3G mobile broadband success story to be short lived

Although the number of people using mobile networks to connect to the internet through dongles will continue to rise, Screen Digest has predicted that the rate of growth is set for a big fall over the next two years.

There has been a significant uptake in the usage of mobile broadband in the past two years, especially in Europe where usage grew ten fold from one million people in 2006 to nine million in 2008. Put another way, the mobile broadband market is currently worth more than mobile TV, mobile games and mobile music combined.

However despite its growth, contribution to data revenues and number of subscribers, author of the research, Ronan de Renesse, senior analyst at Screen Digest, expects to see high customer churn rates this year and in 2010. “The mobile operators have trapped customers into long-term contracts, whilst failing to deliver the unrealistic networks speed that encouraged them to sign up in the first place. The service can be patchy and users become frustrated; many will switch back to fixed broadband if operators don’t act quickly.”

While European growth is set to reach its lowest in 2010 at only 4.7%, the number of connections will rise again in 2011 and 2012 to reach 22.6 million and a total market value of €4.6 billion in 2013. De Renesse said: “While this is potentially good news for stand alone ISPs, upcoming 4G upgrades in 2010 and further price reduction would put the final nail in the coffin for them.”

This way of accessing the internet is particularly attractive as an alternative to a fixed connection for students living in private accommodation, people who live in more than one place and also people who live in areas where fixed broadband is simply not available, stated de Renesse.

The growth in take up of mobile broadband has inevitably fuelled a pricing war between the operators, claimed de Renesse. Not only has the number of operators offering mobile broadband increased nine fold during 2006 and 2007, but he said they have become more competitive; 66% offer prepay packages, 59% have introduced laptop bundles to entice customers to subscribe to their network and they have reduced the average subscription price by a third in the past six months.

The result of these competitive strategies has meant that the overall European market has grown to a value of €1.8 billion in 2008 and accounts for 15% of all mobile data revenues.

Because of the nature of mobile broadband, its penetration is highest outside of the big five markets in Europe where fixed broadband is dominant, so Ireland, Austria, Portugal and Greece had the highest adoption rates in 2008.