How to charge for Video? part 1 - How did we get there?

In January 2009, when Cisco released its first Visual Networking Index, a forecast of data traffic in mobile networks, the first reaction from the market was incredulity.

Cisco was projecting that, based on traffic observed over the last 5 years, mobile data traffic was to double every year. Even more remarkable, video, then a mere 20% of the overall traffic would rise and account up to 64% of the traffic by 2013.

The industry met these projections with raised eyebrows and many dismissed the report as a simple attempt for vendors to sell more network equipment. While the intention behind the report is undoubtedly to bring carriers to the conclusion that they need to strengthen their network and prepare for huge CAPEX spending, the observations remain relevant.

By the summer of 2009, networks started experiencing data outages (AT&T). While the trend seemed to accelerate and spread (Verizon, Sprint, Vodafone Germany, Vodafone UK, O2 UK, Orange UK...), carriers and vendors alike started to look at identifying and defining the issue.

Mobile data indeed was growing fast and video seemed to be a large part of it. Additionally, the outages seemed caused by a variety of factors, from radio access network (signalling) to core (congestion) instability.

It is clear that the massive take-off of smartphones and tablets, coupled with the change in media consumption patterns by mobile subscribers had taken all by surprise.

The main cause, in my mind, for this surge and instability in mobile network traffic is not to be found in the technology but rather in the business model.

At the beginning of 2000, the wireless world is in ebullition. 3G licenses are being sold for Billions (with UK auction the most expensive at £22.4Bn). Wireless operators embark on the promise of wireless internet (WAP) and multimedia messaging. These promises were not delivered on, and many started to look for content and applications to fill their new-found bandwidth.

USB dongles proved popular for the enterprise market, to provide data connectivity on the go. Along that time, flat fee, all-you-can-eat, unlimited data packages start to appear. While there wasn’t that much attractive content available, these plans proved effective in drawing throngs of subscribers and became a weapon of choice in the customer acquisition arsenal.

Fast forward to 2011 - with the rise of social media, the introduction of smartphones and tablets as new categories, the explosion of user-generated-content and the emergence of apps as the preferred way to access or interact with content in the mobile world -  networks find themselves flooded with data usage.

In the next post, I will look at an inventory of existing charging models.