Where’s the Value Add in Big-screen Mobile Broadband?
By Steven Hartley, senior analyst at Ovum
Fierce price competition in Europe continues to drive down the price of big-screen (laptop and netbook) mobile broadband services, threatening profitability as usage increases. Mobile operators have spoken of the potential to boost revenues and margins by selling a range of value-added services. However, the potential options are unlikely to have a dramatic impact. Therefore, operators must focus on stringent network efficiency for big-screen mobile broadband to remain profitable.
Network optimisation should be the main priority
The flat-rate subscription structure that helped to stimulate demand for big-screen mobile broadband (essentially laptop and netbook access) is leading to a margin squeeze for operators as traffic growth per user increases, just as it did in the fixed world. As a result, although there is very little activity today, mobile operators are beginning to investigate the potential of value-added services for big-screen mobile broadband to ease the squeeze.
However, as Ovum has concluded in its recently published report Value-added services for big-screen mobile broadband, we believe that the primary objective for mobile operators in the short term should be to optimise their networks to carry data more efficiently, rather than seek new value-added service revenues. They must also focus on customer retention (primarily their most valuable customers) with those consuming network capacity either migrated to more profitable plans or, as a last resort, off the network.
The reason for this belief is twofold. Firstly, we do not believe that a value-added service for big-screen mobile broadband will contribute a great deal of additional revenue or margin. Therefore, several services will be required to have a meaningful effect on the top line, increasing operational costs at minimal margin impact. Secondly, each new value-added service will be under pressure to progressively contribute more revenues. This will be to plug the shortfall caused by price erosion in both access services and older value-added services.
Very few operators will benefit
Only some operators will benefit from big-screen value-added services. In particular, integrated operators will be able to leverage content and services from their fixed divisions. These will need to be optimised for the mobile environment though, and the costs and complexities of this should not be ignored. The other players likely to benefit in the long term are those aspiring to be among the SMART players of the future (see Ovum report The future of the mobile industry: a vision for 2020 for a definition) – most notably the largest global players or those in large emerging markets with less competition from the global Internet players.
Software, storage and business solutions look most appealing – content and advertising least
Big-screen mobile broadband value-added service activity is limited today, and the services offered closely resemble those of fixed broadband service providers. Operators are mainly focused on selling software, especially anti-virus. Software sales are simple to implement, but will have minimal revenue impact due to the intensity of competition. Software is available from so many different channels that operators will only be able to attract a small share of the market. In addition, price competition will erode margins.
Network storage has much more potential as it plays to the advantages of network operators. Furthermore, for mobile operators, the portable nature of mobile broadband increases both the risk of loss or damage of laptops and the desire for content synchronisation across multiple devices, particularly netbooks used as secondary devices.
Among other potential services, business solutions look inviting, although it will take very dedicated mobile operators to develop, sell, deliver and manage services to businesses. Content is clearly attractive to consumer users, but it is difficult to see how mobile operators, outside those aspiring to be SMART players, will be able to compete for revenues with other online retailers. Integrated players may have more luck if they can leverage their existing content rights across to the mobile arena.
Similarly, advertising services could be utilised from a fixed division for integrated players. For mobile-only players it looks more difficult, although the connectivity dashboard provides excellent real estate. Ultimately, the advertising opportunity sums up the role of value-added services for mobile broadband: difficult to implement, open to a great deal of new competition, difficult to differentiate and unlikely to add significantly to the top line. /PR-Ovum
GSMA Announces Mobile Broadband Service Mark Initiative Backed by Global Media Spend of $1 Billion
Journalists and other representatives of the media are invited to contact ABI Research to learn more about this significant development and to discuss its implications with our industry analysts.
Today, the GSMA announced an initiative backed by operators, device suppliers, software firms and chipset vendors to drive awareness of mobile broadband connectivity embedded within computing devices such as notebooks. The initiative's primary focus is a graphic service mark bearing the words "Mobile Broadband" to be attached to notebooks and designed to help customers know which laptops are mobile-broadband enabled. The GSMA expects a global media spend of $1 billion around this service mark within the next year to create awareness of mobile broadband access.
ABI Research principal analyst Dan Shey comments, "HSPA broadband networks are firmly anchored in major metropolitan areas of Europe, North America and other parts of the developing world and are the foundation for pushing sales of devices with embedded cellular modems. But awareness of embedded mobile broadband has not been high, as operators are the main proponents of mobile broadband, primarily through sales of PC Cards and USB modems.
This initiative is designed to raise awareness of devices with embedded cellular connectivity such as laptops, UMPCs, MIDs and eventually consumer electronics."But is this initiative good for everyone? Says Shey, "This initiative poses the greatest challenges for operators. On one hand, more devices that are cellular enabled will create more opportunity to sell mobile broadband services.
However, except for standard practices of bundling, offer design, and subsidization, it is unclear how operators will differentiate their mobile broadband services as more devices have embedded cellular connectivity. Subsidization is already one area operators would like to avoid but they also want to avoid competing based on price.
Operators will need to think carefully about how mobile broadband will affect their businesses as mobile broadband devices become more widely available and achieve higher levels of consumer awareness." [ABI Research]
Aircell CEO: 2,000 Aircraft Will Offer Gogo by Year End
By Lynnette Luna
Aircell is expected to announce another deal with an airline for its air-to-ground wireless broadband service Gogo. Aircell CEO Jack Blumenstein said an announcement will come within days and, all told, some 2,000 commercial aircraft will be offering Gogo service by the end of the year, he said.
American Airlines recently launched Aircell's Gogo mobile broadband service on three coast-to-coast flights, making the service available for $12.95 per flight on its 15 Boeing 767-200 aircraft. The service is still considered a test, which means the airline could still drop the service or expand it later. The Internet calling feature is blocked to keep passengers from making phone calls.
Earlier this month, Delta Airlines took the plunge as the first U.S. airline to offer inflight WiFi access on a substantial number of aircraft. The company said it will soon WiFi-enable some 330 domestic aircraft, offering Aircell's Gogo service for $9.95 on flights of three hours or less and $12.95 on flights of more than three hours. [FierceBroadbandWireless]
Comcast Interactive Capital Invests in Mobile Broadband Firm
By Sue Marek
Comcast is making more inroads in mobile broadband. The cable firm made a seed-round investment in Littleton, Mass.-based startup Cartiza Networks, which is developing an IP-based content management and delivery system for mobile broadband networks.
Cartiza raised $12.6 million in venture capital funding in 2007 and its investors include Comcast Interactive Capital, Prism VentureWorks and the Business Development Bank of Canada. The company reportedly is in "stealth" mode and has not publicly discussed its technology or strategy. However, the firm is a member of the WiMAX Forum.
The investment is interesting considering Comcast's other mobile broadband plays--most notably its investment in the new Clearwire. In May, Sprint and Clearwire announced that they will combine their WiMAX businesses and create a new company, called Clearwire, that will include a $3.2 billion investment from Intel, Google, Comcast, Time Warner Cable, Bright House Networks and Trilogy Equity Partners. [FierceWireless]
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