Tag Archives: fixed broadband

Mobile Broadband in Sweden – Still Growing

Last year, I wrote about the explosive growth of mobile broadband in Sweden. According to the  National Post and Telecom Agency (PTS), which publishes an annual report on the state of the Swedish Telecommunications Market, the number of mobile subscriptions via data plug-in cards or USB modems increased from 92,000 to 376,000 (a growth rate of around 309%) during 2007. The rate of growth in mobile data traffic was even steeper –  total mobile data traffic increased by over 1000% during 2007  (from 203 TB to 2,191 TB).

Well, the PTS has come out with the 2008 report on the Swedish Telecommunications Market highlighting the state of the mobile broadband in Sweden last year. The number of active customers with broadband in Sweden  increased from around 3.156 million to 3.782 million between 2007 and 2008, corresponding to a growth of approximately 20 per cent. Mobile broadband represented 80 per cent of this increase, proving once again that people with dial-up connections are choosing mobile broadband over fixed broadband.

Naturally, mobile broadband traffic continues to grow as the accompanying picture shows – traffic grew from 2191TB to roughly 9TB (a growth rate of over 310%). Sweden_traffic growth_2008

Source: Swedish Post and Telecom Agency (PTS)

But this growth is clearly not generating adequate incremental revenue to the operators – revenue per GB has decreased from SEK 3000 to roughly SEK 200 (SEK 1 = US$0.14), which amounts to US$28 per GB. In an earlier entry, I commented on the profitability of mobile broadband service – I used Informa’s cost estimate of 2-3 Eurocents per MB, or ~20 Euros per GB which translates into ~US$29.5. Clearly, mobile broadband in Sweden is not a profitable service yet. Sweden_revenue_decreaseSource: Swedish Post and Telecom Agency (PTS)

As the accompanying chart demonstrates, most of this traffic is being carried by 3’s network. The average monthly data  per subscription  has increased to 1.8 GB and there was a great variation between the various operators. In particular, 3 is carrying the bulk of this traffic with its average monthly data traffic per subscription as high as 4.5 GB.

Sweden_traffic_increase_operatorsSource: Swedish Post and Telecom Agency (PTS)

Btw, 3 Sweden is the only operator that I have come across that offers different price levels based on the speed of the modem. Three different price levels corresponding to maximum download speeds of 2Mbps, 6Mbps and 10Mbps are being offered – presumably, the choice of modem restricts the maximum download speed. It is an interesting twist to mobile broadband pricing where the predominant model is based on monthly usage quotas and throttling of user traffic once the quota is exceeded.

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Is Mobile Broadband Profitable?

The consensus opinion is certainly that mobile broadband is not a profitable business (yet)  in Western Europe (especially in countries like UK) where mobile broadband prices are trending lower than fixed broadband prices. I have always wanted to do a quantitative analysis. 

The analyst firm Informa claims that fixed-line costs in Europe are near Eurocent 0.1-0.5 per MB, compared with Eurocent 2-3 for mobile networks. We can use this number to compare the cost basis for various operators’ quota-based mobile broadband packages. For example, 3 UK’s package is as follows:

3_uk_pricing_plans

So if you use the 2 Eurocent per MB number, 1 GB costs ~20 Euros (or 18 pounds) significantly more than the 10 pounds that 3 seems to be charging for the 1 GB package.  Assuming a user who signs up for a 7 GB package uses ~2 GB, the cost for 3 to support that user is ~36 pounds which is still a lot higher than 25 pounds. I am not sure about you, but I sure don’t see how 3 is making money on these mobile broadband packages.

