North American Carriers May Run Out of Cash By 2013, Study Says

Mobile carriers risk an end of profit within four years amid increased smartphone usage, rising investment costs and falling revenue per unit of data, says a new study.

Profitability could become extremely challenging for some mobile operators, particularly in North America within three years, due to challenges in balancing cost and revenue. Existing network architectures are ill equipped to cope with the dual challenge of sustained data demand and falling revenue, the study by Tellabs showed.

The mobile Internet is forcing the transformation of carrier networks and business models. New smartphones, applications like mobile social networking and mobile video services - often provided as over the top services - put increasing demands on how voice and data traffic is handled.

The study showed that costs will surpass revenue for many operators in North America by the fourth quarter of 2013 and as early as the first quarter of 2013 in some cases. Higher network access costs make North American operators most susceptible to the changes wrought by the mobile internet, the study found.

In developed Asia Pacific, this could happen from the third quarter of 2013 to the third quarter of 2014 as operators face rapid revenue decline. Analysys Mason predicts a revenue per gigabyte decline of 88.2 percent between 2010 and 2015.

This challenge is less pronounced for carriers in Western Europe where there is a slower revenue decline of 80.1 percent in the same period, Tellabs said. The company expects operators in Western European to enter unprofitablity from the start of 2014 or 2015.

To avoid the 'end of profit' operators must bring intelligence to their networks - it's critical to carrier survival, said Tellabs chief executive Rob Pullen. Doing so will make the difference betweencarriers running a smart mobile Internet, or an unsustainable dumb-pipe business.

Vikram Saksena, Tellabs chief technology officer, said, It's challenging for mobile operators to sustain a business model based on bandwidth alone. Adding intelligence to the network adds revenue, improves business fundamentals and enables a more profitable business.