O2's network challenge deepens despite £30m cash injection

O2's network challenge deepens despite £30m cash     injection
O2 faces a challenging 2010 after a series of outages last year forced it to admit that smartphones were placing increasing pressure on its network.

Although a £30m cash injection during the last quarter of 2009 may have helped O2's growing network problems, CEO Ronan Dunne told the Financial Times last week that there is still work to be done.

The growing number of mobile applications running on devices such as the iPhone and RIM's BlackBerry devices has been causing problems since last summer, the operator admits.

O2 is now looking at which applications cause particular strain on its network and Dunne is working with RIM, Apple and other manufacturers to learn more.

In November, Mobile exclusively revealed that O2 had added £100m in additional network spend over one year, having admitted problems in areas with a 'high concentration of smartphones'. It brought forward 40 new site builds, to be implemented in London before Christmas 2009.

Data on O2's network had increased 20-fold in one year, the operator's chief technology officer, Derek McManus, told Mobile in November - and it is set to increase further. The operator must now find a way to compress and manage the data.

Strategy Analytics analyst Phil Kendall says: 'There are going to be certain apps that are driving traffic. A lot of it comes down to video use, such as YouTube or iPlayer content. If they [O2] can find a way to compress the video further, then that would make sense.

File transfer and peer to peer downloading can also consume a fair amount of bandwidth - it's how well you can compress that data that is challenging, says Kendall.

The other issue is the browser. For example, Opera says it can offer the mobile web using a tenth of the bandwidth. Reducing the page size makes the browser more efficient, but it is not in its interest to compress data if it reduces quality, adds Kendall.

And as more networks take on the iPhone, the problem could spread. Although it appears O2 is currently behind, addressing these problems now may propel it back to the forefront this time next year.

Who is causing the problem?
Analyst comment: Phil Kendall, Strategy Analytics
It is a relatively small amount of people generating a large amount of traffic. AT&T [the US network that distributes the iPhone] said last year that around 3% of its users represent 40% of traffic. The figure is similar here. If you can adjust pricing to penetrate the heavy users then O2 may need to address this.

Also, it is ironic that O2 is one of the networks that has delayed the spectrum auctions and yet it needs the bandwidth more than most.
Written by Mobile Today
Mobile Today


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