|North America 2008
|Mobile commerce – success, speed and reliability
|Robert W. Pullen
|CEO and President
Robert W. Pullen is CEO and President of Tellabs and a Member of its Board of Directors. Prior to being named CEO, Mr Pullen served in a variety of positions including: Vice President and General Manager of Global Services; Senior Vice President, North American Sales; and Senior Vice President of Tellabs’ Optical Networking Group. Mr Pullen has spoken at many industry forums regarding the development of global broadband full-service wireless and wireline networks to deliver the triple play of video, voice and data as well as upon the impact of DWDM, SONET/SDH and ATM/IP technology on telecommunications, service providers and end customers. Mr Pullen is the Chairman of the Executive Board of the Telecommunications Industry Association (TIA). He is also Co-Chair for NXTcomm 2008. Mr Pullen holds a B.S.E.E. degree, with emphasis on Physics, from the University of Illinois. He also holds a Master of Business Administration degree in Management from Northwestern University with a focus on Finance and Marketing.
Mobile commerce and growing demand for mobile micro payments for vending machines, subway and bus tickets, entrance to show and sporting events, tolls and such are likely to drive the move to 4G. Many operators trying to upgrade to 4G are still struggling with 2.5G and 3G upgrades and need new revenues to finance the move. Among the challenges they face is the need to upgrade their backhaul networks to handle the great increase in traffic generated by 3G and 4G.
The path to 4G/Long-Term Evolution (LTE) wireless communications may soon take a turn straight into a virtual mall where customers buy cans of soda, train tickets and just about anything else using mobile phones. As hyper-competition in wireless telecommunications pushes carriers to plan for fourth generation networks while many are still deploying 3G or finishing upgrades to 2.5G, revenue streams to finance the upgrades are often more potential than real. Mobile gaming and video certainly hold promise, but mobile commerce is the application that seems most likely to support the highly reliable, lightning fast wireless communications of 4G/LTE in the near term. In Japan consumers already buy soda and fast food and purchase goods from online merchants like Amazon.com by using mobile phones and their carrier’s billing system. This generates more than US$400 million a year in revenues, and as customers become more confident using phones for small purchases, these transactions should grow. In developing countries from Kenya to the Philippines, cell phone technology already provides a system for transferring funds among people who do not have bank accounts. Consumers in advanced economies want mobile commerce because of the added convenience it offers. Juniper Research predicts the value of mobile commerce applications and infrastructure to hit US$11.5 billion by 2011. It is an opportunity the wireless industry is eager to embrace. In Europe, several major carriers came together to form the Mobile Payment Services Association to push for new standards in m-commerce systems. More than a dozen mobile operators around the world have launched trials for contactless mobile payment services with an eye toward future commercialization. We have spoken with several participants in these trials and have found great pent-up demand for mobile commerce. Many are eager for cell phones that let them transact business with greater ease and efficiency. “If you ever really pay attention to the moments in your life that you are at a turnstile or at a register, in a place like New York at least, you know these add up to quite a bit,” one trial participant told us. “Instead of hauling my wallet out or having to deal with cash or checks (cheques), it would be just the most wonderful thing in the world to wave this over a reader and have done with it.” That will not happen without the bandwidth and speeds delivered by 3G and 4G systems. “Speed is very much an issue when using your mobile, because you often tend to be impatient in the first place,” another trial participant said. “That’s why you’re using your mobile rather than finding another medium.” Networks that are unreliable, slow or have high latency could discourage growth of mobile commerce before it gains traction. Consumers become nervous when an electronic financial transaction takes too long, or when they have to re-enter their information to make it happen. A typical response was, “When I’m doing a transaction which involves entering credit card numbers and transferring money, I want it done quickly. I want to get it out of the way and I want to know that it’s gone through. And I feel the longer it’s taking to process, the more vulnerable it is to being hacked or stolen.” Speed and reliability are not new notions for wireless networks. Operators have always sought them, knowing customers become impatient with slow, uncertain service. But in the realm of 3G and 4G, the stakes are higher because if customers don’t embrace new data services, revenue to support next-generation technology will be missing. Earlier this year a survey of mobile subscribers in Europe and North America by M:Metrics highlighted the pitfalls of introducing new services with less than stellar execution. In 2007, the survey found that users of mobile video were abandoning that service at an alarming rate. They cited concerns over price, quality and reliability as their major reasons for defecting. We found the ranks