I guess it was just a matter of time before white-label mobile broadband service offerings entered the mobile data lexicon. Spanish PC manufacturer AIRIS has recently concluded a promotion offering a mobile broadband laptop bundle with no specific operator branding. The white-label offer shows how mobile broadband is rapidly becoming a commodity in Spain and in most of Europe. AIRIS ran the promotion (see picture) with Spanish national daily newspaper El Mundo, offering a free ultra-portable laptop and modem to anyone who collected vouchers from the newspaper and signed up for either a 12-month contract with Telefonica or a 24-month contract with Orange Spain. Although the terms of the contract are not any more favourable than those offered directly by mobile operators, the lack of operator branding shows that operators are not the only players pushing bundled mobile broadband offers in Spain.
The reason for such white-label mobile broadband offers in Spain becomes apparent when you consider that close to 30% of Spanish households have neither PCs nor fixed broadband – a ready target for mobile operators, PC vendors and who knows what in the future. This number is actually higher in Portugal (60%), Greece (40%), Italy (40%) as well as France (30%). Expect such white-label services to be launched in these countries very soon.
The flood of new MVNOs in Spain (most of them through Orange) has been the primary reason why non-mobile operators such as fixed Internet service providers are launching mobile broadband services. In addition to AIRIS, Spanish broadband operators Jazztel and Ono have also recently launched mobile broadband packages. Jazztel is offering both a prepaid tariff costing €0.20 per megabyte and a contract offering 250MB for €7.95 a month. The company offers its mobile Internet service as an extension to the mobile voice service it launched in June through its MVNO agreement with Orange.
Cable operator Ono is also promoting “free” mobile broadband up to 5MB a day under the brand BAMG (Banda Ancha Movil Gratis) for users who buy a dual- or triple-play bundle of TV, phone and fixed Internet. KPN-backed Simyo (offered through Orange again), for example, is undercutting the three network operators by offering up to 5GB of data transfer over HSPA for €24.99 a month, with no fixed contract length. While the data packages of Jazztel and Ono are fairly limited, KPN-Simyo has aggressively priced its mobile broadband offering – traditionally Telefonica and Vodafone have not been too willing to bring down the mobile broadband pricing premium (which is close to 45% above that of fixed broadband), Orange which has probably a lot less to lose has thrown the gauntlet through its MVNO partner.
The relative success of Asus Eee PC has created a new product category – netbooks, also called Mobile Internet Devices (MID) or Ultra-Low Cost PCs (ULPCs). Never to shy away from new product hype, ABI research has promptly come out with a forecast calling for over 200 million of these little fellas by 2013. A quick note – this is the same size as today’s worldwide laptop market! The report probably assumes (like Michael Dell does) that mobile operators will play a significant role in pushing these babies out, bundled along with their 3G data plans – with subsidies to boot. This model is no different from the one where the operator subsidises expensive phones to sell a voice plan.
Given that netbooks are all about always-on connectivity, 3G in addition to WiFi is a must for this product category. This leads to the question – does it have to be built-in? I feel that the answer is yes. I am aware of the arguments against embedding 3G functionality in laptops. However, if you recall, PCMCIA cards were the initial enablers for WiFi connectivity – I still have one of those lying around somewhere. But convenience coupled with declines in module costs drove OEMs to deliver laptops with integrated WiFi functionality. The same trend is likely to be repeated with integrated 3G as well. To begin with, USB dongles hanging out of netbooks will look pretty awkward – in addition, embedded antennas down the side of a screen will deliver a better signal that translates into higher speeds. Instant 3G connectivity when the netbook is turned on, similar to WiFi, will also be a key selling point. Finally, mobile operators may end up driving this product category and the OEMs will have little choice other than partnering with the operators. Recent events seem to bear this out. Vodafone announced that it will start selling Dell’s Inspiron Mini 9 ultra-mobile device with built-in mobile broadband, exclusively through Vodafone stores and online, and directly from Dell, in key European markets. More mobile operators are launching netbooks with integrated 3G modem functionality in partnership with OEMs. T-Mobile Germany announced that it will be selling the Asus Eee PC 901 Go with integrated mobile broadband. The announcement also states that the 3G connection will be up and running when the netbook is switched on similar to WiFi. Acer, the world’s third largest PC vendor, is reportedly in talks with several 3G (third-mobile operators such as Chunghwa Telecom and Taiwan Mobile in Taiwan, as well as T-Mobile International, Vodafone Group and Orange in Europe to supply netbooks with built-in 3G.
I have written about the explosive mobile broadband growth in Austria – Sweden is yet another country where mobile broadband growth is rivaling fixed broadband options. This is not very surprising given how competitive mobile broadband is being priced in Sweden compared to that of fixed broadband. Sweden’s National Post and Telecom Agency (PTS) publishes an annual report on the state of the Swedish Telecommunications Market. The 2007 report has several interesting data about the state of the mobile broadband in Sweden called “mobile Internet” in the report.
Clearly, 2007 was the year for mobile broadband in Sweden. During 2007 the number of mobile subscriptions via data plug-in cards or USB modems increased from 92,000 to 376,000 representing a growth rate of around 309%. Apparently, this frenetic pace of growth has shown no signs of slowing down in 2008 as well. USB modems for mobile Internet have for instance been at the top of the sales figures in both Telia Sonera and (3)’s shops during the first months of 2008. This rapid growth in mobile broadband subscriptions has been exceeded by a even more faster rate of growth in mobile data traffic as the accompanying figure illustrates - total mobile data traffic increased by over 1000% during 2007 (from 203 Tbytes to 2,191 Tbytes). This follows a similar pattern in all the countries where mobile broadband is showing explosive growth – traffic increases at a rate significantly greater than the revenue from mobile broadband subscribers, given that the latter pay a flat fixed fee for their subscription. As a matter of fact, total revenues from mobile data traffic in Sweden increased by 60% – compare that to 1000% growth in mobile data traffic!