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Interesting Report on Mobile Broadband Pricing in Europe

Tariff Consultancy has released an interesting new report on Mobile Broadband Pricing – an analysis  of current mobile broadband pricing in 33 countries across Eastern and Western Europe.  There are some interesting, yet not completely surprising, findings from the report:

  • The average flat rate package bundle provided has doubled over the last 12 months to almost 4GB (based on the analysis of 100 mobile operators). The most common monthly user allowance price point on offer across Europe is now 5GB and 10GB, closely followed by 1GB and 500MB allowances. 
  • Pricing in 2008 has fallen by an average of 4% across all countries when compared with the previous year – even though average user allowances have more than doubled.  In some countries,  mobile broadband pricing has fallen even steeper – as much as 53%, 43% and 35% in Latvia, Austria and the UK respectively over the past year.
  •  In Ireland, Germany, Sweden and Spain average mobile broadband prices are now significantly lower than the most popular fixed line DSL broadband service, which is driving customers to the mobile broadband offer. I have pointed out this phenomenon earlier in here and here. Ireland and Sweden have always been mobile broadband leaders. Looks like Spain and Germany are following their lead as well.

The most striking feature has been the continued increase in monthly user allowances which have more than doubled last year while pricing has continued to decline. The implication is that the Euro/MB has fallen by more than half – not a very good sign for the operators. Clearly, the key challenge for the operators is to translate the explosion in user growth into profitability. The report also finds that flexible tariff structures that allow for per day and per week pricing (also called pay-as-you-go plans such as O2’s recent offerings) are now available in the market place.

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3G Routers – Will It Accelerate Fixed Broadband Replacement?

I have been commenting quite regularly in this blog about how mobile broadband (based on USB dongles and modems) is increasingly being used by mobile-only operators (those without fixed assets) to accelerate the replacement of fixed broadband, primarily in Europe. The spectacular growth in mobile broadband subscriptions is being driven by aggressive pricing from mobile operators, along with free laptop bundling offersbuilt-in 3G support for laptops and netbooks isn’t hurting either. One missing element in this puzzle has been a way for multiple members in a household or a small office/home office to share a mobile broadband connection in a simple plug-and-play fashion. Enter the consumer-friendly WiFi-over-3G Router! 3 UK is rolling out the nifty Huawei D100 router –  insert your dongle into the router and share your mobile broadband with WiFi-enabled devices such as PC, Mac or a laptop. The 3 store claimThere’s no need for a landline, because the Wireless Router does all the work” is a clear indication that they are going after fixed broadband. If most people are already making voice calls on their mobile phone, it is a small step for the consumer to wonder if he needs the landline at all! It remains to be seen how many consumers will be happy with a monthly usage plan under 15GB especially with the increased usage in online video. Surprisingly, the mobile broadband plan for the router does not include the 15GB monthly allowance plan (which is an option for the laptop plan) – for some strange reason, only the 5GB allowance is available. One would expect that people who buy into this 3G Router in order to share their mobile broadband would sign up for a plan with a higher monthly data allowance. Clearly, 3 is also looking for this product to create stickiness – 3’s compatibility statement indicates that the router has firmware to ensure that a modem from any other carrier does not work properly.

I am a little surprised that 3 UK is not offering a bundled voice + mobile broadband offering. Both (3) Sweden and (3) Austria have been selling Huawei’s 3WLAN Router E960/E970 for a while now – in addition to 4 Ethernet interfaces and WLAN support, this 3G Router also has a RJ11 interface, ideal for connecting the black phones. It is not clear if voice is transported as VoIP over 3G in this case. Several operators including Vodafone Egypt and Optus (Australia) are offering this product in their mobile broadband portfolio as well.

T-Mobile in UK announced a similar product called “Mobile Broadband Share Dock” earlier in the month, but unfortunately, it is still not available for purchase (unlike 3 UK). The concept is similar – plug in your old T-Mobile USB modem or a new one into the dock and share the mobile broadband amongst as many as three people (3 UK claims their product can support 4 end users). I am betting Vodafone and the other operators in UK will follow suit if this concept catches on.

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Interesting Chart on Mobile Broadband Pricing Premium (or Lack thereof)

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.

Continue reading

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