Live From 4G World – Day Two: Two Paths To 4G Profitability

CHICAGO – How can 4G services translate into profitability for operators moving forward with that next-gen wireless platform? Panelists on Tuesday presented some key innovators that could move the economic needle for carriers.

Some may be wondering why Cisco is entering the wireless arena with a vengeance, but it’s quite clear: It’s all about connectivity, and connecting the people and things that are currently unconnected. The network is the network.

“We used to worry about voice and SMS,” said Kelly Ahuja, senior vice president/general manager of Cisco’s Service Provider Mobility Group. “Now we worry about people connecting to other things.”

As such, Cisco is addressing “the Internet of Everything,” a world in which everything will be connected, thus creating new value chains, new services and new revenue opportunities for operators. New ecosystems will be created on the mobility platform, which in turn must accommodate three things: capacity, coverage and services.

“There always will be a gap in coverage, so operators need to deal with this,” Ahuja noted. “Fifty percent of smartphones already used Wi-Fi, and small cells are growing but they are still in their infancy for fill-in purposes. We need to leverage more unlicensed spectrum, and we need more backhaul.”

Echoing what other industry experts have been saying this week, Ahuja pointed out that mobile-data traffic will increase as much as 18-fold by 2016, and that video will make up 70 percent of that traffic. What operators need to be doing now is aligning that tremendous traffic growth with revenues that match the spike.

Wi-Fi is one platform that could bring in more money for operators. “It’s a platform for business innovation,” Ahuja said. “It’s a business game-changer. It can increase ARPU and mobile ad revenues. It can reduce churn, and it lowers customer-acquisition costs.”

Abstraction Lowers Complexity

“What could happen if we could reduce the cost of delivering new services,” posited Vish Nandlall, CTO and head of marketing strategy at Ericsson North America. “It comes down to the cloud, and everyone has a different definition of ‘the cloud.’”

He continued, “We think about the cloud today the way we thought about the Internet in 1995. The cloud really is about how to deliver services to the customer. We need to be masters of simplicity. We want the ‘easy’ button. Abstraction lowers complexity, and the cloud does this.”

Step by step, Nandlall outlined this process:

>> Lowering complexity speeds innovation.
>> Speeding innovation drives automation.
>> Automation lowers costs.
>> Lowering costs makes services cheaper.
>> Cheaper services are a cure for “Baumol’s Disease” (for a definition, click here)
>> The profit pool will shift.

Fast Facts

Here are some interesting 4G statistics citing during yesterday’s panel discussions”

>> By year-end 2013, there will be 100 million LTE subscribers (41 percent in the United States, 27 percent in South Korea, 14 percent in Japan, 6 percent in Europe, 2 percent in Canada and the rest disbursed globally)

>> It took South Korea three years to deploy 3G technology nationwide but only one year to deploy 4G.

>> Starbucks reports 70 million payments by mobile phone this year alone.

— Debra Baker