Technology | Media | Telecommunications

Thursday, October 30, 2008

The $1 Billion Bet on Wireless Broadband

Embedded cellular modem sales are still limited to the early-adopters, but momentum is building for increased sales, according to the latest market study by ABI Research.

One recent development is the "GSMA Mobile Broadband Service Mark" initiative which, backed by media spending of $1 billion, is hoped to create awareness of laptop PCs with embedded connectivity.

However, it's not at all clear if improving awareness will have a substantive impact in the marketplace, when the price of wireless broadband service offerings remains the primary barrier to mainstream user adoption.

Other potential drivers that are hoped to stimulate demand include Qualcomm's Gobi chipset that enables modem connectivity on both GSM and CDMA networks; the promise of lower mobile broadband pricing; and networks maintaining their current EV-DO Rev A and HSPA air interfaces for at least two more years.

ABI Research forecasts that these and other market forces will hopefully increase embedded cellular modem sales to nearly $9 billion in 2013. Again, assuming that current price points are maintained, and adoption miraculously increases based upon greater awareness.

However, ABI Research principal analyst Dan Shey observes that there are some near term barriers to market development. "Although embedded connectivity is convenient, operators can apply the important levers of PC Card and USB modem pricing and promotion, as well as device-specific mobile broadband pricing. These factors can change the total value proposition of an embedded modem device and limit their uptake in the near term."

ABI also cautions that another near-term barrier is the current negative economic environment. Clearly, this is not the best time to expect increased usage of a service that U.S. carriers intentionally price high to maintain profit margins -- at the expense of increased user adoption.

Shey concludes, "The holiday season will be difficult this year for purchases of bigger ticket items such as laptops. It would not be surprising for laptop OEMs to work more closely with operators to help drive the sales of these devices both with and without embedded connectivity."

"In other words, product bundles that include laptops, mobile broadband price offers and/or USB modems may be made available to entice buyers during these difficult economic times."

My reaction to this upbeat assessment: $1 billion of mass-media advertising spending combined with a large dose of "hope" is not a market development strategy. Dream on.