Mobile data explosion: Not the iPhone’s fault

Here’s an irony for you: Mobile data traffic will increase by a factor of 12 by 2014 — to a mind-numbing 9.7 exabytes, or 9.7 million terabytes — from what it was in 2008, the iPhone’s first big year. But the iPhone won’t drive that growth — in fact, all smartphones, iPads, and the like together will account for just 10 percent of data usage, concludes ABI Research.

That prediction assumes the carriers will continue to aggressively market subsidized 3G netbooks, where customers pay $200 or less to get a netbook or smartbook and commit to a two-year, approximately $40-per-month 3G plan. ABI analyst Jeff Orr expects 2014 to be the year that the majority of netbooks, smartbooks, and laptops will be sold with embedded 3G caopabilities, so the explosive growth in their wireless data traffic will only get worse after 2014. Those systems will require data services for the same kinds of bandwidth-sucking uses as broadband-connected netbooks, laptops, and PCs are today: video, music, gaming, and the like.

ABI’s prediction is scary. If AT&T has had so much trouble ensuring enough bandwidth for the iPhone in its first three years of existence, how can the carriers possibly support the order-of-magnitude larger level of bandwidth that 3G-connected netbooks, smartbooks, and laptops will use? If ABI is correct, in four years, the carriers will need to increase wireless broadband capability by about 10 times what they have now.

The methods by which carriers expand bandwidth vary:

• They can increase the number of cell towers and radios in use to create more local bandwidth, then shuttle it around via traditional or fiber connections. That’s the most efficient method, since they can adjust wireless bandwidth and contain that traffic locally. But they need to have enough wired capacity to make that work, and that can involve digging up streets, which is slow and expensive.
• They can increase wireless bandwidth by licensing more spectrum and using that spectrum not only for local traffic but also as a backbone to carry traffic from cell tower to cell tower, instead of running more fiber or copper. But there’s only so much spectrum available, and when the FCC chooses to auction it off, it takes years to procure — realistically, it’s a decade-long process.

The carriers will do all three (or the first two if the FCC blocks the third option), because there is no silver bullet — forget about 4G networks coming to the rescue. They won’t begin to get any serious deployment until 2015.

The good news is that the carriers seem to be making the investments in upgrading their 3G networks. A recent Novarum test on behalf of PC World across 13 cities in the United States, for example, found that AT&T has nearly doubled its 3G access speeds on average — a sign of increased capacity — and that Sprint and T-Mobile also increased capacity faster than demand. Only Verizon Wireless seems to be falling behind demand, though its performance is still strong.

The carriers can also shape 3G traffic demand using techniques that don’t risk Net neutrality-busting tricks. The easiest is to reduce the subsidies for 3G-equipped netbooks and smartbooks if usage grows too fast for the networks to handle. That’ll reduce demand for the devices while the carriers are building out. In addition, their plans need to be month-to-month.

The carriers are already shaping traffic by not offering unlimited data plans for their subsidized 3G netbooks. Instead, they offer 200MB to 250MB of data usage for $40 per month and 5GB for $60 per month, with varying overage charges per megabyte when you exceed those limits. This is the wave of the future: For the forthcoming iPad, AT&T is offering a lower-cost, limited-usage plan (250MB for $15) in addition to the $30 “unlimited” plan (I put “unlimited” in quotes because there are in fact limits hidden in the fine print of the mobile data contracts).

The tiered pricing approach — which I believe will be replicated on smartphone plans in the not-too-distant future — employs neutral pricing bands to discourage use of high-bandwidth resources and makes those who require the most pay for their share of the infrastructure to deliver it. And the no-contract approach steers users to Wi-Fi networks that rely on the wired broadband network. I believe not requiring a contract will reduce 3G consumption by those who only occasionally travel outside Wi-Fi zones; they won’t use 3G routinely because there’s a clear cost for doing so.

Whatever actions the carriers take to keep the capacity/demand equation in balance will remain a mystery unti they do it, of course. But as they’re the ones pushing the devices and services that ABI predicts will cause the 12-fold surge in wireless traffic, they’re the ones who have the levers to make it all work.

The trends are clear, so let’s hope this time the carriers get the balance right. When wireless data demand is 12 times the current load, it won’t be just iPhone users who threaten a revolt.

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This article, “Mobile data explosion: Not the iPhone’s fault,” was originally published at InfoWorld.com. Read more of Gruman et al.’s Mobile Edge blog and follow the latest developments in mobile computing at InfoWorld.com.