Monday, 1 December 2014

Convergence is not because of 4-Play — find out the Mobile Industry’s secret

In the UK last week there was a lot of activity amongst the mobile carriers. Vodafone is trying to acquire fixed cable operator Virgin Media (owned by Liberty Global’s John Malone) and fixed-line operator BT Group is trying to acquire Mobile carriers O2 or EE.

The business pundits on Bloomberg and the FT are saying its because of 4-Play. This is where the carrier sells 4 services to the same shared user base — the 4 services are TV, fixed broadband, fixed phone and mobile phone (voice and data). The pundits say the evidence is not clear users need to go for this sharing of services so the business case is unclear. In fact, Vodafone’s share price fell nearly 4% on trading because of this doubt and some worries of the debt burden of their prospective purchase.

However, Vodafone has been going round Europe buying up fixed line/cable operators for the past nine months. There is no doubt to their strategy — its clear and furthermore it has nothing to do with 4-Play at all. It’s to the industries advantage to keep the reasons for these transactions secret — if the investors knew the real reason they would be asking much more for these transactions.

The real reason has been kept a secret by the industry. It’s because of the way 5G will work — it will appear in 2020. In fact 5G needs this convergence to work. 5G needs to promise high bandwidths — in fact it will give between 1GBit and 10GBit as it grows over time. The way it will achieve this is by increasing the number of base stations. Today base station are miles apart and require planning permission to put up — having many more base stations could be a real pain? No it won’t. In fact the other issues with today’s mobile networks is they do not work well inside buildings — its only low fequency bands which can penetrate buildings and yet to get high bandwidth you need high frequency bands. But that will not be a problem for 5G either.

The clue is in a feature that BT Group use already — when you buy a BT Internet service, the hub they give the user has an extra function the user does not know about — it provides paid Wifi access to users in range of the Hub. In the 5G world these hubs will also contain a femto-cell and people outside the office or home will use the femto-cell for mobile calls and data. Because everyone has a hub, the number with femto-cells will blossom and provide huge potential bandwidth to the general public. Furthermore these femto-cells will be placed inside office buildings and provide perfect signals and high data bandwidth. Today femto-cells cost about £200 but in this world of mass adoption this cost will come down to a small fraction of that. It's a perfect combination everyone wins.

The home user of the new fibre internet will get these special hubs which additionally allow them perfect mobile reception inside their house and the Internet of Things a route to market where multiple items in the home have perfect high bandwidth connections to the Internet.

Of course the industry does not want to tell anyone about this yet. The statements are that we’re not quite sure what 5G is yet so when we’ve agreed what it is we’ll be able to discuss it. They do know and they have it working in the labs already.