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Facebook Wants to Work With Carriers to Improve Their Networks

By Adam Levy – Mar 1, 2016 at 10:45AM

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But the carriers might not want to work with Facebook.

Source: Flickr/Carl Lender.

One in every five minutes on mobile is spent using Facebook (META -2.36%) or Instagram. In the latest Internet trends report from Sandvine, the two apps also combine for about 20% of mobile data uploads and downloads in North America. So improving the speed and coverage of wireless networks is in the best interest of Facebook.

To that end, the company unveiled the Telecom Infra Project, or TIP, on the first day of Mobile World Congress. TIP is an initiative to get hardware makers and wireless carriers to share designs and technology to accelerate the deployment and adoption of 5G networks and improve coverage in both urban and rural deployments. So far, 30 companies, including Intel, Nokia, Deutsche Telekom, and SK Telecom, are on board.

An olive branch
Facebook CEO Mark Zuckerberg believes TIP provides an opportunity to help carriers save on the development and deployment of their next-gen networks. Verizon (VZ -2.00%) has already started testing its 5G network, and AT&T (T -1.57%) and T-Mobile (TMUS -0.76%) plan to follow suit with tests later this year. 5G connections will offer massive bandwidth and virtually zero latency.

TIP follows in the footsteps of Facebook's Open Compute project, which allowed Facebook and its partners to save billions in infrastructure costs, according to Bloomberg. By open-sourcing equipment designs, partners were able to save money on R&D for their servers and storage equipment. TIP could do the same for telecom companies.

Telecom companies recently complained that Facebook is taking advantage of their hard work and spending. While the telecom firms build the expensive cell towers and other infrastructure, Facebook can offer services such as WhatsApp and Messenger, which now include voice calling, for free. They also complain that they're subject to more regulations than Facebook, making it harder to compete.

TIP is an olive branch of sorts to show telecoms that it's willing to help do the research to build a better network. But telecoms have been wary of Facebook in the past when it's tried to help build networks to connect poorer people in remote areas. AT&T is examining the pros and cons of joining TIP. Verizon has said it won't be joining anytime soon but will "take a look at TIP when it's a little more mature."

Facebook needs more bandwidth
Of course, Facebook has a vested interest in improving cellular networks around the world. Its user base is increasingly mobile, with 90% of its monthly users accessing it through mobile and 52% accessing the platform exclusively that way. Facebook doesn't provide data on Instagram, but its ratios are probably higher as it was originally designed for mobile-only use.

What's more, Facebook is only in the early stages of its video efforts, and its users already watch over 100 million hours every day. On the company's fourth-quarter earnings call, Zuckerberg said the company is looking at ways to improve the viewing experience of video on Facebook, including a dedicated section. That indicates the company sees a lot more growth in video ahead. Add that on top of an expanding user base, and Facebook will continue to take share of mobile data traffic.

Facebook is also expanding the functionality of its other apps. Instagram also features videos. Messenger and WhatsApp support voice and video calling. These data-intensive services require loads of bandwidth and strong connectivity to function properly.

As Facebook continues to grow its various apps and platforms, cellular connectivity becomes even more important. TIP is a plan to improve the networks Facebook needs to continue growing its engagement and, by extension, its ad revenue. But many big carriers seem wary of signing on.

Adam Levy has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool recommends Intel and Verizon Communications. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AT&T Stock Quote
$18.82 (-1.57%) $0.30
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$108.78 (-2.36%) $-2.63
Verizon Communications Stock Quote
Verizon Communications
$38.24 (-2.00%) $0.78
T-Mobile US Stock Quote
T-Mobile US
$149.90 (-0.76%) $-1.15
Nokia Stock Quote
$4.70 (-2.49%) $0.12
Intel Stock Quote
$28.73 (-2.10%) $0.61
SK Telecom Stock Quote
SK Telecom
$20.69 (-0.77%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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