3G, IMS, and the Evolution of Carrier Network Economics
It’s not easy to be a mobile industry executive in a developed country at this time. As a matter of fact, a wireless exec’s life has never been more complex. Just when the wireless carriers are starting to look at service differentiation made possible by 3G technologies, the subscriber penetration is starting to slow and the shareholders are starting to ask for higher OBIDA margins. If these three aspects of our business seem at odds with one another, it’s because they are.
In the developed world, voice ARPUs are generally flat to declining, though data revenue has been on the rise. However, since 3G data services have different usage patterns than voice, the margin for a 3G data session is going to be different than that for a voice call. Put another way, the margin a mobile carrier makes for a 2G voice call is different than that for a 2G SMS message and different yet from that for a 3G voice call, or a 3G email, or a 3G video session… You got the point.
This leads us right into a strategic discussion of how to monetize assets for 3G and so-called 4G with the addition of new services. For carriers who envision fixed/mobile convergence, especially in the case of IPTV and Mobile TV, the differences in the technologies with respect to contention will yield vastly different margins for the same service offerings. Because the wireless spectrum is a highly contended resource, higher reuse of this resource by subscribers with short duration calls creates higher monetization of the asset and therefore, better margin. In the case of DSL, the last mile is a non-contended resource, unless of course your kids are upstairs downloading games off the Internet. All of this means that, for margin parity, the carrier’s cost of content to be delivered to the subscriber, for example video, via a mobile network must be less than the cost of the same, exact content delivered via an IPTV network.
Moreover, with new technologies such as IMS becoming available for the mobile network, the question arises as to whether to maintain the legacy technologies or migrate to what’s new. This means that the business case for IMS isn’t limited to a mixture of new data services, but is also measured against the cost reduction targets for the delivery of legacy services, such as voice. The question that mobile operators must answer is not “when” or “if” but “how” to cap the legacy networks and grow them into packet-oriented, 3G or 4G/IMS based network to be able to provide both new mobile services as well as juiced up OBIDA margins at levels that drive increased shareholder value.
All of this forces those making current investment decisions to pause and answer questions on every stage and aspect of the network, from the radio modulation, to policy management, to transport options across the RAN and backbone that can be wholly or partly re-used in support of the LTE vision of an ultra-flat network.
I realize I have raised more questions than answered, but for something as complex as carrier economics, that’s about all one can hope to accomplish in a short article. You can read more about IMS in our IMS tutorial. For courses on 3G/4G, IMS, and 3G/IMS economics, check out the following links:
- 3G/4G courses: https://eogogics.com/course-category/3g-umts-wcdma-hsdpa-hsupa-courses/, https://eogogics.com/course-category/4g-lte-courses/
- Courses on IMS, SIP, and VoIP: https://eogogics.com/course-category/ims-sip-voip-eoip-courses/
- Courses on 3G/IMS economics and other issues of interest to managers and strategists: https://eogogics.com/courses/3gims-strategy/
- Other courses of interest to managers and strategists: https://eogogics.com/course-category/telecom-for-nonengineers-courses/
If, on the other hand, you are looking for some solutions to your network evolution economics issues, shoot us an email at john@eogogics.com.