Impact of consumer traffic growth on mobile and fixed networks: Business model and network quality impact

The growth of Internet Protocol (IP) traffic per subscriber on fixed and mobile networks is growing at phenomenal rates of 30 percent to 100 percent per annum due to the development and use of manifold new web applications and services. However, the average revenue per subscriber to broadband access service providers is flat for both wireline and wireless. Thus it would appear that there is an essential economic conundrum in which the investment in infrastructure required to support continued innovation and expansion in access to such web services by more users on more devices can no longer be financially supported by the network providers, if these providers are to remain fiscally viable according to any normal economic metric. In this paper, we investigate the validity of this argument by comparing the cost of the network expansion required to match the traffic growth with the revenue potential projected by simple extrapolation from current trends. We find that indeed this dichotomy is real, with trends indicating the cost of network expansion per subscriber may exceed revenue per subscriber in the next two to three years. We propose a solution based on “managed services” in which subscribers are offered a higher quality of service for content and applications they value, and charged an appropriate fee for this enhanced service treatment. We also advocate a model where the selection of services for enhanced delivery is at the discretion of the subscriber and their willingness to pay, so that end user satisfaction or quality of experience is the driving force in the network evolution and associated economics.