Verizon Rides a Mobile Data Wave

The annual results Verizon Communications Inc. (NYSE: VZ) announced this morning provided further evidence of the rising volumes of broadband data traffic being seen in wireless networks throughout the world.

Verizon Wireless 's data revenues were $10.7 billion in 2008, up 44 percent over 2007. During 2008, data accounted for fully 27 percent of total wireless service revenues. Two in every three of Verizon Wireless's retail customers now have a CDMA 1X EV-DO-enabled device. (See Verizon Closes Q4.)

Just a couple of years ago, high-capacity cell sites in wireless networks tended to be served by not much more than six E1s or eight T1s, to give 12 Mbit/s of backhaul capacity. Mostly surprised – but in some cases alarmed – leading 3G operators have gone about doubling that to 20-25 Mbit/s at some sites in the last 18 months. And according to Heavy Reading's latest global survey of wireless operators, a majority expect they will have at least 40 Mbit/s of backhaul capacity deployed at some high-capacity sites within three years.

There are some qualifiers to these intentions being fulfilled. LTE (Long-Term Evolution) will need to be commercialized according to schedule, for example. And operators will need to be willing to support the marketing of maximum speeds at the air interface with matching backhaul capacity per cell site sector – not just per cell site.

Nevertheless, with most other general macroeconomic indicators looking pretty bleak, the growing volumes of mobile broadband traffic, as well as the increasing variety of mobile broadband application types, continues to create new revenue opportunities for operators as well as new challenges in cost containment and optimizing the user experience.

Among the vendors that are best placed to benefit from this new wave of mobile broadband data traffic are those in the policy and deep packet inspection (DPI) space. Thus far the efforts of wireless carriers to restrict the full freedom of use of mobile broadband subscribers via usage caps hasn't met with quite the same indignation and vitriol that has been visited on the wireline carriers. Most committed net-neutralists tend to be a little more accommodating toward wireless operators when they understand the inherent limitations on capacity in wireless networks. In the wireless environment, the case for usage caps as a means of enabling the subscriber base to grow faster, at more affordable price points, can be quite compelling.

Certainly, while still subject to abuse – either of the verbal or bandwidth-hogging variety – no wireless operator has yet suffered from the volumes of printable and unprintable protests that Comcast Corp. (Nasdaq: CMCSA, CMCSK) invited upon itself with last year's disastrous decision to block its customers' P2P traffic without even consulting them.

But, as will be highlighted at Light Reading's "Policy Control, DPI & the Mobile Broadband Revolution" conference, collocated with CTIA on April 2, the data traffic hitting the wireless networks of Verizon and many others is causing the net-neutrality debate to shift increasingly toward the mobile arena. Policy and DPI equipment vendors now consistently report that in the medium term they are expecting the largest proportion of shipments to be into wireless networks.

In his election campaign, U.S. President Barack Obama was clear enough in expressing his general inclination toward the net-neutrality model, though he was noticeably non-specific regarding his outlook on wireline networks, let alone wireless networks. As mobile traffic volumes continue to climb, wireless operators in the U.S. are waiting with some anticipation to see how the President's inclinations will affect their options in the policy control and DPI realm. If the apparent force of "Obamamania" around the world continues to sustain itself for more than a few months, it's not out of the question that as America goes in this regard, so will go the rest of the world.

However, wireless operators and equipment vendors are keen to have the debate broadened out beyond the confines of "Yes we can" and "No you can't." At stake are the terms on which the transition to a mass market in low-cost mobile broadband services that support all kinds of real-time multimedia applications will take place. Better visibility is needed into the optimal relationship among price, quantity, and quality as opportunities are created for mobile broadband services to become, not just a personal broadband service, but a primary broadband service. Understanding what role there might be for policy control and DPI in this transformation would be a good start.

— Patrick Donegan, Senior Analyst, Wireless, Heavy Reading

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