PARIS (Reuters) - “Dongle” may sound a bit goofy, but the innocent-seeming technology is emerging as one of the biggest challenges to the mobile telecoms industry in coming years.
Alongside smartphones, these 3G cards or sticks that allow people to get online via the mobile network from anywhere have come to symbolise how a goldmine of surging data traffic risks becoming a nightmare for mobile operators.
Dongles are often sold with a flat-rate data plan, or with a subscription allowing a certain number of megabits of data to be used. They are fuelling a boom in mobile data traffic that is so heavy it is putting unprecedented stress on networks.
Yet even as traffic explodes, revenues from these new services aren’t keeping up because of the intense pressure on prices — so investment in improvements risks squeezing margins.
“Mobile broadband is manna from heaven for consumers, but it is hell for operators,” said John Strand, who has consulted for global mobile operators for more than 12 years.
As more people access the internet over mobile phone networks using laptops with 3G cards, Apple’s iPhone or Research in Motion’s BlackBerry, data traffic is doubling every six months globally and growing even more rapidly in some countries.
On the day pop star Michael Jackson died, data traffic on Australian telecom operator Telstra’s network jumped 170 percent.
“Everyone wanted to know what was going on at the same time,” said Mike Wright, Telstra’s director of wireless engineering. “It put an enormous stress on the system.”
A laptop equipped with a dongle consumes 450 times more bandwidth than a classic mobile phone, said Pierre-Alain Allemand, who oversees the mobile network at France’s second largest operator SFR.
Yet competition is so intense, few operators increase rates.
The situation is putting mobile operators from India to Sweden in a bind: they have to invest heavily in their networks to prevent congestion and outages, yet doing so risks hurting their long-term profitability.
Many have taken to rationing bandwidth by slowing down the traffic of the heaviest users.
“You can easily lose money on mobile broadband if you do it in the wrong way,” said Bjorn Amundsen, director of mobile network coverage for Norway’s Telenor.
“We have had to be careful not to invest too much — because the only thing that would happen if we did would be to increase in data traffic without an increase in our profits,” he said.
Few mobile firms expected the changes to user behaviour brought about by 3G cards.
For example, the technology allows a banker to follow the progress of his portfolio from his laptop in the back of a New York taxicab, or a photographer to upload pictures of a Paris soccer match instantly from the side of the field.
But even in areas where 3G technology has been rolled out, mobile networks weren’t designed for such heavy traffic.
Base stations can only handle a certain amount of data, which must be shared by all users in a given area.
So if everyone on Wall Street uses their iPhone at lunchtime to watch video, the network can experience slower connections or service outages.
Michele Campriani, CEO of Accanto Systems, which markets software to track data traffic in telecom networks, says the company has signed 15 contracts with mobile operators in the past year to monitor problems due to traffic overload.
He says telecom executives see the data explosion as a serious threat: “They’re all very concerned. If they don’t manage this moment carefully, some mobile operators will run into major problems that threaten their very profitability and viability. Some may not survive.”
Complicating life for the networks are people like Cherif Paul, a university student in Paris who does all his internet surfing via mobile because he doesn’t have a fixed-line phone or broadband connection at home.
“I use my laptop and dongle for everything,” said the 23 year-old. “It saves me money and it’s more convenient when I am on the go.”
Such practices make mobile operators nervous, especially when customers are on flat-rate plans.
Since 2005 the number of fixed lines globally has fallen 0.9 percent to reach 1.24 billion lines, according to IDATE, a telecom market research firm. Over the same period, the number of mobile subscribers has gone up 95 percent to 4.22 billion.
About 10 percent of mobile users — who are often players of bandwidth-intense video games or music and movie pirates — account for 80 percent of the data traffic, according to operators.
“The dongles cause people to use the wireless network just as they would use their fixed broadband line at home,” said Accanto’s Campriani. “But the network just can’t take that.”
Operators are trying to educate customers that mobile broadband should be the secondary method of access, not the main one. “If we don’t succeed in sending this message, then we’ll have to spend such a huge amount to boost the network capacity that it would be very hard to make ends meet,” said Telenor’s Amundsen.
In France, dongles and the expanded use of smart phones caused data traffic on SFR’s mobile network to increase tenfold last year while revenues increased 30 percent, Allemand said.
SFR is a unit of Vivendi.
Operators have already started responding to the data crush with new investments, phasing out flat-rate plans, and introducing techniques to curtail the heaviest use.
One approach some have adopted is to shift some mobile traffic over to the fixed-line network, which is more stable and can handle heavier traffic. Networks in Japan and Korea, two of the countries with the most advanced mobile broadband, are also built this way and face less severe congestion problems.
When Telstra invested $1 billion (628 million pounds) to beef up its mobile network three years ago, it used this strategy.
In France, SFR linked many of its mobile base stations with fixed fibre lines to better handle data traffic.
In addition to investing, most operators are implementing systems that slow or stop internet access once a subscriber exceeds an allotted amount of bandwidth.
“We have to do this otherwise only a few users will end up straining the whole network,” said Telenor’s Amundsen. To keep up with data traffic, Telenor has undertaken 800 projects in its Norwegian mobile network in the past six months, he added.
Esa Rautalinko, who heads TeliaSonera’s mobile network in Finland, warned that such challenges were not going to disappear. “We are closer and closer to a situation where we reach the limits of our capacity,” he said.
Additional reporting by Marie Mawad in Paris and Tarmo Virki in Helsinki; Editing by Sara Ledwith