Microsperience

Teresa Cottam looks at the truth behind the capacity crunch and why, as a challenge, it is somewhat misunderstood…

There’s a lot of talk about the capacity crunch and the impact this is having on CSPs and upon the service they deliver. (See for example: Red Hot Telecoms Tech: QoS Gets Up Close And Personal) In many ways though, even the term “capacity crunch” is a complete misnomer, and disguises what the real problem is.

You see the problem isn’t really rising traffic on our networks – in fact in other circumstances this would be a cause of celebration. Rather the problem is that traffic is rising, capacity is being consumed, and we’re not making sufficient incremental revenues to compensate for this usage or justify further investment.

If revenues were going up along with the traffic, we would have a pure play engineering challenge. And I honestly believe our network folk are creative and expert enough to solve that challenge given an adequate budget.

The difficulty is, of course, that revenues are not rising in line with traffic. So not only do we have an engineering challenge, we also have business, operational and customer challenges. Customers require adequate QoS and desire greater capacity and faster speeds; but in many countries the business case for continual network investment may be far from clear cut. For example, some consumers are using a large amount of capacity, all of the time, and don’t pay sufficient sums for what they’re using (so-called “bandwidth hogs”); others are unable or unwilling to pay for the true cost of supplying services to them (for example, they live in a remote area); some are uneconomic to support because their behaviour makes them unprofitable (for example, they ring the call centre a lot). Cross-subsidisation has long been practised; but is becoming a less useful solution due to regulatory reasons, downward pricing pressure and so on. In the past we were also able to take a much longer term view of our investment, but changes in the market has made it more challenging to take such a long term view of investment.

The capacity crunch is therefore quite clearly not just an engineering problem, but a complex business problem.

We also face another fundamental problem: the deniers. Some people do not believe that the capacity crunch is real; they think it is merely a strategem of an inefficient and greedy industry to maintain profitability. My personal view is that telecoms, like any other industry, is here to make a profit. We are not the Santa Claus of the digital economy, although some people seem to want to treat us that way. Yet these gainsayers are noisy and have “sharp elbows” – meaning they are adept at presenting and even winning the argument.

Bandwidth hogs – the bogeymen of the communications business

Everyone likes a bogeyman, and in telecoms we have the legendary “bandwidth hog”. Although we frequently talk about this beast,  is he or she a myth or based in reality? What does a bandwidth hog actually look like?

There are some unbelievers (although probably we should view these more as “provocateurs”) who deny the impact or sometimes even the existence of the hog; but if you spend a lot of your time talking to CSPs like I do, then some very scary stats begin to drop out.

Meanwhile the gainsayers have positioned CSPs as whingers, who are just out to make monopoly profits from an inefficient business. They have a point to some extent, because certainly we could be more efficient that we are today, and most definitely we could be more customer focused. However, these deniers also have an agenda – most are allied to, or part of, the “hog herd”. They are IT geeks who don’t really understand networking and apply the logic of computer science to telecoms. They are loosely disguised hogs who don’t want to give up their free dinners. Or they work for the growing industry that is making a great living off our backs, thank you very much.

But CSPs in their own quiet, and sometimes ineffective way, have begun to fight back. For example, we’re starting to see real data provided on the kind of challenges we face. What’s new is that some CSPs are even putting their names to this and becoming ever more articulate about their problems.

A recent story on Ars Technica cited Telenet stats for their top downloader this summer. One user was getting through 2.7Tb of data per month. Clearly one user doing this is not in itself a problem; the problem is as more users begin to consume Gb or Tb rather than Mb of data. Neither is this simply a European phenomenon: the writer also related an anecdote about an unnamed US CSP whose top downloader was getting through 4Tb of data. All of these on consumer accounts…

The most interesting thing about this story was not the numbers (I accept that in 18 months these may seem less scary figures), but the debate that ensued (see comments on the post)  between heavy users who wanted more and saw it as the CSPs’ problem for not investing in infrastructure; versus another community of users who felt put-upon and ripped off, or who accepted the need to pay for what you used.