of former mobile video users grew at 68 per cent in 2007, outpacing the growth of the total mobile video user market, which was 36 per cent. Clearly, whether the end application is mobile video, gaming or commerce, customers will not settle for anything slow or clunky. Much industry focus on higher bandwidth 3G and 4G systems has centred on the radio side of the equation, with concerns about whether mobile WiMAX is the best choice or whether Long Term Evolution or Ultra Mobile Broadband are really where the industry is headed. While such discussions are natural and necessary, they often overshadow the equally important questions that next-generation technologies raise about network backhaul solutions. Whatever advanced technologies an operator may choose to implement, they will require modernization of backhaul systems that need to adapt to a packetized world. As connections of base stations to the rest of the network have grown complex, they often became outmoded through inattention. Connections ordered years ago and later upgraded never got cancelled and wireless carriers continued paying for them. Unneeded redundant connections have been overlooked. That is why modernizing backhaul architecture can yield stunning returns on investment. In one example, a Tier 1 North American wireless provider identified more than US$18 million in immediate and annual savings in just three metropolitan markets. An audit revealed errors in billing, design and engineering that built up over years. Removing them not only improved network performance, but saved money as well. Implementing 3G and 4G networks makes backhaul issues even more important than they were in a 2G and 2.5G environment, as Sprint Nextel Corp., the North American wireless carrier discovered earlier this year. Sprint is building a WiMAX network, under the brand Xohm, which it planned to launch in three U.S. markets this spring. The launch was delayed due to difficulties with billing and backhaul. The copper backhaul connections that carry 1.5 Mb/s to cell tower sites cannot accommodate the 30 Mb/s to 40 Mb/s WiMAX pumps out, Barry West, Sprint’s chief technology officer, said at the Wireless Communications Association conference in Washington. Sprint is using fibre and microwave to bolster backhaul capacity. Even carriers that are not building new high-speed networks may find backhaul capacity under pressure as customers embrace new services like video texting. Introduction of flat rate pricing in North America this spring by major wireless operators could also strain network capacity especially for backhaul, an analyst for ABI Research warned. “Flat-rate plans will test the limits of 3G networks, raising new challenges for operators,” said ABI senior analyst Nadine Manjaro. “Operators need to pay close attention to the capacity limitations of their 3G networks and the true cost of ‘all-you-can-eat’ data plans.” She said that carriers were already looking at upgrading backhaul for 4G systems, but that flat-rate pricing for 3G will accelerate their need for such upgrades. “The cost of increasing backhaul capacity, handling more calls to service centres and potential increases in customer churn can quickly erode any gains from flat-rate plans,” she added. Backhaul can present a problem to operators, but it can also be an opportunity. Wisely implemented, new technology can reduce operating expenses and improve performance. The key for carriers is to get the expertise necessary to make good decisions. A new application or service that doesn’t pan out can be abandoned to try something else, but decisions about network design and infrastructure aren’t easily changed. Competitive pressures that compel carriers to select their 3G and 4G strategies today shouldn’t blind them to the importance of upgrading the backhaul network so that it can efficiently continue to deliver the core voice and messaging services while accommodating new bandwidth-hungry applications. Carriers need to integrate all services on a single network rather than operate separate networks. Moving toward 4G while still building out 3G has left many operators short of resources, making it imperative that their partners provide the expertise needed to optimize their current network to be the strong foundation necessary to support tomorrow’s bandwidth-hungry applications. The old refrain from vendors that “my box is better than their box” just won’t cut it any more. Robust, flexible, next generation networks will be built, optimally, by virtual teams that reach out for help as needed to navigate technical and regulatory complexities that multiply inevitably as carriers move far beyond the core products of voice and messaging into video, mobile social networking, location-based services, gaming, commerce and beyond. Customers have shown repeatedly that they love mobility, but they also value the speed and flexibility provided by wired broadband. Dropped calls and incomplete transactions just will not be tolerated. To meet user expectations, mobile operators must extract maximum performance from 3G and 4G technology. The good news is that the resources exist to help them meet that high performance bar that customers demand. The better news is that even though advanced networks will require hefty investments to build and operate, there is plenty of pent-up demand for mobile commerce, video and gaming to open the way to new revenue streams. As we increase bandwidth for faster, more reliable applications, customers will appreciate our efforts and reward us by coming back for more.