Growth of the mobile broadband market happens along two major dimensions: subscribers (adoption rate) and traffic (use rate). Specific growth drivers for both of these categories vary by geographic region, but in general, drivers can be divided into three major categories that are applicable to all the regions:
- Evolution of useful mobile applications
- Carrier pricing and bundling strategies
- Replacement use cases for fixed-line broadband
Evolution of useful mobile applications encourages the increased adoption of mobile broadband and higher use. Consumers turn to mobile broadband with specific needs, such as entertainment or information on the go. As more applications emerge to fulfill those needs, more consumers will sign on and use them, resulting in subscription and traffic growth.
Consumers frequently start with a carrier’s mobile portal as their home page; from there, they link to outside Web sites. Primary consumer applications, representing approximately 80 to 90 percent of consumer mobile broadband activity today, include e-mail, rich messaging, and lightweight Web surfing. Starting in 2007, some consumers began accessing more advanced applications, including streaming Internet video, music, and games.
Growing penetration of smartphones, such as the iPhone and G1 (T-Mobile’s Android phone), catalyzes media consumption on handheld devices. These devices simplify user interface and media purchase processes, offer larger screen for media viewing, and bring innovative applications through application stores open to third-party developers. In addition to the growth in media consumption, in Eastern Europe and, to a lesser extent, in parts of Western Europe, some consumers have begun using peer-to-peer (P2P) applications over the wireless networks.
Carriers’ tiered pricing and bundling strategies are also powerful growth drivers for the adoption and use of mobile broadband. Less expensive, phone-based mobile broadband plans encourage more consumers to try the service with the prospect of future upsell. As a result of carrier pricing strategies, roughly four out of five mobile broadband users access services via a mobile or a smartphone. The rest use a PC air card or a USB modem. PC users tend to consume more traffic and subscribe to higher service tiers. They generate on average over a gigabyte of traffic per month, whereas phone users generate less than 500 megabytes.
Carriers like higher-tier subscribers. They pay higher rates but for the most part do not consume enough data yet to overwhelm the network. Thus, especially in Western Europe, carrier bundles encourage heavier use and drive traffic by giving consumers high-capability devices, such as netbooks and mobile Internet devices (MIDs), in exchange for an extended commitment to a higher service tier.
Finally, a major driver for growth of the mobile broadband market in certain parts of the world is the lack of fixed broadband networks. In the U.S., Canada and Western Europe, where fixed broadband penetration is high, the same carriers often control both the fixed and mobile broadband networks, so consumer mobile broadband services are positioned as complementary to fixed broadband use, resulting in slower traffic growth. In general, consumers in these regions access mobile broadband from mobile phones, which represent the dominant installed base, or from smartphones, which are experiencing rapid growth. In Eastern Europe, fixed broadband penetration is still low. As carriers build out their 3G networks, consumers will start to use mobile broadband as a replacement for or in lieu of fixed broadband, promising significantly higher traffic levels compared to Western Europe, the U.S., and Canada.