5    Cloud computing and capacity in mobile networks

5.1  Introduction

‘Cloud computing’, as it is often referred to in the media, proved to be a strong trend during 2008. Cloud computing may be said to be a broad collective name for the phenomenon that increasing numbers of IT functions are offered as Internet-based services when they were previously dependent on locally installed platforms, applications and/or local hardware. In more concrete terms, this may mean that a business chooses to rely on Internet-based virtual services instead of investing in its own hardware and software in the form of servers, software and network equipment. For private individuals, this may involve an opportunity to store pictures, music, film clips, documents and other material on the Internet in order to be able to access these files from any Internet connection terminal whatsoever.

 

The term ‘cloud computing’ is used broadly and therefore it is difficult to measure this phenomenon as regards revenue or number of users. However, several major stakeholders such as Microsoft, Google and IBM are now pursuing initiatives in this area[38], and smaller stakeholders have also launched services that have achieved great success and publicity. One example in this category is the Swedish ‘Spotify’.[39]

 

There are a number of potential advantages with the development towards more cloud computing. First, there are probably both socioeconomic and environmental economies of scale, for example, through centralising a large number of servers or kinds of hardware instead of these being stored and maintained by each individual company. Second, cloud computing allows flexible business models, as the need for locally installed software reduces. Private individuals and companies may then find it easier to pay for specific functions (for example word processing) rather than for entire programs (for example Microsoft Word) if the software is offered as a service via the Internet. For the same reasons, it is probably easier to offer the end users more adaptations and tailor-made services than before. Third, the preconditions for mobility increase with cloud computing because the service that is required for the moment is not bound to a hard disk on a computer, for example, but can be reached from whatever terminal is being used at that particular time that is connected to the Internet.

 

The development towards cloud computing may have a number of consequences on the Swedish telecommunications market, not least as regards:

In pace with functions that were previously provided locally or via local networks being transposed to the Internet, the need increases for both bandwidth (services requiring high capacity are also shifted in this way) and the security of the networks (only those for whom the services in question are intended should be able to gain access to them in a secure way, with few disruptions).

 

The future rapid increase in packet data in above all else mobile networks will in its turn probably require new business models to adapt traffic to existing capacity in the networks.

 

In sparsely populated areas, where many people can only get broadband via mobile networks, this may mean that the possibility of gaining access to services offered on the Internet with continuously increasing demands on high capacity will be limited or made more expensive compared with those areas that have fixed broadband. Functional IT infrastructure with high transmission capacity in all parts of the country therefore represents an important component for being able to supply the services of the future.


5.2  Effects of increased traffic in the mobile networks

PTS operator statistics show that both the total traffic in the mobile networks and data traffic per mobile subscriber has increased dramatically, primarily over the last two years (see Diagram 20).


Diagram 20   Total data traffic in mobile networks

Mobile broadband subscribers represent the major part of increased traffic volumes. Several major mobile network operators in Sweden have given notice that they are going to upgrade their mobile networks to satisfy capacity demands, but at the same time newer, faster and more expensive subscriptions for mobile broadband were launched while the ‘capacity ceiling’ has not changed to any great extent.[40] Faster subscriptions without the capacity ceiling being lifted may be viewed as one way of suppressing the increase in data traffic in the mobile networks, which has today progressed more rapidly than the increase in the number of users of mobile broadband. In recent years the revenues from mobile broadband are low in relation to the amount of traffic generated by the service. Now that the networks are being filled up, revenues reduce per transmitted Gbyte and investment costs are increasing for operators that need to build out and intensify the networks to be able to satisfy the increased demand for capacity (see Diagram 21).


Diagram 21   Revenue per transmitted Gbyte in mobile networks

Cloud computing and constantly increasingly advanced mobile terminals mean that many more functions can be dealt with via any terminal whatsoever that is connected to the Internet, and it is therefore likely that the demand for rapid, secure and reliable connections via mobile networks will consequently increase further in the future. Demand for capacity in the mobile networks also suggests that the capacity ceiling of between 1 and 5 Gbytes will be insufficient in the future; and this will also apply to user categories who do not share files to any great extent. A subscription with a ceiling of 3 Gbytes per month with up to 14.4 Mbits per second allows, for example, downloading at a maximum rate of about 30 minutes per month.[41] Diagram 22 shows that the total average data traffic in mobile networks per subscription to mobile broadband has increased slightly since the first half-year of 2008, from 1.6 to 1.8 Gbytes per month, and that there was a great variation between various operators.


