Mobile data prices to remain high as telcos struggle to keep up with surging demand

Prices for wireless data will remain high over the next few years if telcos struggle with upgrading networks to cope with more demand for mobile broadband, an industry expert has suggested.

The comments come as Telstra has announced trials of a new mobile network designed to cope with the high take up of mobile broadband.

Nathan Burley, Ovum analyst, says demand for wireless data will continue to grow as smartphones become more common, and businesses and homes become more reliant on web-based services.

“There is no doubt that mobile traffic is going to continue to grow, and will continue to grow very rapidly. Telstra’s traffic is growing rapidly, and there are dramatic increases being spurred by more data cards beings sold, more smartphones being activated and application stores becoming more common.”

“People are now downloading more games and entertainment, but businesses are using more because browsing is becoming a smartphone experience and laptops are being coupled with data cards and so on.”

Burley says this demand will keep prices high, if mobile networks fail to upgrade their infrastructure to cope with the growing demand. This pricing structure differs from overseas networks, he says, where download caps are rare and users are allowed to use as much bandwidth as they like.

As a result, Burley says the massive price drops seen in data usage rates recently will not continue, and that prices will become more stabilised as demand increases.

“One of the major differences between our networks here and those overseas is in how mobile data is priced. In the market in the US, you have unlimited data subscription packages similar to fixed broadband services, and in Europe as well. You can download as much as you want and it doesn’t cost any extra.”

“Obviously that is not how things are priced in Australia. There is more of a tie between what is downloaded to a company’s revenue, and as these caps increase and data becomes cheaper, that will diverge and traffic will grow much faster than revenue. Operators will have to make sure their networks are as efficient as possible to ensure they can deliver those services.”

Possible ramifications of a lag in infrastructure updates include network slowdowns and even connection difficulties. But Burley says the more likely alternative will be that network operators do not lower prices in order to have their network towers and infrastructure updated frequently.

“Prices have come down rapidly over the past three years, but we don’t think they’re going to fall as rapidly as we’ve seen. There were 60% decreases in 2007-08, but we think we’ll see them fall much, much slower than that.”

“These network issues are potential problems for users, so what needs to happen is having some new spectrums come online now. These will deliver more capacity for operators.”

Meanwhile, Telstra’s trials of the 4G wireless networks are set to begin in May, and will run for up to six months. IT comes after Telstra has spent $1.5 bill ion constructing the Next G network.

Telstra’s 4G network is expected to provide coverage for users in rural areas, along with improving connectivity for people in buildings. Additionally, such faster speeds would create easier downloading conditions for streaming video and other data-rich applications.

Other networks across the world, including some in Europe and the US, have also begun testing on 4G networks, but a commercial roll-out is not expected for some time.