In January, Sprint Corp. (NYSE: S) made the decision to apply a US$10 upcharge to all smartphones, 3G and 4G. And that won't be the last time a carrier hikes prices to help cover the cost of keeping up with skyrocketing data usage.

Such moves are a double-edged sword: On the one hand, they provide the extra capital necessary for funding backhaul upgrades and other radio access network (RAN) congestion solutions. On the other hand, these moves make customers even more demanding. If, after several months of forking over extra money, quality of service (QoS) gets worse instead of better, what a carrier's marketing department is braying about its network will sound as hollow as a junkie's promise. High churn followeth.

Upgrading backhaul from E1s/T1s to Ethernet is an obvious place to start tackling the RAN congestion problem, but it is only that -- a start. As discussed in the new Heavy Reading 4G/LTE Insider, "RAN Congestion: Breaking the 3G/4G Bottleneck," RAN congestion has myriad causes. For example, smartphones are problematic not just for the amount of bandwidth they consume, but more so for the signaling traffic they generate. One of the worst-case scenarios thus far was a single Android IM application that generated so much signaling that it nearly crashed T-Mobile US Inc. radio network controllers (RNCs) in multiple markets.

The good news for carriers and their customers is that there is no shortage of tools for reducing RAN congestion. These tools provide an alternative to simply increasing data fees, implementing bandwidth caps or both, all of which can backfire by encouraging desirable demographics to churn away. Discouraging usage can make a carrier a less attractive potential partner for third parties, such as video providers. And from an engineering perspective, tinkering with pricing is not terribly effective because it tackles the problems too broadly.

A smarter alternative is policy control -- a broad category of standards and products that give carriers deep, actionable insights into their traffic and greater ability to manage that traffic, including for individual customers, groups of customers or types of applications and services. Put simply, if carriers can track it, there is a good chance they can manage and even monetize it.

Indeed, if there is an upside to RAN congestion, it is that the problem also is a huge opportunity. Policy-control tools give carriers greater ability to create service tiers, where some customers pay a premium for extra bandwidth and/or prioritization of their traffic. "That's a big, big, big business driver," says Don Bowman, CTO at Sandvine Inc. .

There are also partnership opportunities with third parties whose applications and services are driving significant amounts of traffic. For example, instead of adjusting its data pricing across the board to help defray the cost of mitigating congestion, a carrier might use policy-control tools to identify apps and services that are popular with its customers. Then it could go to those companies and offer a partnership: Pay us a fee, and we'll tell our customers that when they use your service, it won't count against their monthly data bucket -- creating a major market differentiator for that third party.

This strategy could be particularly effective in price-sensitive markets, such as many Latin American countries and India. Or, depending on what a particular country's regulators will allow with regard to net neutrality, the carrier could offer a revenue-sharing deal where the partner's service gets bandwidth and prioritization guarantees, which is particularly attractive for, say, a streaming video subscription service.

The market for RAN congestion solutions is enormous and growing, not just because these products address real-world needs, but also because the market is global. Some of the biggest opportunities lie in developing markets, such as Eastern Europe, Latin America and Southeast Asia. Some vendors see the biggest opportunities in developing markets, where carriers cannot increase data tariffs due to market conditions, such as extreme price sensitivity and cut-throat competition. But ultimately the opportunities exist wherever there are problems -- and judging by all of the customer kvetching, that is pretty much everywhere these days.

— Tim Kridel, Contributing Analyst, 4G/LTE Insider

This report,"RAN Congestion: Breaking the 3G/4G Bottleneck," is available as part of an annual subscription (6 issues per year) to Heavy Reading 4G/LTE Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.heavyreading.com/4glte.