Virgin Media CEO: Future mobile data usage ‘a bottomless pit’ for operators

Networks Allan Swann

10:47, April 5 2012

Mobile operators need to be prepared for a future of potentially endless growth in mobile data usage, especially once 4G launches in the UK.

The majority of mobile phone retailers (84%) believe that 4G licenses will spur demand for mobile data - not just in the retail sector, but in the enterprise sector too.

More alarmingly, consumers have now grown so accustomed to streaming video 8% of customers will ask retailers if handsets come preloaded with these capabilities, according Virgin Media Business' research.

Mobile data usage has increased by 250% over the past two years alone.

"There's a big job on for mobile network operators. Simply put, mobile data usage is like a bottomless pit, it's expanding all the time. We're all looking forward to the benefits of 4G, but it raises some tough questions for operators," said George Wareing, head of mobile and broadcast.

Much of this demand is coming video apps such as BBC iPlayer and YouTube, which are now offered preinstalled as standard on 83% of smartphones.

By 2015 it's estimated that consumers will be using thirty times more data than they were in 2009.

Virgin Media Business CEO Mark Heraghty told CBR that mobile companies are seeing a once in a generation shift in technology, and they aren't prepared.

"To be fair, they were all caught on the hop. Everyone was. The explosive growth of data usage was, and probably still is, unpredictable. This makes it very hard for any business to plan their digital infrastructure requirements," he said.

While the mobile companies tend to have the 'hard' infrastructure built - such as cell sites - and have kept up their Ethernet upgrades scalable, the main problem is coming from backhaul.

Much as a hardcore fibre-optic advocate would preach, Heraghty believes there are too many copper bottlenecks in the national fibre optic networks that simply won't handle the added data stress once 4G launches. Many of them are struggling with the current 3G loads.

Much of the problem for network operators is that their margins on data are shrinking, but the costs involved in providing this infrastructure to customers is not.

"The networks really need to find ways to get the cost per unit down," he said.

He would like to see much more of the national network moving from Fibre to the Node, to Fibre to the premises. This will cut down on mobile data problems, be it over cellular networks or wi-fi.

Once these bottlenecks are resolved, data is data - whether it comes from a laptop over hardline ADSL, an iPad over Starbucks Wi-Fi or a Samsung smartphone out in the Cotswolds.

Virgin Media Business owns the country's second largest fibre network after BT and has been trying to present itself as a market disruptor to the established BT and Cable and Wireless, which have long suckled at the teat of government subsidies.

Heraghty claims that Virgin Media Business is "well plugged in at the cabinet office", but has not received any funding as part of the Government's Broadband Delivery UK (BDUK) funded scheme.

The company has been successful in its pursuits of government contracts however, which now account for 16% of Virgin's total revenue. Of its £4bn in revenue, some £637m comes from the Virgin Media Business division alone.

This is growing - by 7% in 2011, following 3% last year and losses of 3% and 7% the two years before that.

Much of this success Heraghty attributes to the financial crisis. As public sector offices have been squeezed, so have their business budgets - which means that contracts that traditionally might have fallen into BT's hands are now put up to competitive tender - and Virgin Media Business has been striking while the iron is hot.

Within the private sector Heraghty estimates that the company accounts for 4-5% of the B2B telcos market - and wants to project itself as the key part of the future 'digital fabric of Britain', no matter the transmission medium.

No matter what the business, mobility is key. Pushing data through the fibre as efficiently as possible remains the goal - and that remains the problem facing Britain's networks.

To read more about the future of mobile data and 4G networks, read CBR's feature here.

To read CBR's ongoing coverage of the 4G spectrum auction debacle, click here.

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