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Buying time, gaining efficiency with mobile communications

David Hovey

Mobile solutions architect, emerging markets/Cisco Systems

Published  Friday, October 9, 2009

Mobile technology has huge potential in emerging markets. For example, in highly congested cities like São Paulo, it is essential for people stuck in traffic jams to be able to be productive and win back some of the lost time. Providing the population with sufficient connectivity may mean they don't have to get in the car to begin with, and can work from home or some other nearby location.

But what about video, which is often preached as the next killer app. Is it taking off in Latin America?

David Hovey, Cisco's mobile solutions architect for emerging markets, addressed some of those issues at the company's Networkers forum held in Santiago, Chile, from October 5-8. BNamericas caught up with Hovey and quizzed him for details.

BNamericas: Spectrum caps have been introduced into the Chilean and other markets with the idea of letting new players into the market to spread mobile broadband. Do you think this is a positive thing?

Hovey: The real consumer of spectrum now is mobile broadband and mobile broadband is much less profitable per bit. And so if operators continue with the spectrum they have they'll hit the spectrum ceiling and have no more room on their network.

So they'll have to look at new ways of doing things. That may mean using unlicensed spectrum or different spectrum. WiMax or WiFi are two good examples of that. Or they’ll have to change the game totally by creating new propositions that leverage the network more.

BNamericas: Will that force LTE to be adopted more quickly than what they might have previously expected? A lot of operators have just implemented 3G networks one or two years ago. So to think about making another big investment so soon is probably not attractive.

Hovey: The spectral efficiency of LTE is significantly better than anything that has gone before it. LTE was also designed to reuse legacy spectrum that operators already used for GSM, GPRS and 3G and so they can go backwards and engineer out old subscribers into the LTE network while delivering more services and higher bandwidth at greater efficiency.

If they've just invested in HSPA in the past two years, they might have put in place a layer that can scale. However I have my doubts. The way we've seen HSPA deployed in many emerging markets is that it will not scale to LTE.

BNamericas: You have said that by 2013, 60% of mobile broadband traffic will be video. How do you see the trends in use of video in emerging markets?

Hovey: On the whole, emerging markets have not developed that service well because it really kills the networks. They are still really focusing on customer acquisition on mobile broadband. Because the technology of mobile video today is so intensive, everything is unicast. And unicast uses so much bandwidth from the core that the business model does not support itself.

LTE brings multicast video which means you can tune into a channel and the network can deliver it with high efficiency. That will be very new. I think a lot of service providers in emerging markets will wait for that or will deploy alternative techniques like handheld digital TV broadcasting, DVB-H.

Again, I haven't seen that take off in any big way, because typically in emerging markets, the countries are very big. It is so expensive to deploy that they prefer to spend their money on growing the traditional mobile business. That is what I've seen in Latin America so far.

BNamericas: Many emerging markets have big, highly congested cities. Do you think that mobile communications becomes even more of a necessity in such places, where people need to cut down on travel time?

Hovey: I'll answer that in three ways. Take an inner city business person. We're seeing the highest growth in emerging markets, particularly Latin America. That puts more pressure on businessmen; the need to compete is driven. Everybody needs more and faster. And the best way to get that to them is delivery through ubiquitous coverage, which is mobile.

So mobile automatically becomes relevant for the business person in the city in order to leverage spare time. I think mobility has become very key for that. Obviously voice and SMS are well proven to help with simple tasks. But on the road, collaboration is becoming very possible with things like WebEx on smartphones. Those are real tools that you can use on the train, or if you have a driver, you can use them in the car. I know a lot of business people in cities like São Paulo who have drivers because driving there is dangerous and they want to get things done and they don't want to stress. So full collaboration techniques delivered over high quality networks become relevant for senior executives. That is a very valuable market to go after. If the service provider can offer that as a full managed service, when you're in the office, when you're out of the office, when you're abroad, then I think that is a very strong proposition for the inner city.

For the non-business people, we have a very rapidly changing market. Some 50% of the population of Saudi Arabia is under 20 years old. So you have this huge young population launching itself into life with an increasingly high disposable income with all the social networks. They suffer the same traffic as everyone else, so if they're moving around the inner city, they have as much dead time as everyone else.

So I think the benefits are the same, just the proposition is different. What can be very interesting there is mobile service providers partnering with social networking sites, for example, using techniques that are emerging now, to pass on the information such as where are my friends stuck in traffic. Meeting friends in the evening can become increasingly complex now because everyone is late all the time. How do you follow people around?

Lots of innovative consumer-focused applications for young people are relevant for emerging markets because of this surge of young people with money in their pocket.

The third answer is outside the city. The largest untapped market is outside the city, often more than 50% of the country. People that live too far away to get a good job or don't have the education. I think that providing them with mobile connectivity and useful services at the right price and taking them on a lifecycle is what operators have to do in emerging markets. If they pick them up off the floor and put them into the connected world, offering them basic services, maybe subsidized, maybe leased, rent them a netbook for example, give them basic connectivity, outsourced email services, some online training.

If the operator gets them involved in more ways of educating themselves, so they earn more money with jobs that require connectivity, then they spend more money with the service provider. The operator can then up the packages and suddenly you have a segment of society that you never had before as a client, and they will never leave you.

BNamericas: That will take a while.

Hovey: Yes, it is taking a while because everyone is picking the low hanging fruit first. When they have everybody paying money they need to do something else and that is one of the things you can do.

BNamericas: The latest technological innovations are allowing operators to make money in very low-income markets.

Hovey: Yes. You can't continue with the same vertical models that people have done up to now. Sometimes you have to use unlicensed technology or you have to go through revenue share changes that are complex and untrustworthy.

But if you want your business to go somewhere else and hold shareholder value and build value for the country, somebody has to address these people somehow. Everyone has the chance to do it and now is the time to do it.

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