2014: Network Crisis

February 23, 2014. Sochi Olympic Winter Games. Canada faces the U.S. in yet another hockey final. Sidney Crosby, now 27, scored the winning goal 4 years earlier in Vancouver to win the gold medal for Canada, 3-2 in overtime.The entire country is counting on him again…I am waiting in line to re-charge my car battery. 20 more minutes and I will be home enjoying the game in HD3D – for now my iPhone 8 will do. I pull it out, facial recognition boots: the network is saturated again. Damn you Rogers! I can’t believe I am missing the final…

By 2014, the demand for mobile broadband will surpass the spectrum available. According to the Cisco Visual Networking Index (VNI) forecast, global mobile traffic will reach 3.6 exabytes per month (that’s 3.6 billion gygabytes per month) reaching a yearly total of 40 exabytes – the equivalent of roughly 100 million streaming DVDs. Peter Rysavy, in a report sponsored by RIM for the Mobile World Congress, suggests that wireless networks will not be able to cope with this surge in data traffic. Analysts dub this prediction the “spectrum crisis”, whereby the data demand and use of mobile devices will outpace the carriers’ capacity to provide connectivity.

I was attending SAP World Tour recently, and an analogy made by Duncan Stewart, director at Deloitte Canada Research, painted a very clear picture of the challenges of mobile broadband in 2014. Imagine a notoriously traffic-heavy bridge during peak-time (we all have one of those in our cities) would it matter if you increased the speed limit to 700K per hour? No matter how fast the network is in theory (3G, 4G, you name it), it is the number of devices consuming data on that network that is the real issue. The increased computing capacity of the devices themselves (maybe by then our smartphones will be running on 3 GHz processors?) is the equivalent of driving a sports-car in traffic jam.

There is two major global trends expected to significantly drive up data usage. The first and most obvious is the increase in the number of data-consuming mobile devices. According to Cisco, there could be an expected 5 billion personal devices connecting mobile networks and over 400 million of those devices may be the only way of connecting to the Internet for some people. Deloitte estimates 1/5 of those devices could be the US and Canada.

As Duncan Stewart illustrates, with the average selling price of desktop computers falling to an estimated $500 in 2014, the disposable income available to spend on mobile devices becomes less of an issue and  we can expect the North American smartphone and tablet market to go from $36 billion in 2009, to an estimated $133 billion market by 2014.

The second major trend driving up data traffic is the consumption of video on mobile devices. Cisco estimates that by 2014 mobile video is expected to account for 66% of all mobile data traffic worldwide – a 66-fold increase from 2009. Mobile P2P, VOIP, gaming and Web/Data will account for the remaining 34%.

This double punch of increased demand in mobile bandwidth could lead to a crappy user experience and/or heavy-handed data pricing. Carriers are already abandoning unlimited data plans. Data capacity is clearly a scarce resource, any economist will tell you that tiered data pricing is the way to go – in the short term at least. In the long term, wireless carriers around the world are moving toward a technology called Long-Term Evolution, or LTE, that ramps up the speeds and capabilities of their networks. In the U.S. Verizon, AT&T, Sprint, T-Mobile and Clearwire have layed out their strategy to transition to LTE. In Canada, Rogers, Bell and Telus are all following suite. But while there is excitement about LTE, analysts point to a number of factors that indicate that it will not be enough to quench the thirst for data in 2014.

One thing is certain, with Android and Windows Phone 7 pushing their OS onto more and more handsets and the foothold of Apple and RIM devices, data-hungry smartphones and tablets are here to stay. The big question remains: will carriers have the capacity to stomach the surge in data traffic?

This blog post was published previously on Socialemon.