Tuesday, November 3, 2009 at 4:34PM Get ready for a smart phone that won't work like it's supposed to anymore. Apple & AT&T, are you paying attention?
There is a crisis in the making. Some people who are pay attention won’t be surprised—most consumers who are presently using or soon-to-buy an Android or iPhone will be. It’s a real issue that appears to not be acknowledged by smart phone sellers and providers, at least publically, but here’s the problem nonetheless: The marketing of smart phones and services is on a collision course with infrastructure capacity to actually provide the expected benefits that many see their friends and family members as early adopters enjoy--or what they anticipate might be theirs upon the purchase of a new smart phone in the not too distant future.
It’s a case of real-world conflict between propagating the increasing sales of smart phones [and, implicitly, smart phone services] that depend on a wireless infrastructure that that is running out of capacity to deliver such services. U.S. mobile data revenues surpassed $19.4B in the first half of 2009, a roughly 30% increase over the same period a year before. It is reported that the future of 3G networks traffic volumes will—obviously with predicted sales—continue to grow exponentially where the networks will experience serious capacity problems as early as by the middle of 2010.
Today penetration of mobile broadband is estimated to be in the range of under 10% in most western countries, yet already the present level of customers is eating up enormous network capacity. A broadband customer using 1GB per month consumes the equivalent network capacity of over 7,000 minutes of voice transmission. This problem is exaggerated with the success of Apple’s iPhone: Whereas a typical smart phone customer uses up an average of 60MB of wireless capacity a month, the average iPhone customer is estimated to use 400GB. Growing exponentially, U.S. internet traffic has swelled from a monthly 100 petabytes [where one petabyte equals one quadrillion bytes] in 2000, to about 11,000 petabytes a month in 2008! Already—even at relatively low levels of market penetration by smart phones, users are reported to be familiar with the “network busy” signs when trying to place a call at rush hour.
So the question can be logically raised, Will service prices go up to pay for additional capacity [which is likely not even possible in the short-run!] and, thus, also limit access to many, consequently having a moderating effect on the problem? Or will services simply decline with the occurrence of over selling—with current and future consumers having a limited, diminished transmission experience in the not too distant future? It’s a real-life ethical dilemma brewing: more marketing versus less service.
From all we can see from here, it appears that over-selling is very likely to continue, amounting to the equivalent of selling more seats at a concert than exist, over-booking on an airline flight, or making a sale for something’s that’s known to be out-of-stock! There’s an obvious remedy to each of these normal-but-erroneous purchase situations, namely a refund, but not one for a smart phone package that’s not performing as anticipated—worse yet, as advertised!
Stay tuned—it’s likely going to get very interesting.
Update to this post, November 4, 2009:
In some papers on my desk I ran across this morning was an Oct14 opinion piece by Wall Street Journal's Holman W. Jenkins, Jr. entitled "The coming mobile meltdown." In that article he writes thus:
Consider: A single YouTube viewing consumes nearly 100 times as much cellular bandwidth as a voice call. In Asia, some 200 million people already watch video on their smartphones. No wonder Google (whose YouTube unit serves up one billion videos a day) is an investor in a new undersea fiber line connecting North America to the Far East.
More omens: Data collector AdMob reports that mobile Web page requests grew 9% from July to August—a 180% annual growth rate. And Motorola recently went public with worries that a handful of mobile Slingbox users (a video streaming device) could wipe out cell service in a whole neighborhood.
This is a mobile meltdown in the making.
Later in the same piece:
Think about it. Mobile browsing could quickly become a very different experience for users, and require an entirely new approach by Web businesses. After all, flat-rate pricing inspired customers to sample the Web and its services a lot more freely than they otherwise would. Still, the resistance of Google, Microsoft, Amazon and others to usage pricing may be futile unless they're willing themselves to subsidize delivery of their services to mobile consumers—which would turn net neut precisely on its head.
Again, pull up a seat and get ready to watch either a high-tech train-wreck...or how the mishap will be averted--in any case, something's has to change! And it will be interesting to see what it is.
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Reader Comments (1)
No doubt we'll see an exponential rise in bandwidth usage as denizens from emerging economies increase their buying purchasing power over the next few years. Indeed, the CIA Factbbook estimates that, at its current growth rate, China will surpass the USA's GDP to become the largest economy in the world by 2040 or so. Without a doubt, we'll see 1 billion mobile phones in that country alone before too long.
Having said the above, the problem is not with bandwidth but with research. The USA and other leading economies have gotten themselves in a bind by effectively killing high-performing research labs like AT&T Bell Labs and Xerox's Palo Alto Research Center. The focus now is innovating for short term business profits (aka as competitive advantage). In the world of research, 10 years is considered short term.
Why is pure research so important one may ask? Two reasons come to mind: the transistor and the computer mouse (we can include GUI, internet, radio, etc). I use electronic technology not for convenience because I'm an electrical engineer but because it is the most relevant segment that has shown that it can overcome technical challenges if research is not foresaken. With the demise of Bell Labs (a tragedy if ever their was one), those researchers who study slugs to create computer-based neural networks are now much more difficult to find and lure. There are several promising technologies that can assist in conquering the bandwidth problems but they seem to be dragging on forever (spintronics, nano technology, neural networks, computer-based biochemical reactions to name a few).
The USA should take the lead to harvest award winning research labs like Bell Labs and The Palo Alto Research Center did in the past (Bell Labs alone peoduced six Nobel Proze winning researchers and thousands of patents over the years). Such outstanding research facilities will attract the best and brightest from around the world. Such folks who are smarter than me will solve the bandwidth problem because technology made by man can be enhanced and conquered by man given the right incentives, accommodations and environment (and money of course).
The bandwidth problem is not due to the proliferation of the smartphone. It's due to the money poring into business research to sustan competitive advantage but not to sustain the infrastructure to support it. Let's get the research back and that problem will be fixed.