In other words, even customers are beginning to understand that flat-rate is not all it’s cracked up to be. To help illustrate the crux of this issue I often talk about restaurants. (Sorry, Dominic Smith; yes it’s another food analogy.) Flat-rate is an all-you-can-eat restaurant. You may feel like a low quality, high quantity experience sometimes; other times you want a snack or even a Michelin star restaurant experience.

I believe this is also true of the telecoms experience. Some people like all-you-can eat but that does not mean everyone will. If you just feel like a sandwich or have a small appetite then an all-you-can-eat bucketed approach may not seem such a bargain. Also note that in all-you-can-eat or budget restaurants, they have a nifty way of charging for extras, which helps creep the price up (think drinks, service, pudding…).

Solving the crunch: maintaining QoS

Solving the capacity crunch means providing sufficient capacity in the right place and at the right time. Understanding the true face of the crunch is an important part of this. The crunch is not the same in every network, and its effects are not universally felt. Data may be rising in the backbone networks with little ill effects overall; congestion may be localised to specific cell sites, or be related to time-of-day or service usage. On fixed broadband QoS may be worst when the neighbourhood children are off school. The crunch may be driven by broadband uptake, mobile broadband uptake or smart devices. Or by bandwidth-hogging services such as YouTube or the BBC’s iPlayer.

Once a network planner understands the nature of the crunch in their network, that helps them target the bottlenecks. For mobile networks this may be in specific cell sites or in the backhaul network, for example.

However, today’s network planners have ever more challenging goals, because now the engineering problems are only part of what they have to do. Designing end-to-end QoS is more challenging when your budget is highly constrained, and optimising CAPEX and OPEX means you now need to deliver just-in-time capacity.

Gone are the days when planners had the luxury of insulating themselves through investment in excess capacity. And the timescales have shortened – eg with more services being rolled out more regularly, as well as the requirement for just-in-time capacity – so there is less time to plan, to test and so on.

Solving the crunch: monetising usage

Great planning, in itself, is essential but not sufficient. To solve the effects of the crunch we also need to address commercial realities. Investment has to be tied to likely return, as in any other business.

Flat rate tariffs are not just a disaster for telecoms. Unmetered usage has led to abuse in every industry in which it has been employed. Telecoms is no different to the water industry in this respect: both resell a scarce and finite resource, and so must conserve this resource from overuse by a minority.

It sometimes surprises people that in the UK we had an entirely unmetered water supply. However, this is becoming less common as more consumers move to metered usage. We’re doing that because even in an island where the rain never seems to stop falling, we now have intermittent (and increasingly regular) water shortages. The fear that has retarded uptake of water meters in the UK though, is exactly the same fear as telecoms customers have with being billed for data services – ie fear of bill shock.

The principle that people pay for what they use  is a good one, as it aligns supply and demand more closely. The trick is to find the pricing model that is perceived as being good value by the consumer, and is affordable. SMS is a classic case of value-based pricing. As data it is expensive; but the consumer perceives it to be good value and understands it.

This is why solving the capacity crunch is not simply about getting better at planning our networks and investing in them, but also about monetising that capacity to deliver an acceptable return on investment. Ultimately, if we all want better QoS and greater capacity then there has to be sufficient return for CSPs to justify investment; they will not be able to raise investment if they can’t demonstrate a likely return.

There is therefore a balancing act to be achieved in pricing between the interests of the CSP, the national good, and the interests of the customer. In solving the capacity crunch there is also a balance to be achieved between over- and under-supply, in order to deliver an appropriate and commercially-viable QoS.

Resources

• Microsperience Post: The truth about the capacity crunch: Europeans blame tarrifs; Asian and Americans blame hogs; Africa and Middle East worry about their brands
• Microsperience Post: Not Quite A Christmas Carol: A Tale of Two Crunches
• Microsperience Post: Bridging the capacity gap: why CSPs need to make better use of what they already have
• Telesperience Data Sheet: Key Strategies for Solving the Capacity Crunch – presenting the key findings from our primary research
• Telesperience Issues Paper: Key Strategies for Solving the Capacity Crunch (new!) - presenting the strategies available to CSPs and a review of how mobile operators are using them