Mobile Operator Survey: Increase in Data-Hungry Devices Set To Be Most Disruptive Force, But Driving Revenues Still the Biggest Challenge

Strong support for LTE Advanced, VoLTE, small cells and Wi-Fi offload in global operator survey by Radisys.

HILLSBORO, OR, U.S. – February 22, 2012 - A rise in the volume and variety of data-hungry mobile devices, including more affordable smartphones, tablets and e-readers, is set to be the most disruptive force in the wireless industry in the next three years. Operators are investing heavily in their networks to support new devices and services, yet they identified driving revenue from mobile broadband as their most significant challenge. These were the key findings of a global operator survey commissioned by Radisys Corporation (NASDAQ: RSYS) and undertaken by wireless analysts Senza Fili Consulting, ahead of Mobile World Congress 2012.

In January and February 2012, senior decision makers from operators in North America, Europe and Asia Pacific were interviewed for the survey. The survey revealed which technologies or services operators expected would have the most significant effect on the industry, how those technologies would impact network performance, subscriber experience and revenue, and which they would support or fight.

Highlights from the global operator survey include:

  • 100% of European and Asia Pacific operators intend to deploy small cell networks within two years; 100% of North American operators will do so but in three years’ time
  • 86% of all operators surveyed support VoLTE
  • 82% of all operators surveyed support Wi-Fi® offload
  • 82% of all operators surveyed believe new mobile devices will have a positive impact on revenues and subscriber experience
  • 71% of all operators surveyed viewed new mobile devices as the most disruptive force in the next three years
  • In North America, the most disruptive force will be VoLTE. In Europe, it will be new mobile devices, and in Asia Pacific, it will be, jointly, Wi-Fi offload, small cells and TDD/FDD hybrid networks, with devices in second.
  • 58% of all operators surveyed believe LTE Advanced will have a highly positive impact on revenues and subscriber experience; 66% agree that it will not happen for three years

“Devices will continue to be the main driver to change in our industry,” comments Monica Paolini of Senza Fili Consulting. “They have fundamentally changed the way subscribers use mobile broadband – why they use it, what they do with it, and how much traffic they generate. Yet, there is a pervasive feeling that we have just started to scratch the surface.”

Radisys CTO Manish Singh added: “It is clear from the results of this in depth study of mobile operators’ views that capacity increases and cost reduction are still at the forefront of their near-term operational plans. With the exception of tablets, operators are focused on making their networks faster and more efficient. Yet this is all set in an environment where to grow revenue is enormously challenging, and competition on new services from OTT players is fierce. Operators are seeing increase in adoption of exciting new applications, but they are not able to benefit so capacity and cost remain paramount.”

A consistent theme presented by the operators during the in-depth interviews was the feeling that it was impossible to predict subscribers’ behavior and manage them effectively, improving the user experience and shaping services. However, those operators also recognized the advancement in technologies that would allow them to actively manage traffic, from the device through to the core – streaming video optimization, policy management and service enablement in the core through advanced, high-speed platform capabilities. One North American survey participant said: “We are currently upgrading to 40G ATCA. Enablement in the core is the key to providing a fast service. Every link in the transport chain needs to be high speed.”

Small cell networks

Small cells deployed in urban or other high traffic locations as an underlay to increase cellular capacity density are seen as a game changer, especially in Asia Pacific, where they are the joint highest-rated source of disruption. There are, however, obstacles to be overcome before deployments are widespread and many operators view small cell topologies as a gradual solution to capacity pressure points, rather than a radically new type of network topology.

What the operators said:

  • “Today it is Wi-Fi offload, but in the long-term small cells will become more important to increase capacity. But we need to solve the backhaul challenges. Fiber is too expensive, and microwave is not ideal.” – North American survey participant
  • “Wi-Fi offload is for residential offload and indoor public locations. Small cells for outdoor dense urban areas.” – APAC survey participant

VoLTE

VoLTE is almost universally recognized as a must have, but only at a later stage. Some operators want to deploy it sooner than others, but for most it is not perceived as an immediate requirement. Operators do not plan to deploy VoLTE because they need LTE to carry voice, but because they want to move to LTE-only devices.

