Mobile broadband: Realism sets in; challenges abound

MELBOURNE, AUSTRALIA: Ovum, the analyst and consulting company, believes mobile broadband is maturing rapidly in the Asia-Pacific region.

The results from an Ovum/Telecom Asia industry survey completed in January 2010 revealed that although respondents still believe mobile broadband is good news, they are now more realistic about its benefits and challenges when compared to the more overt enthusiasm of last year’s survey. “Margin expectations are more reasonable, the threat to fixed broadband is now viewed as real, while the network is seen as critical for differentiation”, said Nathan Burley, Analyst.

Mobile broadband service matures as enthusiasm gives way to realism
Mobile broadband traffic has been growing rapidly, partly due to the business models adopted - especially unlimited/flat-rate models. Approximately two-thirds of respondents believed both access and backhaul capacity are, or will be in the next 12 months, constraints to services.

Excluding installing more capacity to ease constraints, respondents thought operators should look at off-loading traffic, especially through WiFi and, to a smaller degree, femtocells. “This reflects our belief that there is no silver bullet to dealing with traffic growth and numerous solutions will need to be utilised”, said Burley based in Melbourne.

Additionally, last year, 65 percent expected mobile broadband to be the same or higher-margin business than mobile voice. This year, this is down to 55 percent of respondents, still an optimistic view of the service’s future, but less so than before.

Fixed-to-mobile substitution is a challenge
The survey also revealed that 76% of respondents saw some, significant or large fixed-to-mobile broadband substitution occurring. Burley added, “We agree mobile broadband revenue streams in Asia-Pacific will not entirely be generated from a new product category. Rather the service will steal revenue from the fixed broadband market, as more mobile broadband operators compete directly for fixed broadband users. For many consumers, especially in emerging markets, fixed broadband access will be irrelevant.”

The network becomes critical for differentiation
In a notable change from last year, price is no longer considered the most important differentiator in the Asia-Pacific mobile broadband market. It has been replaced with coverage and quality of service. It has become evident within the industry that cheap mobile broadband pricing alone will not secure customers acquisition, loyalty or differentiation.

Burley concludes: “This is another sign of a maturing industry, and a signal of the need for ongoing network investment to meet growing traffic demands. Coverage and quality of service have been very important differentiators in the mobile voice market. They will also be, if not more so, for mobile data.”