IF THE seven billion people on planet earth start calling each other concurrently using the mobile phone, traditional telcos will know how exactly to dimension the network. However, if the seven billion people go online at the same time, no one will have a clue on how to go about it.
How does a conventional telco make money? It is based on two fundamental aspects - Time and Distance. Still remember how we used to get charged when calling our relatives next door or to other states? For a domestic call, the further the distance, the more expensive it is. For international calls, apart from distance, charges differ according to the duration of your call, plus during peak or non-peak hours. That is how conventional telcos profit from the voice business.
Research firm Ovum indicated that consumers' increasing use of IP-based social messaging services on their smartphones cost telecom operators US$8.7bil (RM26.1bil) in losses in SMS revenue in 2010, and US$13.9bil (RM41.7bil) last year.
Change is in the air. Technology advancement brings us amazing benefits such as free online communications tools. Applications like Whatsapp, Viber, Skype, Google Talk and many more, offer us cheap or even free instant messaging and voice calls. These free applications are threatening telecom operators' bread and butter operations.
I have spoken about this change at many 4G conferences all over the world. After the launch of 3G in 2005, I noted the phenomenon that we spend more time reading than talking on our phone. I am a typical example of this change - heavy instant messaging and data use. Some 90% of my mobile phone usage is to do with reading and typing. Only a fraction of the time is used for voice calls.
US research house Senzafili Consulting pointed out that Softbank, the third largest mobile operator in Japan by number of subscribers, became the first operator worldwide to have a data average revenue per user (ARPU) higher than its voice ARPU in 2010 (http://bit.ly/PN41DN).
Conventional telcos are well aware of the necessary changes that must take place. However, decision makers are sceptical about when and which strategy to use to reinvent the business model.
P1, a Greenfield operator that started from an all-IP (Internet Protocol) technology - WiMAX, presented a business case that differs from its 3G incumbents which used circuit-based technology.
Our 4G WiMAX network is designed to provide high-speed and high-capacity broadband from the start. On average, every P1 user consumes 17GB of data per month. This will crash a 3G network at any point in time because it is not designed to withstand massive loads of data transmission; unlike 4G network architecture.
P1's existing business model is being tested and modified since its inception to cope with the explosive data consumption by customers. In other words, rolling out WiMAX gives P1 the lead time in all-IP data management.
At a media showcase in April 2011, P1 successfully demonstrated the ability to transition a WiMAX network to a TD-LTE network in just 30 minutes via a mere software upgrade.
On the devices front, P1's parent company Green Packet is developing TD-LTE devices.
Globally, the momentum for TD-LTE devices proliferation is quickly taking shape. GTI, the Global TD-LTE Initiative has over 30 devices developed and tested. They range from USB dongles, mobile routers, tablets, MIFIs and even smart robots.
TD-LTE will be the springboard for P1 to tap into true mobile broadband, as well as the machine to machine communications market, a new virtually limitless level playing field for everyone. It is now just a matter of time for the whole ecosystem to ramp up and that's happening very soon.
This is a fact simply because Softbank has already commercially launched its TD-LTE network in Japan, China Mobile having trial in six major cities in China, Reliance in India just firmed up its technology partner and many more deployments is expected in the pipeline.
LTE will bring true super high-speed 4G broadband and with huge capacity to life. The technology is ready to show off its capability and operators must be ready to take up the challenge. Regulators are playing a crucial role where the policies will have a direct effect on the operators' business model.
As I always say, if the seven billion people on this planet start calling each other concurrently, traditional telcos will know how to handle the network. However, if these people go online at the same time, no one will know how exactly to dimension the network. Simply because the users may access all sorts of applications and content on the Internet from multiple devices.
One classic example is the new iPad in the United States supports LTE. Operators in America, such as AT&T and Verizon, are now facing a challenge on the surge of data that will potentially crash their LTE network (http://bit.ly/PPpR7b).
Therefore, is 3G to 4G an evolution? More likely it's a disruption! So, are we ready for the future? As former US President Ronald Reagan once said, "You ain't see nothing yet."
(Michael Lai is chief executive officer of Packet One Networks (Malaysia) Sdn Bhd, or P1 in short.)