There is little expectation that VoLTE will provide new revenues. On the contrary, VoLTE will put additional pressure on voice revenues if, as expected, voice services increasingly move to flat-fee plans. Among survey participants, 25% expect VoLTE to have negative impact on revenues or customer experiences.

What the operators said:

  • “Circuit-switched voice is not going to disappear over the next five years. But we do need VoLTE to gradually reduce our dependency on legacy 3G and 2G networks, to a point where we will feel comfortable to turn them off. But it will take a long time.” – APAC survey participant
  • “It is still crucial to have good quality voice on handsets. Without it subscribers will not be impressed by LTE. Equally important is the ability to seamlessly switch between voice and data, and that is not currently available.” – European survey participant

Wi-Fi offload

As operators wait for their LTE networks and their small cell deployments, many have deployed a Wi?Fi offload solution to ease network capacity pressure. Even though Wi-Fi was in many cases deployed as a temporary solution, the operators surveyed are keen to retain their Wi-Fi infrastructure and/or roaming agreements after deploying LTE and small cells. The role of Wi-Fi may be reduced by small cell deployments, but most operators see the two as complementary.

What the operators said:

  • “Wi-Fi offload is crucial as we wait to deploy LTE or LTE Advanced.” – APAC survey participant
  • “A crucial element to ensure continued success of Wi-Fi offload is to make the connection to Wi-Fi completely transparent, so that the subscriber does not even need to know whether Wi-Fi is used.” – North American survey participant

Tablets and new mobile devices

The impact of new devices on revenues and subscriber experience is expected to be largely positive across the world, but interestingly North American respondents have highest expectations, perhaps driven by a higher penetration of these new data-centric devices. Yet tablets have potential for creating a new headache for operators. Compared to smartphones, tablets generate much more traffic – and this is slated to increase as tablets evolve, more applications become available, and they increasingly use cellular networks instead of Wi-Fi for access.

What the operators said:

  • “Devices will become big screens anchored in the cloud for content and applications. We will not need faster processors, but network reliability has to go up to support this model.” – European survey participant
  • “We expect change to be driven by devices like tablets expanding functionality and gaining ground over other device categories.” – European survey participant

Service monetization

All operators surveyed agree that their main goal is to increase revenues both to retain profitability and to maintain investment in the infrastructure required to keep up with demand. Operators are challenged to balance future investment while also ensuring service monetization is possible despite the anticipated disruptions.

What the operators said:

  • “We cannot afford to manage traffic growth without corresponding increases in revenues. We have ways to increase capacity but we cannot necessarily afford it.” – European survey participant
  • “We need new more dynamic, application-based revenue models. Using a tonnage-based charging system is not sustainable in the long term. You do not want to charge everybody the same way: it has to depend on subscribers’ behavior.” – North American survey participant

LTE Advanced

Capacity comes to the fore as the main driver to deploy LTE Advanced, as it is for small cells and Wi?Fi offload. Overall North American survey participants are more optimistic about the opportunity that LTE Advanced offers, both in terms of improving subscriber experience and revenues, and in reducing costs and improving performance. And they expect to deploy it earlier: 67% of North American survey participants expect LTE Advanced to be deployed in two years, compared to 33% in Europe and APAC. This is in line with the more accelerated LTE deployment timeline in North America.

What the operators said:

  • “LTE Advanced increases network capacity, but in most cases it will not improve the subscriber experience as small cells will.” – European survey participant
  • “LTE Advanced is an incremental transition, not a game changer.” – European survey participant

About Radisys

Radisys (NASDAQ: RSYS) is a leading provider of embedded wireless infrastructure solutions for telecom, aerospace, defense and public safety applications. Radisys’ market-leading ATCA, IP Media Server and COM Express platforms coupled with world-renowned Trillium software, services and market expertise enable customers to bring high-value products and services to market faster with lower investment and risk. Radisys solutions are used in a wide variety of 3G & 4G / LTE mobile network applications including: Radio Access Networks (RAN) solutions from femtocells to picocells and macrocells, wireless core network applications, Deep Packet Inspection (DPI) and policy management; conferencing and media services including voice, video and data, as well as customized mobile network applications that support the aerospace, defense and public safety markets.

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