Study: "Solving the network strategy puzzle for mobile broadband operators"

• Mobile telecommunication operators face heavily growing demand for mobile broadband services, especially driven by data cards
• To meet rising bandwidth and capacity needs, and to prevent network congestion, operators must adjust their network strategy
• Investments in new access technology bring along radically new network economics leaving mobile operators with the quest to gear their network investments towards a cost optimal access, backhaul and core portfolio
• To make the required investments pay off financially comprises a major challenge, there is no one size fits all solution

All across Europe, mobile telecommunication operators face rapidly growing demand for mobile broadband services as customers supplement their fixed-line broadband behavior with mobile usage. In 2008 mobile broadband penetration as a percentage of total population was approaching 10% in some European markets. While this figure is still relatively low compared to fixed broadband penetration levels in the range of 60-80%, forecasts project mobile penetration to increase significantly over the next 2-3 years, reaching levels of 25% by 2011. This growth in mobile broadband usage is primarily driven by data dongles and the spreading acceptance of newly developed handsets, opening up long-awaited business opportunities for mobile service providers. However, while this may generate additional revenue for mobile operators, the surge in traffic and users puts intensive pressure on the capacity of their networks. Managing the surging traffic becomes a major challenge. At the same time bandwidth needs of users are rising steadily.

"In order to meet rising bandwidth and capacity needs top level decisions about network investments have to be made" says Tim Bottke, Principal with Roland Berger Strategy Consultants. "However, such decisions are associated with high economic risks: With new technologies on the horizon, the principles of network economics are changing dramatically with regard to costs, capacity and demand."

Mobile operators must examine all parts of their networks

A wide range of radio access technologies is available for operators. However, investments in new access technology bring along radically new network economics leaving mobile operators with the quest to gear their network investments towards a cost optimal access, backhaul and core portfolio. "The new technologies truly change the rules of the game from an investment and network perspective," says Tim Bottke, "Making such investments pay off financially requires thorough analysis. The ideal network strategy varies from operator to operator" adds Dr. Lars Finger, Principal with Roland Berger. Fixed access networks can be a cost efficient add-on to mobile access and significantly improve data transfer rates for customers. However, "while some converging mobile operators will build fixed access networks on a large scale, other players must more selectively use this option to enhance their mobile networks," says Tim Bottke. Roland Berger's network technology experts have financially modeled new technology deployment scenarios in full, building on real life data for mobile broadband usage and identifying the most important focus areas for improving the profitability of new technology deployments. "It is key for operators to exploit their existing technological footprint in order to minimize CAPEX and OPEX. At the same time, they must aim for the most actionable economically sound wireless broadband technology to cope with surging demand" adds Dr. Lars Finger "Additionally they must leverage the best available frequencies and licenses for incremental technology deployment".

Eight Key statements driving network strategy

1. Mobile broadband usage is finally becoming a fact for customers: mobile and fixed broadband will coexist
2. To manage the challenge of surging traffic, a coherent approach to network strategy is imperative for today's mobile operators. With OPEX and CAPEX optimization as its goal, the strategy must incorporate both mobile and fixed access as well as backhaul and core strategies
3. The existing infrastructure will inevitably have to be upgraded to align the network with the projected growth in mobile data use, rather than merely enforcing fair usage measures
4. A stand-alone mobile network solution will likely not be enough to handle the anticipated mobile data traffic, especially in densely populated areas
5. It is key for operators to exploit their existing technological footprint in order to minimize CAPEX and OPEX – At the same time, they must aim for the most actionable economically sound wireless broadband technology while simultaneously leveraging the best available frequencies and licenses for incremental technology deployment
6. Fixed access networks can constitute a cost efficient add-on to mobile access and can significantly improve data transfer rates for customers. Convergent mobile operators, however, do not have to build fixed access networks on a large scale, but must selectively identify and exercise the option to enhance their mobile network
7. Any technology taken into consideration for backhaul and core must be NGN-ready in the long-term, since future convergence aims at an all-IP core network with the capability to seamlessly handle traffic from fixed and mobile access networks
8. Mobile operators can choose to follow established blueprints for investing in networks, but they will likely make expensive mistakes and miss the opportunities of adapting their approach to changing supply and demand conditions. To ensure success in solving the network strategy puzzle, they must effectively minimize the investment risks by partnering