Telia Sonera with 39% of mobile broadband subscriptions is the market leader. The next largest is Tele2 (25%) followed by 3 (19%) and Telenor (15%). The smallest is Nordisk Mobiltelefon (who is actually a CDMA operator operating in the 450Mhz band) with less than 3% of the market.
What’s the outlook for mobile broadband now?
At the end of 2007, roughly 78% of Swedish households had some kind of Internet access with 62% of the households having broadband connectivity. We can fully expect that the 16% of the households with dial-up access will choose some flavor of broadband in the near future. Mobile broadband is perfectly placed to win over this customer segment – in addition to the 22% of households without any Internet access. In fact, mobile broadband jumped to 12% of all broadband subscriptions in 2007 from a 4% base in 2006. In addition to an extremely competitive price – flat-rate mobile broadband connections with speeds of up to 7.2Mbps are available for SEK199 (US$30.80)) a month, comparable to the price of a 500Kbps fixed-broadband subscription, around 1 million of Sweden’s 4.5 million households are outside the reach of ADSL. Many Swedes are also opting for a mobile broadband connection when they migrate to holiday homes in the countryside during the summer. With no fixed broadband offerings to protect, it is a reasonable bet that (3) will go after this segment aggressively similar to its approach in the other countries in which it operates.
LTE (the GSMA-adopted roadmap to 4G for GSM/UMTS carriers) has been getting a lot of attention of late. Verizon Wireless plans to begin network deployment in 2009 (using their newly acquired 700MHz spectrum) with full network deployment in 2010 and beyond. AT&T has also announced LTE rollout plans in 2012. Vodafone is also making the obligatory statements about rollout plans in 2011-2012 time frame – its ex-CEO, Arun Sarin has made snarky comments about Verizon needing LTE more than Vodafone owing to the inability of EV-DO to scale up to near-4G speeds like HSPA.
With the possible exception of Verizon, how real are these LTE rollout plans especially given the current financial turmoil? My bet is that 3G operators will look to squeeze the last ounce of return by upgrading their 3G/HSPA networks to HSPA+ (also called Evolved-HSPA or Advanced HSPA) long before they consider LTE. In fact, Japan’s Softbank Mobile has already chosen HSPA+ over LTE because of cost and backward compatibility. The reasons are as follows:
- No marked difference in spectral efficiency – LTE proponents talk about 144Mbps Downlink (DL) and 50+Mbps Uplink (UL) speeds. But realization of these speeds require available spectrum in excess of 20 Mhz. Now probably is not a good time to be buying spectrum. As the chart shows (courtesy: Qualcomm), spectral efficiency of HSPA+ (when MIMO is included) is close to that of LTE when you consider 5Mhz spectrum.
- Significant less Investment in Infrastructure – It is much easier and less expensive to upgrade HSPA to HSPA+ given that LTE is based on OFDM – a completely new modulation scheme while HSPA+ is still based on W-CDMA. LTE needs a completely new set of radio access and core infrastructure components – not only are the radio access algorithms different, the signaling and control protocols from the access to the core are also significantly different.
- Backward compatibility – It is simpler for a HSPA+ subscriber to gracefully handover to a HSPA network – the connectivity between RNC and the core (SGSN and GGSN) remains as before. Significant complexity exists for handover to be implemented between 4G/LTE and HSPA+ networks.
- Handset and terminal availability – Availability of LTE handsets may be less of an issue – clearly, the initial application for both HSPA+ as well as LTE is in mobile broadband (with USB dongles). It is reasonable to expect that HSPA+ dongles will be cheaper than those supporting LTE – given that a new semiconductor ecosystem needs to emerge that supports LTE.
AdMob, a mobile advertising marketplace releases what they call a Mobile Metrics Report every month. Since they serve ads for more than 5,000 mobile web sites around the world, they claim they are capable of storing and analyzing the data from every ad request, impression, and click. For every ad request, AdMob determines device capabilities using information available in the user’s mobile browser. They claim that over 5 million ad requests and impressions flow through their network every month. The reports reveal some interesting data regarding worldwide share of smartphone traffic. Contrary to popular opinion (and even here in this blog), the iPhone is nowhere close to holding the top spot in this list. Nokia’s Symbian OS takes that honor on a worldwide basis, while out here in the States, RIM’s BlackBerry browser takes the top spot. In fact, as the accompanying charts show, while Symbian’s (driven primarily by Nokia’s N-Series handsets) market share has been steadily growing from 44% to 64% on a worldwide basis in the past six months, iPhone’s share has been hovering around in the 4%-6% category. Not a bad number for a platform that has been in existence for hardly over a year, but a far cry from the market share numbers reported by Net Applications. In fact, even if you assume that Net Applications measure browsing statistics only in the United States, their numbers are not consistent with what is shown here – RIM, Windows Mobile and Palm handsets all have a higher share of Internet traffic to that of the iPhone.
Take a look at this chart that shows the pricing premium (or lack thereof) of mobile broadband over fixed broadband in 26 European markets (Chart courtesy: Analysys Mason Group).
The chart is a little difficult to read – so let me try and break it down.
I have to admit that I am slightly puzzled by Cox’s decision to go the CDMA route for their wireless network in the 700MHz band. Apparently Huawei beat out both Alcatel-Lucent and Nortel to win the business. Cox spent more than US$304 million on 22 licenses during the 700MHz-spectrum auction that wrapped up in March. It is also part of the SpectrumCo consortium, which also includes cable operators Comcast, Time Warner and Bright House Networks and holds nearly US$2.4 billion worth of AWS spectrum.