Not a week goes by that I don’t come across a raft of complaints in online forums about the quality of 3G mobile broadband services in the UK, with criticism levelled at all operators. Acision and YouGov have just published research of the experiences of mobile broadband users, and found 84% of the users surveyed had experienced quality of service problems, including low speeds (67% of respondents), coverage problems (49%) and connection problems (45%). Certainly, this tallies with my own experience of using mobile broadband. I’m unable to use mobile broadband services reliably in my own home (despite the operator insisting that I have good coverage according to their maps) and, when I went on holiday to a popular UK destination, I was also unable to use the service in the heart of town.
While public statements from mobile network operators are keen to point out that they are making significant investments, international benchmarking provides useful insight into the challenges faced by operators in a market that is emerging from an economic downturn and characterised by relatively cheap pricing, a relatively large number of players and low market shares for each operator. Not exactly the best environment to encourage substantial network investment.
Our regular tracking of mobile network operator CAPEX and network investment continues to show profound differences between individual countries and operators in terms of 3G network investment levels, which inevitably have a direct impact on quality of service for mobile users.
CAPEX as a proportion of revenue can be a useful indicator of the extent to which mobile network operators are investing the revenue they generate into providing good quality of service. Given the economic environment, there’s no surprise to find out that, across all the operators we track, that there was a significant dip in CAPEX as a proportion of revenue in 2009. Given the continued pressure from investors to control costs (particularly as there are no immediate prospects of a significant increase in ARPU) there is little prospect of substantial short term CAPEX uplift for many operators.
Our analysis reveals major differences between countries and operators in mobile CAPEX as a proportion of revenue – ranging from 43% down to 6% in 2009. In our league table of operators, the UK operators were near the bottom.
These low figures are particularly worrying when you consider that the revenue per operator of UK operators is relatively low compared with other operators, particularly those with stronger ARPUs and higher market shares. A comparison between the UK and Japan is stark.
NTT DoCoMo has been investing huge sums in its 3G networks for many years, recognising the importance of service coverage, performance and reliability. In the year ending March 2010, NTT DoCoMo’s CAPEX was USD8.3 billion. Despite this huge sum, CAPEX per revenue is not sky high (19%) because NTT DoCoMo has a large market share (about 50% in the first quarter of 2010) and very healthy monthly ARPU (USD65.0). In March 2007, NTT DoCoMo announced that it had reached 100% population coverage with its 3G network. It has deployed more than 50,000 outdoor base stations and over 20 000 indoor base stations. NTT DoCoMo is so far ahead that it will shortly be able to switch off its 2G network – something that most other operators cannot do. NTT will terminate its 2G service (launched in 1993) in March 2011.
This comparison raises worrying questions for operators and investors, over what investment levels are realistically required to deliver high-quality mobile broadband services . Continued low investment is unlikely to address many of the issues experienced by mobile users today. As traffic levels continue to climb, UK operators need to define a clear vision of where their networks are going, and how they are going to achieve a step change in investment. Otherwise, we’re going to be in for a bumpy ride in terms of the quality of mobile broadband services.