Mobile broadband is revolutionizing broadband access across Asia-Pacific in developed and emerging markets. It is meeting pent-up broadband demand while being marketed as both a fixed line replacement, and as a personal and mobile broadband experience. Focusing on consumers and 3G-based technologies, Nathan Burley discusses the mobile broadband revolution and how operators should position their offerings.
Ovum forecasts that the mobile broadband revolution in Asia-Pacific will continue unabated. This will occur as wireless becomes the standard mass-market broadband platform in many emerging markets with limited infrastructure, and both complements and substitutes fixed broadband in developed markets.
In the context of unimpressive 3G handset value-added services (VAS’s), mobile broadband is achieving strong take-up and providing additional incremental revenue to operators, use of advanced 3G networks’ data capabilities, and generating heavy traffic growth for relatively empty networks. Solutions with attractive pricing are meeting user broadband and mobility demands and addressing new customers in newly defined segments. We see a significant upside for mobile operators, with new multiple connections and improved ARPUs. We expect a mobile broadband dividend not unlike the fixed broadband dividend.
The early stages of the mobile broadband revolution occurred in 2006/07 as key enablers, primarily around technology, began to come together. These enablers will continue to crystallize and drive mobile broadband’s rapid adoption and market share gains from fixed technologies. These enablers include technology advances, laptop penetration increases, lower cost of equipment and devices, operators seeking more broadband exposure, and demand drivers such as hyper-connectivity and broadband adoption. Additionally, although in most circumstances fixed broadband (where available) will provide a superior user experience, mobile broadband has numerous competitive differentiators. These include mobility, its personal nature and lower cost of deployment. Mobile broadband will also be much more than a fixed replacement with new device categories, services and applications.
Certain markets and segments are more likely to adopt wireless solutions. Leading factors that will determine take-up include broadband maturity, price, speed, penetration, usage patterns, existing infrastructure and coverage, consumer demand for mobility, laptop penetration, and disposable income. Emerging markets and those with dispersed populations are likely to provide the best prospects.
However, the effectiveness of mobile’s differentiators varies significantly and across markets. We believe operators should target the following segments; low-end connectivity, no-broadband alternatives, essential anywhere access, renters and shared houses, itinerant workers, and non- home access buyers. Other segments, such as bandwidth-hungry users, should be avoided as mobile’s capacity constraints limit provision of profitable solutions at affordable price.
Defining mobile broadband
Mobile broadband, in its broadest sense, is much more than a fixed broadband replacement. It includes mobile Internet on handsets and access from numerous new device categories beyond handsets, traditional laptops and desktop PCs. As such, mobile broadband is not only associated with the limited market of data cards, USB dongles, handset as modems, and fixed access points. We expect new device types, services, business models and applications to emerge due to the mobile broadband revolution.
This report focuses on the place of mobile broadband in the traditional consumer broadband market. We have refined our analysis to 3G-type broadband technologies focused on mobility, rather than fixed wireless services and technologies such as fixed WiMAX.
In many markets across Asia-Pacific broadband penetration is very low, especially in comparison with broadband leaders in the region such as Singapore, Taiwan and Korea. (see Figure 1.)
There are many reasons for the divide. One of the largest is the lack of broadband infrastructure due to limited existing fixed telephony and cable networks. This is where mobile operators come in. In emerging markets, these operators are often among the most powerful brands, and the biggest and most profitable companies. Mobile operators brought voice services to the masses and now, as wireless technology has developed, they have the same opportunity with data and broadband.
There is a huge differential between the investment of time, effort, money and risk to put fixed networks in the ground, and the deployment of a wireless base station. Where there is a lack of existing fixed broadband alternatives, we expect wireless to increasingly provide more broadband in the mass market. As with voice, it is generally the mobile operators that are best placed to control these networks and deliver broadband services.
Primarily due to scale, we see the mobile network as becoming the standard vehicle for broadband provision, meeting pent-up broadband demand in these markets and growing market share from fixed players.
Mobile broadband is personal
Broadband, like the fixed phone before it, has historically been a family or household purchase. Different terminals, personal computers, networking, routers and WiFi have made it more personal but at least the bill is still communal.
Although the broadband situation does not provide an exact comparison with voice, there are similarities. Mobile broadband does have the potential to change the dynamic as the mobile phone did for voice. (see Table 1.)
The personal aspect of mobile broadband makes it appealing to numerous segments, such as those in a shared house that want an individual broadband connection or bill.
The personal and mobility aspects also give rise to different usage patterns for broadband users - like mobile phone usage for voice. Additionally, the individual nature also makes the market potentially larger for mobile broadband than household fixed broadband. Deploying new mass-market consumer fixed broadband networks is expensive. In most scenarios (except in the case of government investment) and especially in emerging markets, a business case for new network investment is difficult to justify.
Excluding cable networks, which are not that prevalent across Asia- Pacific, existing public switched telephone network (PSTN) penetration generally provides the maximum potential for fixed broadband. (see Figure 2.)
In some cases, the PSTN networks cannot be upgraded to provide broadband of significant quality due to factors such as long line lengths from an exchange. Even in developed markets, there are still significant parts of the market where fixed broadband is not available.
On the other hand, mobile operators generally have the entire population covered for voice. Although their networks are usually not provisioned to provide large quantities of data and require access and backhaul upgrades to do so, this is much cheaper than rolling out new fixed networks.
Additionally, in Asia-Pacific’s developed markets, we already see close to 100% 3G wireless coverage from operators in Hong Kong, Singapore, Korea, Japan, Australia, Taiwan and New Zealand. For many of these operators backhaul is becoming the bottleneck rather than access.
Wireless also has numerous other advantages, such as speed of setup and lower cost of end-user install and provisioning.