Rethinking the 4G business model

John C. Tanner
23 Nov 2009
00:00

Wireless Asia: Some investors are reportedly skittish on 4G's short-term prospects, even though they traditionally see telecoms as a long-term play. What do they have to be nervous about?

Herns Pierre-Jerome: Data is far less predictable. They see that slide of traffic growing faster than revenues and run from the room screaming.

How can cellcos get into the value added side of things and not just be a fat LTE pipe?

A significant challenge there is getting the data to the RAN. We have the issue of backhaul and how much you can cost-effectively provide to support these large channels. You can get away with T1/E1s when you're using a 1.25 MHz or 5 MHz channel. Once you go up to 20 MHz, you need a big chunk of backhaul right off the bat, and you need to overprovision and anticipate the potential for growth. So the question then becomes what kind of operator are you - a classic wireless operator from the last 20 years, or one that's better positioned for this - a multifaceted one that has a wireline business and a wireless business that actually talk to each other and like each other that have access to Internet interconnect, in-house resources for transoceanic connections?

Beyond that, the business models fundamentally are rooted in 3G six or seven years ago when it was in its infancy in terms of conceptualizing how we're going to use this platform. It was like, "It's a fairly fast connection, you can download information with it, here, have at it, and here's a walled garden for you to play in, but you can't go outside of it." So the mindset has changed - for example, look at Verizon's Open Device Initiative.

But how much innovation are we really seeing with wireless data business models?

It depends what you compare it to. If you look at innovations in voice, the voice market really took off, especially in emerging markets, when they started prepaid as an option, because it allowed people to quantify what they were doing in a different way. So I know that I need to spend $20 this month, but maybe next month I'll need to spend less, or more. So I can spend at whatever rate I want and top off when I'm ready, and I don't get penalized or have to deal with these crazy plans.

Compared to that, data services are still in the Stone Age. How do you quantify something like wanting to have certain content streamed to your phone, which means I don't need a super hi-res stream, so maybe I should pay less for that than I would if I got the same content streamed to my plasma TV in my living room. But we're not set up to even determine or auto-detect certain devices - the RAN knows who you are through the SIM, but doesn't know what device your SIM is in.

So we don't have a good way to effectively charge for data. It's not that we don't know how people consume data now, but we don't have a model that makes sense for different forms of media, the different usage patterns and behaviors, and the different bearers that can deliver that. And there are so many angles to this that we have to get our heads around - the delivery mechanism, security, billing, regulatory definitions of services.

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