Mobile carriers face ‘scissor effect’ challenge

Avoiding the dreaded Scissor Effect has become the number 1 priority for mobile carriers. The scissor effect refers to the phenomenon of rising infrastructure costs and flat revenues; an unsustainable situation for any business.

The scissor effect has already been witnessed in fixed line networks and now mobile carriers face the same challenge in relation to mobile data services. Is it possible for mobile carriers to grow revenue per user in line with bandwidth usage?

The key to avoiding the scissor effect is intelligence. You can’t manage what you can’t see, so more intelligence on network and service usage is a fundamental first step. But, intelligence can also be understood as providing smarter services that better meet the needs and expectations of customers and, for which, mobile carriers can earn revenue in line with bandwidth growth. The intelligence gathered from the network lays the foundation for building more intelligent services, which in turn leads to more satisfied customers, who spend more.

Mobile carriers are fully aware of the Scissor Effect threat and have taken steps to respond with various solutions based on Deep Packet Inspection to manage traffic. This includes services where consumption caps are introduced (i.e. you pay a flat-rate up to a certain download limit and higher rates thereafter) and even degradation of performance for “undesirable” services, such as peer-to-peer downloads.

These approaches are effective, but are they customer-friendly? Will this approach lead to more satisfied customers who are willing to pay more or customers ready to switch provider as soon as the option arises? How easy will it be for a hungry competitor to compete with this model? I think the answers are clear.

An alternative approach is to build a strategy based on understanding and satisfying customer needs and providing services that reflect how they would like to use their mobile data services. The proposition is that by concentrating on providing exactly what customers want, they are less likely to switch provider and are more likely to pay more for the convenience and value their mobile data services provide.

The key to achieving this is intelligence. The first step is gathering intelligence on network and service usage, so we understand how customers are using their mobile data services and that they are receiving the quality of experience they require. With this intelligence, it is possible to tailor services to different types of customer usage scenarios. For example, some customers are more active during the day, others in the evening. Some customers are more active on Facebook, others more interested in news broadcasts or music download.

With this intelligence, a better basis for network planning is established, based on a much better understanding of how and when customers will use their services. The infrastructure established to gather network and service intelligence data can also be used to monitor usage in real-time trends and shifts in behavior that can be detected early allowing changes to network planning and service plans to be made, not to mention pricing models.

In short, more intelligence on network and service usage leads to more intelligent, agile and responsive service definition, pricing and network planning. What is required is the establishment of a network intelligence infrastructure that can provide the data, in real-time, that is required to make this a reality.

This investment need not be expensive. It is possible to build Deep Packet Inspection and Policy Server systems using off-the-shelf standard server hardware and commercial intelligent network adapters. This provides an extremely cost-effective hardware platform with high-performance. Since multiple systems will need to be deployed at critical locations in the network, it is important to base development on a cost-effective, high-performance, reliable and, most importantly, scalable platform.

Scalability is absolutely essential as mobile data traffic threatens to swamp mobile networks. The advantage of standard servers is that the underlying server chipsets are increasing performance by up to 60% each year. What’s more, these chipsets are based on multiple cores with higher densities available on an annual basis. The availability of more and faster processing cores each year provides an opportunity to scale performance as and when new standard servers are available.

Avoiding the scissor effect requires intelligence. To build intelligent services, you need network intelligence based on systems that are built intelligently. Only by re-thinking how services are provided, how networks are built and how systems are developed can we hope to respond quick enough to the challenges that will face mobile carriers over the coming years.

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Daniel Joseph Barry is VP of Marketing at Napatech and has over 17 years experience in the IT and Telecom industry. Prior to joining Napatech in 2009, Dan was Marketing Director at TPACK, a leading supplier of transport chip solutions to the Telecom sector. From 2001 to 2005, he was Director of Sales and Business Development at optical component vendor NKT Integration (now Ignis Photonyx) following various positions in product development, business development and product management at Ericsson. Dan joined Ericsson in 1995 from a position in the R&D department of Jutland Telecom (now TDC). He has an MBA and a BS degree in Electronic Engineering.