European wireless operators could be facing a financial crisis as traffic from OTT giants are growing at an unprecedented rate, driving higher-than-ever utilization of their networks at a time when electricity prices are up 500% from normal levels!
And, winter is coming.
When you think about the cost base of a wireless operator, you will think about wages for employees, equipment, software licenses, and so on. But few will realize that base stations and antenna systems consume power. Lots of power. The more bandwidth subscribers use, the more power the RAN uses.
Watching video in 720p on phones uses 1/20th of the energy resources of a 4K video. Keeping that in. mind, let’s do some quick math. A quick calculation says that the average cell site today uses about 5kW of power, and considering geography, that means each operator uses about 0.4 kW per square kilometer. That means in a country like Sweden, with roughly 528,000 square kilometers, an operator covering half of that geography would use roughly 100000 kW, or 100 MW of power across 20000 cells. Crikey!
If we further assume that somehow on average the operator is using about half of that because of power savings during the night, among other considerations, that would come to about 462000 MWh of usage. Using 2021 electricity pricing ($0.19/kWh, which is still historically really high), that would cost an operator about $86M (roughly 4% of revenues).
Fast forward to 2022, in which the current price is $0.51/kWh, assuming the same revenues, electricity would now account for 12% of revenues! That means that for wireless operators in Europe, where margins are extremely thin, driving prices down is all the more important to remaining competitive.
This is motivating service providers to come to Sandvine. They need to better manage these problems with solutions that can bring more equitable use of network resources. Fair usage and heavy usage policy management, as well as galvanizing large OTTs to foot some of the bill (as well as the regulators who can influence policies affecting business models), are the paths service providers have to take.
Smaller amounts of traffic would directly lead to more substantial energy savings, especially during the peak hours of the day, when electricity pricing is the most expensive.
Worth noting is the paradox that OTTs build and operate huge data centers across Europe that also consume huge amounts of electricity for compute and cooling, but yet they aren’t in trouble like the network operators. Why? OTTs get discounted electricity pricing because European governments are competing to attract the data centers to their countries, assuming that jobs and taxes will follow. Some are offering discounts as great as 95%. This is a sharp contrast to what mobile operators are experiencing!
Bottom line: operators have to find a way to cut energy bills, and the best way is through less usage during the most expensive times.
Sandvine can boast unparalleled experience with 22 years of helping mobile operators manage traffic: reducing tonnage, ensuring fair usage policy, alleviating congestion, moving tonnage from peak to off-peak, and much more. We are the company that is ideally suited to helping operators with this problem.