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Mobile Broadband: a Collection of Niche Apps

Mobile broadband access services have failed worldwide to capture the interest of mainstream consumers, with Internet users in most countries unwilling to pay a premium for such services, according to Parks Associates.

Parks latest market study finds that only Internet users in the U.K. are willing to pay a significant premium -- 28 percent on average -- over the cost of a fixed connection for mobile broadband access, defined as a wireless high-speed service with which users can access the Internet anywhere at home and in other locations.

U.S. consumers are willing to pay only a 6 percent premium for a basic mobile broadband service. Consumers in countries with advanced phone-centric mobile Internet services are even less interested in paying a premium for mobile broadband access.

"Wireless broadband access services marketed by mobile carriers today resonate with road warriors and are having success in that segment," said Yuanzhe (Michael) Cai, director of broadband and gaming, Parks Associates, "but the majority of broadband users primarily access the Internet at home and work and are unwilling to pay more for a subscription service they won't use on a frequent basis."

The Parks report finds that at $35 a month, approximately half of the prevailing price, only 19 percent of U.S. Internet users are interested in adopting a mobile broadband service. At this price point, the total worldwide addressable market is less than 100 million subscribers.

"The road warrior market offers ARPU potential but is limited in size," Cai said. "In order to expand beyond this segment, mobile carriers need to provide application-centric rather than access-centric mobile broadband services and offer flexible business models that fit consumers' usage patterns."

However, I'm beginning to wonder if mobile broadband services are destined to be a niche connectivity service for a small subset of mobile phone users -- due to the inherent costs associated with service delivery. This scenario has already been played-out repeatedly in the Mobile Satellite Services (MSS) sector.

Originally, Iridium and Globalstar both had aspirations of a wireless service that was attractive to a relatively large global addressable market. That was proven to be unrealistic. In fact, even after Iridium filed for bankruptcy and the infrastructure that cost $5 billion to build was sold for $25 million, the relaunched company's value proposition and associated Opex model was still niche-oriented. The MSS carriers were forced to become domain experts, and niche marketers.

Earlier in the market development of terrestrial mobile broadband services I too was hopeful that if carriers became more application-savvy, and pricing plans were better suited to usage patterns, then the adoption rates would increase. However, perhaps the success of carriers in the Asia-Pacific markets are an anomaly that simply can't be repeated in other markets.

Therefore, I believe service providers that intend to deploy WiMAX-based offerings should decide if they are going to pursue a low-cost Capex/Opex model intended for mainstream users, or prepare themselves to become experts in identifying and targeting value-added niche applications that collectively will enable them to sustain their business. My advice; choose wisely.

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