Have 3G operators finally found a 'killer app' with mobile broadband?

By Gavin Patterson

The successful commoditisation of high-speed wireless-internet access as “mobile broadband” may have eventually supplied 3G operators with the missing link in their service proposition – a “killer app”.

Recent announcements from two of the largest 3G operators in Western Europe have highlighted the increasing momentum behind mobile broadband from a customer perspective, although fears about the excessive cost of cross-border usage are continuing to limit the market for roaming.

The take-up of mobile broadband services has been inextricably linked to the supply of dongles for laptop and notebook connectivity on HSPA networks and has risen inexorably as more and more embedded devices come on the market.

Vodafone recently reported a 19 per cent rise in group revenues to £9.8 billion (US$19.4 billion) in 2Q08, with data revenues excluding messaging increasing almost 51 per cent to £664 million. The group attributed the growth in data revenues to the penetration of mobile PC-connectivity devices and improved service offerings, with particular success coming from its Mobile Connect USB modem offering in the consumer segment.

As of June 30, Vodafone said a total of 6.7 million customers were connected via handheld business devices or mobile PC-connectivity devices, an increase of 105 per cent compared with end-2Q07. In Europe alone, Vodafone reported revenues of £7.2 billion, up 15.5 per cent on 2Q07, with data accounting for £552 million, a rise of 42 per cent. The growth in data revenues resulted primarily from an 84 per cent increase in sales of mobile PC-connectivity devices, driven by the promotion of “attractive” data tariffs across its European markets.

Informa Telecoms & Media forecasts that global mobile data service revenues are set to exceed US$200 billion this year, up from approximately US$157 billion in 2007. According to Informa, mobile data revenues in Western Europe were US$13.1 billion in 1Q08, accounting for 21 per cent of total revenues, while Eastern Europe generated mobile data revenues of US$2.9 billion, or almost 16 per cent of total revenues.

Meanwhile, 3 has announced that it has signed up a million broadband customers in its European markets, which include Austria, Denmark, Ireland, Italy, Sweden and the UK. At end-June, 3 had approximately 14.6 million subscriptions in these markets, giving it a mobile broadband penetration of almost 7 per cent of its European customer base.

“This milestone shows people everywhere want to access our mobile broadband services,” says Christian Salbaing, managing director of European telecoms at Hutchison Whampoa. “We have seen phenomenal growth from customers who are using it to both supplement and replace their fixed-line broadband.”

In the UK, the Mobile Data Association (MDA) predicts that mobile internet will become a true rival for traditional desktop internet access, with growth of about 20 per cent in 2009. The lack of a fabled “killer app” has seen traditional handheld mobile internet access fail to excite, with the latest figures from the MDA showing steady, if unexciting, growth in the UK.

The MDA says that 16.5 million people accessed the mobile internet in May, representing 25 per cent growth in the 24 months since May 2006. The majority of usage comes from MMS, with 10 million picture messages now sent every week in the UK.

“There remain a number of challenges that mobile operators need to address to accelerate the growth of mobile internet,” says Steve Reynolds, chairman of the MDA. “The MDA is calling for greater price transparency on the costs associated with using the mobile internet. The findings of this report suggest a real consumer appetite, but confusion and fear over costs may be holding back growth.”

Hutchison’s Salbaing also highlighted the fear of excessive costs, especially for consumers who use mobile broadband while travelling abroad. “Typical retail roaming prices are literally hundreds of times what customers expect to pay domestically,” he says.

The European Commission will put proposals to cut data roaming tariffs including SMS by as much as 62 per cent before the European Parliament in the autumn. “On seeing the latest price trends gathered by national telecoms regulators, I am particularly concerned by the high prices paid by consumers for text messages when they are travelling abroad,” says Commission president Jose Manuel Barroso. “There is also a danger that European businesses are put off by non-transparent roaming costs for mobile data services.”

Salbaing believes the Commission now has an opportunity to bring the same clarity and value to data roaming as it did so successfully with voice roaming last year. “The difference between domestic and roaming data rates is far greater than with voice, only wholesale action can put an end to charges that are sometimes hundreds of times greater than our customers pay at home,” he says. “A million connections in a matter of months from a comparatively small business make it abundantly clear that mobile broadband is already a mass-market proposition.”