The economics of optimisation
10 January 2007
GSM>3G Vision
As we noted in our editorial section, much of GSM>3G Vision's coverage in the next month will involve companies attending the 3GSM World Congress. Given tightening margins for operators, it's no coincidence that many of them are aiming to promote the economic effectiveness of their products or services.
One such company is network optimisation specialist Arieso whose CEO and founder Shirin Dehghan recently spoke to us about the importance of this area of the mobile business to operators' bottom lines.
As she says: "Operators are continually adapting to competitive pressures and the constraints typical of a marketplace full of empowered consumers. The introduction of 3G brought new players into the market ...but penetration of mobiles is very high, leaving very few non-users left to recruit as first-time customers. Meanwhile, ARPU is dropping, dragging profits with it. Add to this the capital investments in 3G licenses which had to be largely written off - and, as an operator, your balance sheet doesn't look very good." Meanwhile competing wireless technologies like VOIP are a reminder to consumers that they are paying quite a lot for roaming. All of which amounts to increasing financial pressure for mobile operators across the board.
Dehghan's comments echo the sort of modern mobile business realities of which Thomas Wehmeier, a senior research analyst with the Informa Telecoms & Media World Cellular Information Service, speaks in the 2007 3GSM World Focus directory when he says: "With ARPU expected to trend slightly upwards at best and subscription growth set to tail off from 2007, it's safe to say that double-digit revenue growth in western Europe is a thing of the past." He continues: "Operators...must increasingly focus on trimming costs in order to stabilise their bottom lines and will be looking at any and all ways to reduce both opex and capex."
Of course for many this means outsourcing, as our story on emerging markets suggests. However, Dehghan's take on this is, not unreasonably, that greater pressures on the tight management of capital and operational outlay are an opportunity for her area of specialisation, or, as she puts it: "Automated network optimisation is one way for an operator to clean up their house, by securing the best possible configuration, even for a network running multiple technologies."
With her company's system, called Altaro, you can see what improvements in coverage or quality will cost before real money is spent, she says. But this is not just a sales pitch. "These days operators are certainly more aware of the commercial advantages of better planning and operations than they were three years or so ago. Then, we were spending so much of our time evangelising," she says.
The usual arguments for optimisation are that it can mean fewer dropped calls, and that improving the link between the mobile and the base site, means less power is required from the mobile. However, network optimisation can also provide an objective financial justification for the varying investment strategies that will depend on where an operator is in the life cycle and the compromises that have to be made, Dehghan suggests. "Take a green field starter, for example. When they first come to market, they don't have users, so to reel them in they trade off coverage for quality. For a more mature operator, the trade-off will be different. So, for example, while it may be expensive, it may also be commercially beneficial to improve coverage in and around a high net worth village where the residents are high fliers who rely continually on their wireless devices."
