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The history of rate structures for wireless services is fascinating. Broadband data, as a separately tariffed service, emerged around the time that major U.S. carriers were abandoning usage-based billing for voice. The plans might have been characterized as “buckets of minutes,” but thanks to competition the buckets were so big, and “free minutes” call categories so numerous, that the majority of users rarely came close to reaching their limits.

Bucket plans for voice minutes were enormously popular, to the point that many people dropped their wireline phones altogether. Flush with this success, carriers tried offering similar “unlimited” plans for data in hopes of attracting users to their new 3G data networks. However, when smartphone sales began to take off, and some data-hog applications on the new devices became popular, data networks were frequently swamped. In response, most carriers implemented monthly data caps as a means for controlling congestion. And even though caps proved to be at best a blunt instrument for this purpose, until quite recently cap-based data plans have pretty much remained the standard. Now, however, carriers are being forced by competitive pressures to abandon data caps and again offer “unlimited” data for a fixed monthly charge.

While unlimited voice plans were a hit with customers, they presented a huge problem for operator finances. Network capacity had to increase to deal with surging demand, but revenues weren’t growing nearly as fast. Fortunately, technology came to the rescue. A new CDMA2000 voice standard, 1XRTT, pretty much doubled capacity on CDMA networks, and sophisticated frequency planning software greatly improved spectrum efficiency for GSM systems. But despite these advances the industry struggled through a few lean years even as cellphones became ubiquitous in our everyday lives.

The move to unlimited data plans is likely to bring to operators a return of the capacity crunch and financial headaches that came with the introduction of “bucket of minutes” voice plans, but this time on steroids. It’s not just that customers are likely to use their smartphones more for data apps, they are likely to want to use them for very high-bandwidth, long-duration services like streaming high definition movies. And if a significant number of customers decide to abandon their fixed wire- or fiber-borne broadband service, as they earlier abandoned their home phone lines, things will get really ugly.

As gloomy as these prospects seem, what’s really concerning is that there do not appear to be on the horizon any new LTE capacity enhancing technologies of the sort that helped when demand for voice service exploded. A few years ago hopes for juicing LTE capacity were pinned on MIMO and smart antenna systems, but it now appears that these aren’t particularly useful in interference limited situations (which is what happens when networks get congested).  The latest hope, “HetNets” seems promising, but only with enabling ultra-sophisticated interference management tools, which currently do not appear to be in the works.  In fact, the industry doesn’t even seem to have developed a good method for gracefully handling demand overloads.  Verizon’s plan to temporarily throttle heavy users to ease congestion was shot down by raised FCC eyebrows and bad publicity.

So, what needs to be done?  LTE technology developers should start focusing on interference management tools.  This alone will give capacity a boost, but more importantly could open up the vast potential of HetNet technology.  We should stop pinning congestion relief hopes on new spectrum.  However much is eventually squeezed out for broadband wireless, it won’t be nearly enough to deal with rising demand in an “unlimited” world.  And carriers need to adopt “fair” congestion policies that will preserve service quality for low demand apps – email and such – when demand exceeds capacity.  These steps will take time, so we better get moving.  Like “bucket of minutes”, unlimited data plans are sure to be a big hit, which means unlimited operational headaches for network operators.

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