Mobile Broadband: How and Why

| May 22, 2009 | Telecom Infrastructure and Services | Advisory Report

| Analysts: Peter Jarich, Emma Mohr-McClune

Summary

To call mobile broadband a “hot topic” in today’s telecom market is a serious understatement. For mobile operators worldwide, 3G has been rightly called the biggest success story in mobile services today; new network capabilities and speed claims have driven increased data revenues, new mobile data users, and even new device categories such as USB dongles and netbooks.

For network vendors, the opportunity to support this service success – with new technologies, base station rollouts, core network upgrades – represents an opportunity to grow revenues at a time when the economy suggests this would otherwise be difficult.

For device vendors, mobile broadband holds the promise of more sophisticated services, implying more sophisticated (i.e., expensive) devices and encouraging new market entrants.

And, as 3G proves out the value of wireless data services, the case is made for new 3G evolutions and proto-4G technologies – what some people might call “real” mobile broadband. Of course, similar to any market that has captured so much attention from so many different market segments, mobile broadband comes with its own critical questions – questions defining the market and the way its participants look at it.

• What is mobile broadband? What technologies does it include?
• How are mobile broadband standards being adopted and/or deployed? Where are they finding success?
• Why do operators care? How are they making money from mobile broadband? How should they?
• Where do devices fit in?
• What does the future hold?

Current Perspective

As with most telecom market segments, mobile broadband sits at the nexus of multiple, diverse trends and developments. In particular, when the media, operators, or wireless vendors talk about “mobile broadband,” they may be referring to anything ranging from the technologies underlying high-speed wireless data services to the networks and devices that make those services work to the services themselves. Any discussion, then, of mobile broadband needs to kick off with a review of what is happening in those areas, as well as how they are driving the market and will continue to do so going forward.

• Technologies: Since the first transitions from dial-up to DSL in the home, the question of, “What is broadband?” has been fiercely debated. Is it an issue of technology? Is it a simple issue of bandwidth or the applications supported? To be sure, in the mobile space, any transition to higher-bandwidth services provides an experience that may seem broadband when compared to what came before it. Thus, CDMA2000 1X and EDGE networks delivered impressive new capabilities when first launched. Today, however, the concept of mobile broadband is also inextricably linked to 3G technologies including EV-DO and HSPA (and, potentially, TD-SCDMA), along with proto-4G technologies such as WiMAX and LTE. The development of technologies such as Evolved EDGE could give the venerable 2G technology claims to a place in the mobile broadband family, thanks to promised data rates up to 1 Mbps. Like EV-DO Rev. B, however, operator support is, at best, questionable. Much less questionable is support for HSPA+ (leveraging high-order modulation schemes and multiple antennas) to squeeze more capacity from current HSPA launches and mobile operator interest in LTE as their next major network evolution – largely leaving mobile WiMAX (based on the 802.16e standard) to target fixed-portable applications in emerging or otherwise underserved markets.

• Networks: At a very basic level, wireless networks serve a single purpose: to deliver wireless services and help cellcos make money. To this end, network launches and upgrades are driven by two needs: the need to support new services, applications, and capacity (whether that means added voice calls or more user bandwidth) and the need to support service provider OpEx efficiencies and profitability. It is no surprise, then, that as operators look to transition their networks from HSPA and EV-DO to LTE – while still supporting 2G services – the concept of the multi-standard base station has resurfaced, infusing early, inefficient 2G/3G implementations with support for HSPA+ and LTE. Of course, where 3G evolutions and 4G are about delivering more bandwidth to more users in more places, network upgrades need to be about more than the traditional macro-cell radio access network (RAN); smaller cells – picocells or femtocells – will be necessary for delivering improved coverage and “spatial efficiency;” backhaul network upgrades will be necessary for getting all this data, now in the form of IP, from 4G base stations to the Internet and other networks; mobile packet gateway upgrades will be critical for handling the added scalability, securing the connections and ensuring payments get made. On top of this, the success of voice and messaging services (not to mention the myriad of device-based application stores) has long ago proven to operators the value of delivering applications instead of simply delivering access, making application enablement programs and developments equally as important from a network perspective.

• Services: 3G network enhancements, notably HSPA, have boosted mobile broadband download speeds some three to six-fold in recent years, allowing mobile operators to market a wide-area “broadband” message for the first time, with a communicated download potential of up to 7.2 Mbps in certain European markets. Increased speeds have nurtured interest in mobile broadband as both a substitute and a complement to fixed broadband, leading to dramatic sales spikes for USB “dongles” in 2008, somewhat compensating for depressed mobile voice revenues across the board. The arrival of the “flat rate” has led to some pricing erosion, down some 60%-90% over a 12-month period in markets such as the UK, Spain, Austria, and Portugal. However, new prepaid pricing models, including the “one-day” or “five-day” pass have helped offset this pricing aggression somewhat. Multi-bearer services are also evolving in this market (a single service proposition for multiple access options, including DSL, cellular, and WiFi), and the market has seen DSL + mobile broadband bundles and even access bundles with hardware, such as PCs or the “mini-laptop” (aka, netbook). From a service perspective, the largest issues on the horizon relate to regulation (content filtering and the appropriateness of speed-based marketing promises), and this area is also ripe for the whole net-neutrality discussion (carriers across the U.S. and Europe are coming under increasing scrutiny for their anti-VoIP policies).

• Devices: Ironically, some of the most significant hardware driving the mobile broadband market today hails from “new players.” In the handset space, the Apple iPhone has revolutionized customer expectations for an intuitive, simple, and effective UI, and Google is quickly following in this slipstream with its Google-inspired OS for Android-powered devices. The USB modem (or “dongle”) has helped do for mobile broadband what data cards could never achieve, and service providers worldwide are now excited about the marketing potential of access bundles together with zero-rated or extremely low-priced mini-laptops, from providers such as Acer and Asus.

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