CSL's fear of the unlimited

Despite its relatively small geographic area, Hong Kong’s population of seven million has no less than five wireless operators to choose from. And with each player enjoying significant market share, the city state’s telecoms market is one of the most hotly contested in the world. CSL is the second largest operator of the bunch with just over 24 per cent of the market, according to Informa WCIS stats, and so has a major say in shaping the local broadband market.

“We’ve seen a massive uptake in mobile broadband offerings and we’ve seen that the usage of phones is much more of a broadband nature than of a traditional calling nature,” Han Willem Kotterman, CSL’s executive vice president for customer service & operations tells Telecoms.com. “Broadband is very much key to our strategy and we are striving to be one of the premier providers in the world on that.”

CSL soft launched its LTE network in March 2011 and in the first week of August made it widely available thanks to the launch of a new dual-mode dual-carrier HSPA/LTE dongle. “We have recently launched our LTE network so we are already providing LTE services, so we can deliver speeds of theoretically up to 100Mbps,” Kotterman says. “But in reality it’s 40/50Mbps, which is still very, very good.”

Naturally at this stage the carrier’s LTE coverage is not ubiquitous, but Hong Kong has the advantage of a relatively small geographic area and CSL can rely on users falling back to its dual-carrier HSPA Next G 3G network, which currently covers 99 per cent of the city.

Despite this solid backing, Kotterman says that there are challenges ahead. Chief among these is the huge demand for data, which has grown by a factor of 100 in the last few years, and is compounded by the scarcity of spectrum to cater for it. “Clearly the challenges we face—and wireless operators around the world are facing this issue—is that spectrum is limited. It’s the scarcest resource in the industry and the data volumes that customers are consuming are increasing rapidly.”

Nevertheless CSL is in a better position than many. “We have luckily invested in a lot of spectrum within the Hong Kong market,” Kotterman says. “We hold 127MHz, which is very, very strong for any one operator to own. In addition, we have quite a strong capacity on the network so we’ve catered for it, and we’re prepared for growth.”

CSL is offering a HK$459 (US$59) unlimited plan for LTE but, despite this, Kotterman believes that the end of the road for unlimited data plans is in sight. “If operators continue on the path that they are on, which is unlimited plans with capped pricing… there will be issues,” he says.

The reason for this, Kotterman believes, is that many users are profligate in their treatment of the networks. “Customers want to use wireless broadband the same way they use fixed broadband at home, which is to never worry about the amount of data they are downloading. There is a tremendous amount of waste in the downloads that are being made by people, especially when networks get faster.”

However, he’s confident behaviour will change once users are no longer given the free reign of an unlimited package. “It’s a part of education. It’s comes from serving unlimited portions. If you go to a restaurant and they have a buffet that’s all-you-can-eat people tend to more on their plate than they would normally eat. I think that’s it’s probably not uncommon for operators to see less than five per cent of their customers consuming more than 50 per cent of their network resources and that’s something they need to manage.”

It’s not just the customers that will have to adjust to new pricing models. Kotterman also believes that, long-term, the OTT services will also need to step into line and start paying their way—and he pulls no punches in his approach.

“I think it’s imperative. I think it’s important we understand what usage is costing the operator. I think right now there is a free for all. Customers have had a free ride and on the back of that the OTT providers have had a free ride, like the Googles and the Amazons and the YouTubes of the world. And I think that it’s only reasonable that if they want to make money off the customers that are using their content and are looking at their advertising, then they should be part of that value chain that is the delivery mechanism to their customers.”

How this should actually occur is of course open to debate. The most direct route would be for the OTT players to pay the operators directly but an alternative, he posits, could be what he refers to as ‘net un-neutrality’, where customers pay for the high bandwidth services that they want to use. “If it’s general browsing, no problem, but if it’s bigger, high-def, 3D content then these things take massive bandwidth, so customers will have to understand that they have to pay for that.”

The alternative Kotterman believes will not be good news for customers or operators as the latter will have to invest in more spectrum. His fear is that this will be so expensive that there could be underinvestment in networks, negatively affecting performance. “Customers will go back to pre-2003 times, before 3G was there [where] the experiences were horrible.”

He also isn’t convinced by the arguments put forward by the Wi-Fi offload community, due to what he perceives as performance and interference issues. “If you switch on your phone and you look for a wireless hotspot in the city you’ll probably see 15-20 hotspots around you. Any radio operator knows that if we were to just put our antennas wherever we want right next to one another they would start to massively interfere. That causes issues from a performance perspective, because they’re operating in the same band. That’s the problem with unlicensed spectrum.”

Despite his concerns, though, Kotterman says overall he is thrilled by what’s happening in the wireless world, and is especially pleased with the progress CSL has made. “It’s a fully deployed LTE network and I’m really excited to see the growth in mobile broadband and wireless.”

Han Willem Kotterman will be speaking in the Traffic Management stream of the Broadband World Forum, taking place on the 27-29 September 2011 at the CNIT, La Defense, Paris, France. (Click here to register).