Diagram 22   Average data traffic in mobile networks per subscription to mobile broadband and month

In simple terms it can be said that the phenomenon cloud computing contributes to increasing demand for capacity, which in its turn increases the need for investments to be made in the mobile networks. Operators’ revenues from subscriptions for mobile broadband are, however, too little to cover the costs of such investments, and prices are therefore increased, which in turn will probably make the product less attractive. For this reason, the operators need to develop new business models to achieve long-term sustainable business with mobile broadband that both satisfies the needs of end users and generates revenues for future investment.


5.3  New business models

As described above, cloud computing contributes to increasing data traffic in the mobile networks, which requires changes to business models. At the same time, it can be said that cloud computing competes directly with the operators’ content services. It is becoming increasingly common for functions that could previously only be offered by the operator at an additional cost (for example sending a picture via MMS) are currently processed via the terminal’s Internet connection without any additional cost (for example by sending the picture via e-mail). Mobile telephony subscriptions have actually been launched that, in the first instance, use the 3G network to relay voice traffic via mobile packet data.[42] In a similar way, it is on certain terminals possible to install applications that facilitate Internet telephony and thereby do not generate any call revenues for the operators.[43] One other example is the downloading of ring tones, where many people use third-party suppliers via the Internet rather than the operators’ special services. In this way, the operators act rather as intermediary providers of Internet than suppliers of content services. This is one effect of cloud computing which further illustrates the need for new approaches.

 

It is of course difficult to assess which business models will be competitive in the future, but the operators have to labour with above all else the following variables, whether separately or in combination:

  1. Changed charging according to data volume used.

  2. Bundling with fixed broadband.

  3. Differentiation depending upon content of the data traffic.

The operators can differentiate their subscriptions by changing the charge per volume of data used, for example by changing the capacity ceiling in combination with sales of further data traffic as an add-on. Another possibility is to launch even more beneficial combination offers with fixed broadband in order to channel some of the traffic to fixed networks. It is, however, unclear how the end users would react to such changes in the operators’ price plans, as the trend is increasingly clearly towards increased mobility and nondependence on terminals.

 

One can also consider business models where the price or the capacity depends upon whether the user surfs to elective sites or to sites where, for example, the operator or a cooperating partner offers its services.[44] Today, bandwidth is allocated in mobile networks mainly according to needs (Best effort) instead of the operators prioritising certain traffic in favour of another (Quality of Service). PTS’s position on this matter is that Internet users with ‘Best effort’ should be at liberty to receive and send content and also use services that do not harm the network, while the operator may not manipulate or give lower priority to traffic depending upon content, origin or destination and should provide clear information about the capacity and quality of the connection. As yet, PTS has not considered that there is reason to act on any matter related to network neutrality. PTS will in the first instance work to ensure that users are well informed about service quality, etc. In addition, PTS will monitor the issue from an international perspective.[45]


5.4  Effects on accessibility

Regardless of which way the operators modify price plans for mobile broadband to increase margins, the price of mobile broadband will probably increase in proportion to corresponding rates and functionality with fixed broadband. Such development would make it more expensive for those households and businesses that can only reach the Internet via mobile broadband when they wish to have access to the new functions and services resulting from, among other things, cloud computing. As regards access to IT infrastructure for those households and businesses that do not have or have far too limited opportunities of gaining access to electronic services, PTS’s view is that the USO tool[46] represents an important resource that should be extended to accesses higher than the current USO level of 20 Kbits per second.[47] Another measure could be to put in place a bitstream product that is attractive for alternative operators to TeliaSonera, which would stimulate competition and facilitate the offering by operators of xDSL services with high transmission capacity where such services are not offered today. The capacity in the fixed networks is not as restricted as in the mobile networks, and therefore the operators do not have as great incentives to introduce new price plans with capacity ceilings or other restrictions for xDSL subscriptions in a corresponding way as for subscriptions to mobile broadband. Mobile broadband is today actually the most common form of access for those inhabitants and businesses that cannot get Internet access via fixed or mobile solutions (see Diagram 23).[48]


Diagram 23   Population in areas with basic prerequisites for only fixed and only mobile broadband (number)

