By Mike Roberts

The rapid and widespread success of mobile broadband services-which now have more than 100 million subscribers worldwide using more than 300 live networks-is sparking a data traffic boom that will revive the struggling mobile base station market, according to Mobile Networks Forecasts: Future Mobile Traffic, Base Stations & Revenues, a new strategic report and forecasts from Informa Telecoms & Media.

There is also good news for operators, given clear evidence that the mobile broadband boom is helping mobile operators achieve one of their key strategic goals-increasing mobile data revenues in a bid to offset declining voice revenues. For example Vodafone, the world’s largest mobile operator by revenues, reported £2.2 billion in non-messaging data revenues for the year ended March 31 2008, up 55 per cent from £1.4 billion in 2007, due to “strong growth in business email and PC connectivity devices” along with “strong takeup of mobile broadband USB modems.” The operator says it signed up 2 million consumer customers to its flat-rate mobile Internet plans in 2007.

However the bad news for Vodafone and virtually all other operators ramping up mobile broadband services is that data traffic is growing much faster than data revenues, partly due to the launch of flat-rate mobile broadband tariffs. Vodafone notes that data traffic increased by more than tenfold in the year ended 31 March 2008 compared to 2007, versus a 55 per cent increase in data revenues. And the trend is widespread-T-Mobile reported a 10-fold increase in WCDMA/HSPA traffic in first-half 2007 compared to first-half 2006, and operators reporting at least a four-fold increase in mobile data traffic in 2007 include AT&T and Telecom Italia Mobile. Similarly, Swedish telecoms regulator PTS reports that mobile broadband subscribers in the country increased three-fold from 92,000 in 2006 to 376,000 in 2007, but over the same period mobile data traffic increased nearly ten-fold, from 203 to 2,191 terabytes.

The bottom line is that all mobile operators are facing the same dilemma, and it is only going to get worse. Informa Telecoms & Media forecasts that global mobile data revenues will increase 77 per cent from 2007 to 2012, but global mobile data traffic will grow far faster, increasing more than 1000 per cent over the same period. The traffic boom will be driven by a dramatic increase in the use of advanced applications such as mobile browsing and video-for example mobile video traffic will grow more than thirty-fold by 2012, according to Mobile Networks Forecasts. The bulk of the traffic boom will naturally happen on advanced networks such as HSPA, EV-DO, WiMAX and LTE, with LTE for example seeing a 70-fold increase in global traffic from 2010 to 2012.

The de-coupling of network traffic-which has a direct impact on costs-and revenues means mobile operators and vendors will have to reinvent their strategies, products and services to cope with the realities of the new mobile broadband era. This helps to explain why operators and vendors are actively pursuing or exploring everything from network outsourcing, network sharing and spectrum refarming to the launch of new and potentially lower-cost systems such as femtocells and next-generation networks.

Another impact of the traffic boom is that it will lead to rebound in the mobile base station market, which is currently flat due to restrained operator investment and fierce price competition. That has led to tough times for mobile infrastructure vendors, and the reality is that the tough times will continue for several years. But Informa Telecoms & Media forecasts that global base station unit sales and revenues will rebound starting in 2011 as operators are forced to add capacity to existing systems and in some cases to upgrade to next-generation networks such as WiMAX and LTE. In fact the traffic boom helps to explain why WiMAX will overtake CDMA to become the third-largest segment in the mobile infrastructure market, according to the base station unit sales and revenues forecasts in Mobile Networks Forecasts.

Apart from seeing a rebound in base station revenues, Informa Telecoms & Media forecasts that 2011 will also be a watershed in that it will be the year when mobile data traffic overtakes mobile voice traffic, which has always driven mobile network design, rollout and operation.

Clearly the transformation of mobile networks from narrowband to broadband and from voice to data will also raise larger strategic questions for operators. For example, many operators are already moving more strongly into mobile Internet content and services, given the higher margins and stock valuations prevailing in those segments. If their strategies are successful they may exit mobile networks entirely, via sales to new dedicated infrastructure players which may in turn rely heavily on infrastructure vendors to operate the networks.

As mobile operators move into mobile broadband content and services, they will naturally have to decide how to cooperate with and compete against the Internet giants such as Google and Yahoo, which have made no secret of their ambitions add mobility to their hugely successful Internet services. In fact a host of operators are already doing deals with major Internet players, though it is too early to gauge the success of the partnerships.

In other words, the mobile industry is still largely structured around its key product to date, narrowband voice, but that structure is breaking down fast due to the boom in mobile network traffic, which is in turn driven by the boom in mobile broadband services. The mobile industry’s transition to mobile broadband is underway, and mobile operators and vendors may never be the same again.