So much data, so little money for mobile operators
Operators are struggling to manage capacity and pricing so that a few heavy users do not clog up networks and deny average downloaders reliable speeds, access and predictable bills.
At the same time they do not want to be relegated to "dumb pipes" or be stuck with the bill for network investment while services and application providers like Google and Apple reap the benefits.
"The really big question for everybody is: What is the business model?" Holger Forst, telecoms expert at accountant firm Ernst & Young, said on the sidelines of the Mobile World Congress, the world's largest wireless trade show.
While no one regrets heavier mobile data, a lack of clarity about the investment in networks and platforms needed to turn that growth into cash is giving investors the jitters.
"Uncertainty is very high, the investment community is totally petrified of the sector ... it does not understand how to price the growth," said Vimpelcom CEO Alexander Izosimov.
A recent study by Cisco forecast mobile data traffic would rise 26-fold by 2015. At the same time mobile operator revenues, especially in developed markets, are barely rising.
"The tobacco sector has better growth prospects than us," Izosimov added.
But operators have yet to map out future steps.
"It is difficult to overestimate the impact of mobile data," Vodafone Group CEO Vittorio Colao said, conceding that "the challenge is to develop a model that makes it profitable."
The British mobile operator has placed making more of mobile data at the center of a strategic restructuring.
Rival Deutsche Telekom is pursuing a similar approach, aiming to almost double sales from mobile Internet and IT services to 29 billion euros ($39.32 billion) by 2015.
"But the investment community has not quite bought into the connected device story, it's too vague," said Martin Garner, analyst at research firm CCS Insight.
For the time being analysts agree that the most important step for telecom operators is to become more aggressive and selective on pricing.
"Telecom operators are taking the wrong view, approaching it from the voice business model," said John Strand of Strand Consult, adding operators need to raise prices for heavy data users with laptops.
Mark Newman, analyst at Informa, said operators should just cut to the chase and bear down on the heavy users.
"They know who those few percent are and they can get to them. If they switch operators that's not so bad, they'll go and congest someone else's network," he said.
Some operators have taken note.
France Telecom's Orange has basically ended most unlimited offers on mobile Internet with capped data plans for dongles and fixed caps for smartphone users, except for the most expensive plans.
"We haven't found all the solutions yet, but we are making progress," said Anne Bouverot, Orange's head of mobile services.
AT&T, often mocked for its network problems and patchy coverage, was one of the first to drop unlimited data plans and introduce tiered pricing.
"It all raises the dumb pipe question again," Ernst & Young's Forst said and "that's dangerous for the operators."
Telcos have a limited window of time to avoid that fate where they would basically offer their services like utilities, effectively competing only on price.
Some say they are already there.
"We are just dumb pipes," Softbank chairman & CEO Masayoshi Son said, adding that's "depressing reality."
(Additional reporting by Georgina Prodhan and Leila Abboud; Editing by David Cowell)