In order to improve accessibility to services requiring great capacity throughout Sweden, it is also important to increase capacity in the mobile networks by stimulating fibring further out into the network. In pace with demand for capacity increasing and new technology in mobile networks being launched (such as HSPA+ and LTE[49]), greater demands are also being placed on capacity further back in the network, for which reason the need of fibre-based transmission to base stations close to the end users will probably increase. In order for such a build-out to take place it is, however, necessary to have a functional wholesale market for dark fibre. PTS does not currently govern the market for dark fibre, but during 2008 the agency conducted a study of the wholesale market for dark fibre in Sweden with the aim of describing this market, the problems that exist and how these may be resolved.[50] In order to resolve the problems prevailing in the wholesale dark fibre market, PTS considers, among other things, that it is important to provide better access to the existing infrastructure and also that better preconditions are created to establish the infrastructure that is required, and that impediments to establishment in the market be minimised so that the market will be able to cope with the developments on its own. As regards current impediments to establishment, PTS considers that they could be reduced by the municipalities encouraging joint laying, good IT infrastructure planning and an establishment-friendly approach to both fibre rollout and to competition for the same.[51]

 

New developments in technology and demand for capacity also require that frequency space is sufficient for the operators to be able to offer mobile broadband in areas where coverage is limited or absent. The board of PTS decided on 13 March how the frequencies in the 900 band would be assigned. This decision aimed, among other things, to enhance competition in the market for mobile broadband and provide better broadband coverage.[52] Currently, PTS also plans to allocate the frequencies in the 800 MHz band, which among other things could possibly be used to ensure accessibility to rapid broadband in areas that completely lack or have inadequate access to IT infrastructure with high transmission capacity.[53]


5.5  Effects on security and privacy

The trend towards increasing cloud computing can result in new security risks and weaker protection of personal privacy. As regards a business, this may entail risks with transferring critical data to some third party and a failure of control over where data is stored and processed. However, there are extensive economies of scale as regards storage and processing of data, and therefore it is reasonable that the development towards cloud computing will also entail considerable volumes of information being stored in a fewer number of large server halls. Sabotage of such halls or operational disruptions in the areas where the halls are localised might then possibly have major global consequences. On 6 to 7 May 2009, PTS conducted the exercise ‘Telö 09’, which was based on occurrences that influence the networks for electronic communications and other parts of society, for example severe disruptions to the Internet and physical impact on the infrastructure. The overall objective of Telö 09 was that the stakeholders participating in the sector for electronic communications would become better at, in collaboration, dealing with serious and extensive interruptions, interference and disruptions.

 

Private individuals may jeopardise their personal privacy by disclosing details to social networks via the Internet, as it may be difficult to check or eradicate information that has been published on the networks. There are also cases where private individuals have been exposed to breaches of data secrecy, normally via unprotected wireless networks. However, increasing amounts of data are being transmitted via wireless networks and therefore it is becoming increasingly important to protect oneself from undesirable intrusion. In the report ‘Improving the security of wireless communications’,[54] PTS provides a number of items of concrete advice about what is important to consider in this context.

 


[38] Microsoft: http://www.microsoft.com/sverige/pr/articles/2008/081027_windows_azure_services_platform_nyhet.mspx; Google: http://www.google.com/a/help/intl/sv/index.html and IBM: ftp://ftp.software.ibm.com/common/ssi/sa/wh/n/oiw03022usen/OIW03022USEN.PDF.

[39] http://www.spotify.com/en/help/faq/#about-spotify.

[40] According to Telepriskollen, 20 of a total of 21 offers of mobile broadband had some kind of express capacity ceiling or variable cost per Mbyte at the beginning of June 2009. Most offers have a capacity ceiling of between 1 and 5 Gbytes per month. If more data than this is transmitted, the customer must either pay for the further traffic or is penalised with strangulation of capacity, often to a maximum of 30 Kbits per second.

[41] Based on 1 Mbyte being equivalent to 8 Mbits, which provides 24 000 / 14.4 / 60 = 27.8 minutes.

[42] See, for example, http://www.megaphone.se.

[43] For example Skype Lite™.

[44] Bredbandsbolaget is, for instance, cooperating with Spotify, which is bundled with certain subscriptions to mobile broadband.

[45] PTS-ER-2009:6.

[46] USO stands for Universal Services Obligation and the ‘USO Directive’ governs which electronic communications services are to be universal.

[47] PTS-ER-2009:8.

[48] PTS-ER-2008:

[49] LTE stands for ‘Long Term Evolution.’

[50] PTS-ER-2008:9.

[51] PTS-ER-2008:9, pp. 65-66.

[52] Decision, 900 MHz band, PTS File reference 08-12019, p. 5.

[53] The licences will be allocated by an auction during the autumn of 2010.

[54] PTS-ER-2009:16.