This is not PART 2 of “Mobile Data Growth…The Perfect Storm” … This is the story of the Thousand Times Challenge!
It is not unthinkable that some mobile operators will face very substantial problems with their cellular data networks due to rapid, uncontrollable or un-managed cellular data growth. Once cellular data demand exceeds the installed base supply of network resources, the customer experience will likely suffer and cellular data consumers will no longer get the same service level that they had prior to the onset of over-demand.
One might of course argue that consumers were (and in some instances still are) spoiled during the period when mobile operators had plenty of spectral capacity available (relative to their active customer base) with unlimited data plans and very little cellular network load . As more and more customers migrate to smartphones and 3G data services, it follows naturally that there will be increasingly less spectral resources available per customer.
The above chart (from “Capacity Planning in Mobile Data Networks Experience Exponential Growth in Demand” illustrates such a situation where customers cellular data demand eventually exceeds the network capacity … which leads to a congested situation and less network resources per customer.
A mobile operator have several options that can mitigate emergence of capacity and spectrum crunch:
- Keep expand and densify the cellular network.
- Free up legacy (i.e. “old-technology”) spectrum and deploy for technology facing demand pressure.
- Introduce policy and active demand management on per user / segment level.
- Allow customers service to degrade as provider of best-effort cellular data.
- Stimulate and design for structural off-loading (levering fixed as well as cellular networks).
DEMAND … A THOUSAND TIMES FABLE?
Let me start with saying that cellular data growth does pose a formidable challenge for many mobile operators … already today … its easy to show that even at modest growth rates cellular data demand gets pretty close or beyond cellular network resources available today and in the future. Unless we fundamentally changes the way we design, plan and build networks.
However, Today The Challenge is Not network wide … At present, its limited to particular areas of the cellular networks … though as the cellular data traffic growths, the demand challenge does spread outwards and addresses an ever higher share of the cellular network.
Lately 1,000 has become a very important number. It has become the answer to the Smartphone Challenge and exponential growth of mobile data. 1000 seems to represent both demand as well as supply. Qualcomm has made it their “mission in life” (at at least the next 8 years) to solve the magic 1000 challenge. Mallinson article “The 2020 Vision for LTE” in FierceWirelessEurope gives a slightly more balanced view on demand and target supply of cellular resources: “Virtually all commentators expect a 15 to 30-fold traffic increase over five years and several expect this growth trend to last a decade to 2020, representing a 250-1,000-fold increase.” (note: the cynic in wonders about the several, its more than 2, but is it much more than 3?)
The observant reader will see that the range between minimum and maximum to be a factor of 4 … a reasonably larger error of margin to plan for. If by 2020 the demand would be 1,000 times that of demand in 2010, our Technologies better be a lot better than that as that would be an average with a long tail.
Of course most of us know that the answer really is 42! NOT 1000!
Joke aside … And let’s get serious about this 1000 Fable!
Firstly, 1,000 is (according with Qualcomm) the expected growth of data between 2010 and 2020 … Thus if data was 42 in 2010 it would be 1000×42 by 2020. That would be a CAGR of 100% over the period or a doubling of demanded data year in year our for 10 years.
… Well not really!
Qualcomm states that data demand in 2012 would be 10x that of 2010 . Thus, it follows that data demand between 2012 and 2020 “only” would be 100x or a CAGR of 78% over that period.
So in 2021 (1 year after we had 1,000x) we would see demand of ca. 1,800x, in 2022 (2 years after we solved the 1000x challenge) we would experience a demand of more than 3,000x, and so forth …
So great to solve the 1,000x challenge by 2020 but it’s going to be like “peeing in your trouser on a cold winter day” . Yes it will be warm, for a little while. Then its going to be really cold. In other words not going to help much structurally.
Could it be that this 1,000x challenge might be somewhat flawed?
- If All Commentators and Several Experts are to be believed, the growth worldwide is almost perfectly exponential with an annual growth rate between 70% and 100%.
- Growth is “unstoppable” -> unlimited sources for growth.
Actually most projections (from several expert sources;-) that I have seen does show substantial deceleration as the main source for growth exhaust, i.e., as Early & Late Majority of customers adapt to mobile data. Even Cisco own “Global Mobile Data Traffic Forecast Update, 2011 – 2016” shows an average deceleration of growth with an average of 20% per anno between 2010 and their 2014 projections (note: it’s sort of “funny” that Cisco then decide that after 2014 growth no longer slows down but stays put at 78% … alas artistic freedom I suppose?).
CELLULAR CUSTOMER MIGRATION
The following provides projection of 2G, 3G and LTE uptake between 2010 (Actual) and 2020 (Expected). The dynamics is based on latest Pyramid Research cellular projections for WEU, US, APAC, LA & CEE between 2010 to 2017. The “Last Mile”, 2018 – 2020, is based on reasonable dynamic extrapolations based on the prior period with a stronger imposed emphasis on LTE growth. Of course Pyramid Research provides one view of the technology migration and given the uncertainty on market dynamics and pricing policies are simply one view on how the cellular telco world will develop. This said, I tend to find Pyramid Research getting reasonably close to actual developments and the trends across the various markets are not that counter-intuitive.
For the US Market LTE is expected to grow very fast and reach a penetration level beyond 60% by 2020. For the other markets LTE is expected to evolve relative sluggish with an uptake percentage of 20%+/-5% by 2020. It should be remembered that all projections are averages. Thus within a market, for a specific country or operator, the technology shares could very well differ somewhat from the above.
The growth rates for LTE customer uptake over the period; 2010/2011 – 2020, 2015 – 2020 and respective LTE share in 2020.
