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By Tom Sloan
As Mobile data costs fall consumers will welcome the cost savings but the trend over the next five years may drive mobile data communications carriers into the red.
How can this be - as the carriers are delivering more and more data should they not receive an increasing amount of revenue? Yes they are but not at sufficient rates to cover their capacity costs. This is according to a new study released by economist Thomas Hazlatt.
There is potentially a doomsday screnario that is currently playing out in the mobile space going forward over the next five years if carrier bandwidth costs are not adjusted upward.
The real cost of delivering a gigabyte of data will surpass the cost carriers receive for the same gigabyte. This is projected to occur some time in early 2013, according to the telecommunications gear vendor Tellabs.
The reason why is pretty clear. All mobile services rely on the infrastructure of wireless networks. These assets, in turn, rely on both man-made capital - items such as radios, base stations, high-capacity bit transport grids -- and natural resources, namely the frequency spaces through which their signals hop. These infrastructure costs are variable based on usage of the network. As demand increases the cost to operate increases at a faster rate because of scaling data transmission costs tied to newer technologies to carry more data in the same frequencies. This gets capital intensive for the carriers and more expensive to deploy and maintain their networks.
According to the recent Tellabs report, the 2010 revenue a carrier received from delivering a gigabyte was nearly $25 and it is projected to drop to about $5 by 2015.
While this may be seen as a win for consumers but the cost to the carriers of delivering a gigabyte will from around $20 to about $7 or $8 in that same time frame. The gap in operational cost and revenue will put carriers in the red, and explains their insistence that the demand for mobile data will bankrupt them without new pricing models.
It should be noted that Tellabs has a stake in carriers raising rates since they sell telecom equipment to the carriers.
The paper, by economist Thomas Hazlatt, a professor at George Mason University and managing partner at Arlington Economics LLC, argues that making spectrum easier for operators to come will help them meet demand for mobile services. It also says that looser spectrum policy could enable new businesses to form and use the spectrum for alternative mobile services.
In his paper, Hazlatt makes the case that, "Radio spectrum is the mother‟s milk of the Information Age. The wireless services it hosts are driving many developing countries into the modern economy, helping to make them global competitors and – soon, perhaps – wealthy nations. In the U.S., wireless is unleashing a torrent of mobile devices and applications, stirring innovation and creating impressive new efficiencies in business, government, health, and social networking. Consumer gains from mobile phone calls (voice) are alone estimated to top $190 billion annually. Social benefits from emerging data services appear poised to eclipse these magnitudes. We have only yet to scratch the surface of this rich, deep vein."
Newly emerging technologies and services will only saturate data mobile networks even more in the future. These include data-intensive applications as high quality video streaming required for medical, video conferencing and other enterprise purposes. These services are needed to expand our digital economy.
Published by myITview.com
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