Mobile broadband is the name used to describe various types of wireless high-speed internet access through a portable modem, telephone or other device. Various network standards may be used, such as GPRS, 3G, WiMAX, LTE UMTS/HSPA, EV-DO and some portable satellite-based systems.
There are currently 184 million mobile broadband subscribers (end 2008). Each of the last two years saw over 80% growths in the subscriber base. Informa Telecoms and Media estimates the mobile broadband subscribers to cross 1 billion mark in 2011 and touch 2.2 billion by 2013. Juniper estimates that the revenues from mobile broadband subscribers in 2014 would exceed $70 billion.
Before I move further, I guess it is important to provide the explanation of the few mobile broadband technologies. The picture below is an illustration of the variation in internet speed across various technologies
Drivers of Mobile Internet usage
- Mobility – People want true mobility and to be able to use their broadband everywhere gives a big reason for consumers to adopt mobile broadband
- Flat Fee – Consumers want to have control on the expenditure and hence flat fee acts as a trigger for higher adoption. A number of reports have conclusively shown that the subscriber base increased at a much faster pace after the flat fee introduction by carriers
- Devices -The portable devices like the netbooks, notebooks, Mobile Internet Devices (MIDs) have been the cornerstone of mobile broadband uptake ever since the USB modems become popular in 2007. The popularity of the modems can be gauged from the fact that at the end of Q3’2008, 15% of HSPA subscribers of Telstra in Australia are modem subscribers. The carriers are offering free netbooks or in some case a free notebook in return of 2 year mobile broadband contract. Launch of mobile devices like iPhone, Android based phones and increasing popularity of smart phones is adding to the mobile broadband subscriber boom
- Simplicity – Mobile broadband is easy to use and consumers need not shift to fixed internet at home. They can continue to use mobile broadband even at home. This simplicity is a key driver for current adoption and would lead to churn in fixed internet in favor or mobile broadband
The popularity of mobile broadband is making the operators to invest in the HSPA+ rollout. Vodafone recently announced that it has managed to achieve speeds up to 15 MBPS on HSPA+ using 64QAM technology. Vodafone is now preparing for trials for up to 21 MBPS speed on HSPA+. The renewed focus on HSPA+ and the current economic conditions may push LTE roll-outs by a few years. Though the Nordic countries are once again taking the lead in LTE roll-out but I guess the other key European operators would delay their LTE plans.
The main barrier to the take up of mobile broadband is uniform consumer experience. There are economic considerations in network roll-outs leading to limitation on coverage the mobile phone networks can provide. At the same time, there are issues related to capacity and speed in a few areas that is not seen as uniform consumer experience.
The success of mobile broadband is more prominent in the western countries or Japan and Korea as they have small populations to cover. The real test would be countries like India and China which have vast land mass as well as huge population. Providing seamless coverage in these countries would be a challenge. Additionally, the consumers in developing countries are economically constrained and hence it would be a challenge to profitably provide mobile broadband services.
The unprecedented growth in mobile broadband subscription and usage of new portable devices in the last couple of years has lead to even higher growth in data traffic. The data revenues have not kept pace with the increase in traffic due to introduction of flat rates. The mobile broadband users on the portable devices are heavy users and use as many as 8-9 times more bandwidth than a normal user. This heavy usage is choking the 3G networks of most of the operators. Moreover, the highly competitive carrier landscape is leading to severe price erosion. Optus in Australia was recently forced to upgrade backhaul to its base stations to reduce congestion on its networks. Informa estimates that the mobile internet traffic would increase by 1587% in next 5 years but the mobile data revenues would increase by just 84%. This means the carriers would need to substantially reduce the bandwidth cost per megabit or create hindrances to the fixed to mobile substitution. In the meantime, the carriers have started to impose fair usage limits on their customers.
Another barrier in mobile broadband adoption, like any other service, is regulatory policies. The spectrum availability remains a key concern in many countries. The greed of the Governments had raised the 3G auction price in European countries in the past and the same is likely to continue in future auctions. Certain actions by the regulatory authorities are leading to not only higher prices but also hindrances in adoption of VOIP which could be a big driver of mobile broadband. There is excessive lobbying by certain industry players with the Government trying to block the ecosystem players from offering VOIP without realizing that the technology evolution cannot be stopped and what is good for the consumers is good for the industry. The regulatory authorities would do well by expediting the resolution of long pending decisions on spectrum and VOIP
Lack of killer applications especially for mobiles is one of the reasons for lack of consumer interest in mobile broadband. For many consumers, voice is the only killer application on mobile and they do not see any need to expand the horizon of services they use on mobile. A few killer applications with a critical mass gathering around them would make consumers adopt mobile broadband. Email was the killer application on fixed internet, probably location based services could be the killer application for mobile broadband. Adoption of an open mobile ecosystem (Read earlier post on “Wireless Business Models”) would go a long way in addressing the current challenges being faced by the developer community.
Current credit crunch is also likely to stall the network roll-out efforts of carriers. The sources of money have dried out and the cash is king. In such an environment, there are additional pressures on profitability and capital expenditure. The HSPA+ and LTE roll-outs may get hampered by limited availability of money for investment.
The projections made by Informa may look very bullish at the moment but if the industry is able to resolve the issues around mobile broadband, I am sure that we will exceed the projections. The key would be how much the carriers feel threatened by the mobile broadband as there is a strong feeling in the carrier community that there is a real possibility of their marginalization as it happened to the Internet Service Providers (ISPs) in the fixed internet world.