An economic argument for moving away from Mbps
An economic argument for moving away from Mbps
Domos CTO Magnus Olden tells us why a mathematical framework for network quality should pique the interest of Telecom CFOs
When face mask demand surged during Covid-19, prices increased, there was a deficit, prices rose, and it took time before suppliers could catch up with demand. Supply and demand, exactly what you learned in ECON101.
When home network demand surged during Covid-19, telecoms companies shrugged and said that they still had plenty of capacity left to spare. If there’s so much extra capacity, are poor user experiences a thing of the past? How can there be an over-supply of network capacity and still unsatisfied customers? Do telcos have high net promoter scores?
Mbps is only one part of the end-user experience
The short answer is that Mbps is the measurement of network capacity and Mbps is only one part of the end-user experience. Increasingly, variations of latency and packet loss are the performance bottlenecks. In the past, Mbps have primarily been the performance bottleneck. Still, as the bandwidth moves towards, and over, a 100 Mbps threshold, Mbps is becoming an increasingly worse proxy for user experience. Trends show an increase in streaming content (for example, video games, movies, and music) which has low Mbps requirements but is sensitive to latency, further weakening the Mbps standing.
The peak network requirements of different applications. No Application has yet breached 100 Mbps requirements. The reader should note that several 4K video streams can coexist on 100 Mbps. 4K cloud gaming uses around 25 Mbps. (Source: TM forum)
A promised increase of Mbps is the primary metric used in telecom equipment acquisitions. Here is the critical insight; there is no guarantee that increasing Mbps will improve latency, in fact, it can worsen latency. Indeed, there is no guarantee that increasing Mbps will improve the user experience. A network upgrade that reduces peak latency will, in many cases, improve user experience more than an upgrade from 1Gbps to 10Gbps.
Most telecoms measure network quality incoherently
Network quality is often measured incoherently with too strong a focus on Mbps. Vendors may also have diverging takes on what Mbps means and there can be differences between technologies and silos. It is often impossible to know to what extent an equipment upgrade or optimization will improve the end-user experience. The capabilities for understanding the end-user experience are lacking. An analogy could be found by measuring the effectiveness of a customer-support call-center, but only the number of calls concluded were measured, ignoring measurements such as whether the issue was resolved or if the customer was satisfied. It creates the wrong incentives.
The graph shows that for Mbps, increases above 100 have diminishing User Experience Perception returns. ARPU is not moving. How well spent is the money it cost to upgrade from 100 Mbps to 300Mbps? 1000Mbps? (Source: Omdia)
There is a higher willingness to pay for a perceived better network [1]. But what makes a network better for a user? It’s the snappiness of webpages loading and lag-free video gaming and conferencing. You can get better user-experiences from your existing equipment while still selling “up to X Mbps,” but the equipment needs to be tuned and optimized differently. Again, the problem is that the network quality is being measured so poorly that doing so is currently impossible.
The questions for operators and service providers are therefore how can you efficiently price network usage when there is no model between user experience/NPS/perceived network quality and an investment? And how can you calculate ROI?
Introducing QED
Broadband Forum’s Quality of Experience Delivered (QED) is a technology-independent, mathematical framework for network quality that enables these calculations and maps network quality to user experience. Complete with test procedures and a decomposition of quality degradation that will let you know which investments will yield the most significant ROI.
A financial model is only as good as its underlying data. Currently, network quality and the ROI on network equipment upgrades are imprecise. Exclusively evaluating network equipment by Mbps is like exclusively evaluating a call-center on wait-time. You may have made a promise regarding wait-time, but nothing with regards to resolving a problem or customer satisfaction. You are missing large parts of the business case. Mbps does matter, but it is only a part of the story and the business case. By measuring the network quality better, improved telecom finance models can be created. Start assessing network investments based on their customer experience impact.
For more information, read MR-452.2 here: https://www.broadband-forum.org/marketing/download/MR-452.2.pdf
[1] Bidit Lal Dey, Wafi Al-Karaghouli, Stanimir Minov, Mujahid Mohiuddin Babu, Angela Ayios, Syed Sardar Mahammad & Ben Binsardi (2020) The Role of Speed on Customer Satisfaction and Switching Intention: A Study of the UK Mobile Telecom Market, Information Systems Management, 37:1, 2-15, DOI: 10.1080/10580530.2020.1696526
For Press and Analyst inquiries, contact Proactive PR at broadbandforum@proactive-pr.com
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