WEU 2010-2020: 87%, 2015 – 2020: 24%, share in 2020: 20%.
USA 2010-2020: 48%, 2015 – 2020: 19%, share in 2020: 62%.
APAC 2010-2020: 118%, 2015 – 2020: 61%, share in 2020: 30%.
CEE 2011-2020: 168%, 2015 – 2020: 37%, share in 2020: 20%.
LA 2010-2020: 144%, 2015 – 2020: 37%, share in 2020: 40%.
Yes the LTE growth rates are very impressive when compared to the initial launch year with the very initial uptake. As already pointed out in my Blog …. growth rates in referenced back to a penetration less than 2% has little practical meaning. The average LTE uptake rate across all the above markets between 2012 to 2020 is 53%+/-17% (highest being APAC and Lowest being USA).
What should be evident from the above technology uptake charts are that
- 3G remains strong even in 2020 (though likely dominated by prepaid at that time).
- 2G will remain for a longtime in both CEE & APAC, even toward 2020.
In the scenario where we have a factor 100 in growth of usage between 2012 and 2020, which is a CAGR of 78%, the growth of usage per user would to be 16% pa at an annual uptake rate of 53%. However, without knowing the starting point of the LTE data usage (which initially will be very low as there is almost not users), these growth rates are not of much use and certainly cannot be used to make up any conclusions about congestion or network dire straits.
Example based on European Growth Figures:
A cellular networks have 5 mio customers, 50% Postpaid.
Network has 4,000 cell sites (12,000 sectors) that by 2020 covers both UMTS & LTE to the same depth.
in 2020 the operator have allocated 2×20 MHz for 3G & 2×20 MHz for LTE. Remaining 2G customers are one a single shared GSM network support all GSM traffic in country with no more than 2x5MHz.
By 2020 the cellular operator have ca. 4Mio 3G users and ca. 0.9Mio LTE users (remaining 100 thousand GSM customers are the real Laggards).
The 3G uptake growth rate ‘2010 – ‘2020 was 7%, between ’10 – ’12 it was 25%. 3G usage growth would not be very strong as its a blend of Late Majority and Laggards (including a fairly large Prepaid segment that appear hardly to use Cellular data).
The LTE uptake growth rate ‘2010 – ‘2020 was 87%, between ’10 – ’12 it was 458%. The first 20% of LTE would like be consisting of Innovators and Early Adopters. Thus, usage growth of LTE should be expected to be more aggressive than for 3G.
Let’s assume that 20% of the cell sites carries 50% of the devices and for simplicity also data traffic (see for example my Slideshare presentation “Capacity Planning in Mobile Data Networks Experiencing Exponential Growth in Demand” which provides evidence for such distribution).
So we have ca. 800 3G users per sector (or ca. 40 3G users per sector per MHz). By 2020, one would likewise for LTE anticipate ca. 200 LTE users per sector (or ca. 10 LTE users per sector per MHz). Note that no assumptions of activity rate has been imposed.
Irrespective of growth rate we need to ask ourselves whether 10 LTE users per sector per MHz would pose a congested situation (in the busy hour). Assume that the effective LTE spectral efficiency across a macro cellular cell would be 5Mbps/MHz/Sector. So the 10 LTE users could on average share up-to 100Mbps (@ 20MHz DL).
For 3G, where we would have 40 3G users per sector per MHz. Similar (very simple) considerations allows to conclude that the 40 4G users would have no more than 40Mbps (under semi-ideal radio conditions and @ 20MHz DL). This could be a lot more demanding and customer affecting than the resulting LTE demand, despite LTE having substantially higher growth rate than we saw for 3G over the same period.
High growth rates does not default result in cellular network breakdown. It is the absolute traffic load (in the Busy Hour) that matters.
The growth of of cellular data usage between 2010 and 2020 is likewise going to be awesome (it would be higher than above technology uptake rates).. but also pretty meaningless.
Growth rates only matter in as much as growth brings an absolute demanded traffic level above the capability of the existing network and spectral resources (supplied traffic capacity).
Irrespective of a growth rate is high, medium or low … all can cause havoc in a cellular network … some networks will handle a 1,000x without much ado, others will tumble at 250x whatever the reference point level (which also includes the network design and planning maturity levels).
However, what is important is how to provide more (economical) cellular capacity avoiding;
- Massive Congestion and loss of customer service.
- Economical devastation as operator tries to supply network resources for an un-managed cellular growth profile.
(Source: adapted from K.K. Larsen “Spectrum Limitations Migrating to LTE … a Growth Market Dilemma?“)
Thanks a lot for the great post. I found that China Unicom and China Mobile provide a much transparent view about Mobile Data Traffic Growth & Revenues. Infact, China Mobile provides a clear seperation for WLAN Traffic & Revenue. As per yesterday’s results released by China Unicom, the data growth rate seems to be slowing down drastically. Based on results and my calculations.
Overall Mobile Data Traffic Growth Rate Slows Drastically …..
489.1% to 293.4% to 112.4% (1H2011 v/s 1H2010); (2011 v/s 2010); (1H2012 v/s 1H2011)
3G Mobile Data Traffic Growth Rate Slows Considerably …….
373.8% to 129.3% (2011 v/s 2010) (1H2012 v/s 1H2011)
GSM Data Traffic Growth Rate Slows Considerably …………….
256.2% to 113.7% to 43.8% (1H2011 v/s 1H2010); (2011 v/s 2010); (1H2012 v/s 1H2011)
http://www.chinaunicom.com.hk/en/investor/ir_presentation.html ; 3 presentations for 2012H1, FY2011, 2011H1.
Thank you for this additional data point and analysis on China Unicom. Very interesting and important information for understanding data traffic in growth markets.