“This study is a wake-up call for carriers,” Waheed said.

“Operators can spend themselves into the red trying to add capacity to keep up with demand. That’s ultimately a losing battle because they’re fighting on the wrong front. “Increasing tariffs and implementing bandwidth caps

also are futile because they encourage customers to spend less, or to churn, or both – the last things that carriers can afford. In fact, those strategies can actually speed up the end of profitability.”

“A Packet is a Packet” If there’s a bright spot in all of these gloomy predictions, it’s that carriers still control their fate. In a sense, the Tellabs study is like a doctor warning that you’ll live longer if you make healthier lifestyle choices. That’s one of the study’s key findings: Carriers that start

kicking their bad habits now can remain profitable over the long term and potentially increase their margins, too. The top priority is to stop playing dumb pipe. “Our study shows that

“Our study shows that bigger dumb pipes won’t reverse the slide toward unprofitability.”

— Rob Pullen, Tellabs president and CEO

bigger dumb pipes won’t reverse the slide toward unprofitability,” Pullen said. “The most effective solution is for carriers to add intelligence to their networks so they’re better able to offer value to their customers and their business partners.” The new intelligence

centers on platforms capable of analyzing each packet of traffic. That information helps identify opportunities to monetize that traffic beyond whatever the user pays each month for access. (For more details about that strategy, including how it’s implemented in the network, see “Financial Security” on page 6.) “Today, a packet is a packet,” Waheed said. “The

packets in a teenager’s Facebook upload are treated the same as the ones in my e-mail to a major customer. Network intelligence changes that dynamic. Now carriers can treat each packet differently based on policies designed to maximize data revenue. “That could include charging a premium for users who

want unlimited mobile gaming, or for businesses that want constant mobile access to their corporate cloud. This level of flexibility and actionable intelligence is crucial for avoiding the end of profitability.” 

3G: Third Generation APAC: Asia-Pacific

EMEA: Europe, Middle East and Africa

CapEx: Capital Expenses OpEx: Operating Expenses

Mobile Carrier End of Profit Revenue per GB

CapEx per GB OpEx per GB NORTH AMERICA

$30 $25 $20 $15 $10 $5 $0

Total Cost per GB

2010 2011 2012 2013 2014 2015 DEVELOPED ASIA PACIFIC

$35 $30 $25 $20 $15 $10 $5 $0

2010 2011 2012 2013 2014 2015 WESTERN EUROPE

$25 $20 $15 $10 $5 $0

2010 2011 2012 2013 2014 2015 Region North America

“High” (earlier) Median

“Low” (later) Q1 2013 Q4 2013 Q2 2014

Developed Asia Pacific Q3 2013 Q3 2014 Q1 2015 Western Europe

TELLABS INSIGHT Q2 15

Q1 2014 Q1 2015 Q2 2015 Source: Tellabs