Mobile carriers will profit from data usage

First, phone companies told us that we need phones that operate on 3G, and now they're saying we need 4G. That might beg the question of what exactly is 3G and 4G technology? Furthermore, why did these businesses create it?

The development of more high-tech phones and tablet computers has increased data transfer, which are activities such as sending emails and downloading videos. In fact, by 2009 data traffic exceeded voice traffic. In order to allow data traffic, companies have to have something called mobile spectrum, which is a part of the electromagnetic spectrum that can transfer data across networks. The number of frequencies in the spectrum that are useful for cell phones is very small, which is why in the US the Federal Communications Commission (FCC) allocates these frequencies. The price of mobile spectrum will only increase as the amount of data transfer increases.

Jan Markendahl, from the Royal Institute of Technology, and Bengt G. Molleryd, from the Swedish Post and Telecom Agency of Stockholm, recently published an article on the AlphaGalileo Foundation site analyzing the mobile spectrum market. They found that many companies had recently bought the licenses to these frequencies at cheap prices from government auctions. The corporations that purchased these licenses can operate at more frequencies than their competitors and will probably soon dominate the market, especially if they also consider such policies as network sharing and spectrum aggregation.

Companies that can carry out these policies will have lower production costs because buying existing spectrum is cheaper than creating new stations. Network sharing is when data on one network, such as a computer, can be remotely accessed from another computer. Spectrum aggregation is when a user can utilize multiple bandwidths for a service so that activities with large bandwidth demands can be carried out well.

Spectrum aggregation is what allows companies to profit from all the small individual bandwidths they own. 3G and 4G technologies allow aggregation, which is why they are faster and more profitable. Companies could also lease some of their bandwidths to other corporations at high profits.

Markendahl and Molleryd analyzed data from Sweden and found that data traffic increased from 27,800 to 53,100 terabytes, roughly 56 billion megabytes, from 2009 to 2010, an increase of 90 percent. Similarly in the US, data traffic has increased to 341.2 billion megabytes in 2011 from 161.5 billion megabytes in 2010, a 111 percent increase.

Overall, the company CISCO predicts that by 2015, data traffic will have reached 6.3 exabytes, which is 10003 megabytes. This increase is partially because of the increase in smartphone and tablet computer usage. Thus, phone companies are interested in 3G and 4G technology because of the profits they will develop when more people buy smartphones and data transfer increases.

The researchers do acknowledge, however, the success of these companies will also depend on the data rates that they can offer. Data rate is the amount of data that can be transferred in a certain unit of time.

Companies with slower data rates will experience less marketing success. Those businesses with licenses to more of the mobile spectrum, or that can use what they have more efficiently, will be able to gain an edge over their competitors.