the UK, O2 replaced unlimited data tariffs offered with the iPhone with a new tiered set, including 500MB, 750MB and 1GB data packages, as well as unlimited Wi-Fi time via The Cloud and BT OpenZone services. The company said that 97pc of smartphone users use less than 500MB per month and that the changes would really affect the 1pc of high volume users who are using 36pc of its total mobile data traffic.

“While Telefónica O2 Ireland has no immediate plans to introduce a new pricing model for mobile data, we continuously review our price plans in accordance with changing customer needs,” a spokesperson said in response to questions.

“All of our O2 Advance price plans include 2GB of data to cover mobile data and tethering, with additional options for data add-ons if higher volumes are required. This amply caters for customer demand in this area at present,” she said.

A spokesperson for Vodafone said she was not aware of any plans the company has to alter its data tariff plans at present.

New from 3 Ireland

3 Ireland, which recently hit the 500,000th customer milestone, revealed it was introducing a number of new tiers of mobile broadband dongle plans from a €9.99 per month product for light users with 1GB of monthly usage to a 30GB package for €26.24 a month.

“In order to better serve customers and meet their needs, the opportunity was there to move to a tiered model,” explains commercial director Eoin McManus.

I asked McManus if the new tiered structure is in line with the recent decision by AT&T to get rid of its flat-rate products because of heavy data usage in the US.

“Short answer – no. Companies like AT&T have found they need to introduce a different way of pricing to make money. Our motivation is quite the opposite. We have the largest mobile-broadband base in the country and have invested so much in our network that data capacity is not an issue.

“These tariffs are for customers who are either light volume users or those who are heavy volume users who require extra capacity but not at a substantially higher price. Theoretically, for an extra €10 a month, some users are getting 10 times the capacity.

“Our aim is to introduce the lowest price for mobile broadband in the marketplace as a standalone package without the need to buy fixed line to do so,” McManus said.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years