Mobile networks desperately seek data capacity

Call it network congestion, capacity crunch or data overload - the complaints aired at the Mobile World Congress in Barcelona this week were all about cellphone network operators trying to find ways of profitably handling an explosion in mobile data traffic.

Management of the data traffic has become a priority for the telecoms industry as mobile internet usage is booming but data revenues for the phone companies grow slowly at best.



Research firm Informa forecasts a 50 per cent rise in mobile data traffic in 2010 on the back of the increasing popularity of devices such as the Apple iPhone and netbooks, but only a 13 percent rise in data revenues.



This has put added pressure on the phone companies to find ways of using fixed line networks including the internet to take some of the strain off the airwaves.



"Offloading is crucial for us," France Telecom -owned Orange's global head of mobile Olaf Swantee told Reuters ahead of the conference.



"In many countries where we have a fixed network we try to offload directly," he said.



The problem is that offloading data from wireless network to local hotspots still costs money, and operators are searching left and right for solutions that will not raise their overall capital spending, industry executives said.



"To address the smartphone challenge they are investing again," said Rajeev Suri, chief executive of joint venture equipment maker Nokia Siemens, who added that it was uncertain whether this spending was additional to or instead of other investment plans.



More certain was Bruce Brda, head of rival Motorola's networks business. "Carriers have been very consistent - they do not increase capex," he told Reuters.



Nevertheless Motorola saw better than expected demand late last year for equipment as some operators strengthened their existing networks to cope with surging data traffic, Brda said.



"In early 2010 I am seeing the same trend. The indication is there is incremental spending."

Equipment vendors such as Ericsson, Nokia Siemens and Alcatel-Lucent were also demonstrating new technology LTE equipment in Barcelona, as a route toward handling the data rush.



Operators are expected to spend billions of euros converting their networks to the Long Term Evolution standard, which will enable fast mobile broadband access for services such as watching movies on mobile phones, although some critics say LTE would prove a stopgap solution if data traffic goes on growing.



"LTE will buy a carrier two to three years of relief, but then it runs out," Brda said.



And analysts say telecom operators' sales in mature markets are not growing fast enough to justify major investments, which may mean an increase in demand instead for other technologies such as Wi-Fi or femtocells.



Femtocells are localized phone network base stations sited in homes and offices where signal strength might otherwise be weak, taking users onto the phone company's network via their own broadband internet connections.



"The biggest problem is that everybody is expecting these huge amounts of data but nobody is willing to pay much extra for it," said Stephen Rayment, chief technology officer of Belair Networks, which provides Wi-Fi services.



"Operators started offering 'all you can eat' data and now that's coming back to bite them," he said.

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