Catch the mobile broadband wave

10 Feb 2009

Mobile broadband was one of last year's big stories. Connections soared, as did revenue, creating a broadband dividend for many mobile operators. SK Telecom, for example, is generating nearly 30% of its revenues from mobile internet services.

Last year, however, was just the start. Despite the downturn in the global economy, mobile broadband is expected to continue its rapid adoption in 2009 and beyond.

'There's no doubt that the mobile internet has been quietly growing in the background, but we believe the market and industry has now reached an axis point and 2009 will be a huge year for mobile,' said MIA CEO Richard Mergler.

'Newer high-end handset penetration combined with higher network speeds and lowering data rates means more people are able to access mobile services and are able to browse sites quickly and cheaply.'

The GSM Association predicts that HSPA tariffs and the cost of consumer hardware will fall by more than half in the next three years, which will drive global HSPA-subscriptions from 67 million last November to more than one billion in 2012. Other analysts forecast mobile data growing 160% annually over the next four years. (see 'Prepare for the mobile internet revolution' story.)

A joint Telecom Asia-Ovum survey of industry participants in Asia Pacific about the prospects for mobile broadband found that although respondents believe mobile broadband is good news for operators, there are major challenges around differentiation and traffic growth.

Higher margins‾

Respondents expect mobile broadband adoption to be a huge boost for the industry. In fact, 66% expect mobile broadband to be an equal or higher margin business than mobile voice. Almost a quarter see it bringing lower margins.

Ovum analyst Nathan Burley says this view seems optimistic. Interestingly, however, responses to this question were dependent on market maturity. Participants doing most business in emerging markets were more likely to see mobile broadband as higher margin service. In contrast, those in developed markets think that 'the same' or 'lower' margins are more likely.

'Obviously, when filling up un-used capacity or capturing high-value early adopters, mobile broadband will deliver fantastic margins,' Burley noted. 'However, as the service matures, we believe most signs point to lower margins for mobile broadband than mobile voice. Limited ability to differentiate, flat-rate pricing, strong - mostly priced-based - competition, and ongoing capital investment required to support growth, all raise significant questions about mobile broadband profitability. '

Respondents were almost equally split on which device would drive the most traffic growth, with 45% of those surveyed selecting laptops and 41% going with laptops.

Burley noted that device traffic use is generally proportional to screen size. Laptop/PCs will therefore continue to use much more data per connection as users consume in a similar way to fixed broadband. However, generally far fewer laptops than handsets access the network. Handsets will also continue to become more data friendly and consume more data per connection.

Due to pricing and usage patterns, handset data is generally higher margin than that delivered to laptops/PCs. This makes driving handset rather than laptop/PCs data use advantageous to operators. Driving device handset data usage may also result in increased use of voice and messaging services as well as operator own content.

Mobile broadband is being enabled in large part by the new wave of smartphones that incorporate GPS and state-of-the art graphics. High-powered computing devices capable of running all kinds of applications will become the norm as users replace their standard phones with smartphones.

Just look at the iPhone. The average iPhone owner downloaded at least 15 applications in the past six months, according to Nielsen Mobile.

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