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Wireless Data Services Vulnerable to Cuts

Apparently, 2008 was a growth year for the cellular modem market, as many wireless operators aggressively increased their 3G data service offerings.

Consequently, 3G modem manufacturers enjoyed an upswing in demand with shipments reaching 20 million units in 2008, according to the latest market study from In-Stat.

Two big trends are the move in form factor to USB modems and the growing emphasis on embedded modems, led by Ericsson and Qualcomm.

Embedded shipments will overtake external modem shipments by the end of 2011. The result is increasing price erosion for external clients, especially in Western Europe, where Huawei has become a strong player.

"Clearly, here is an instance where CAPEX investments in good times are paying dividends in lean years" says Daryl Schoolar, In-Stat analyst. "Operators continue to move forward with their mobile data subscription initiatives even as the economy suffers. This has put cellular modem manufacturers in a really nice place to be."

However, relatively speaking, these services are still considered expensive by mainstream users -- unless, of course, you don't personally have to pay the service fees. Therefore, in a down economy, the employer-pays model makes wireless data services very vulnerable to budget cuts.

In-Stat's market study found the following:

- The peak of the external modem market will be in 2010 when revenues crescendo at over $2.6 billion.

- USB has become the dominant form factor, overtaking PC cards in annual shipments in 2008.

- According to a survey of 504 individuals from the In-Stat Technology Adoption Panel, most users have their mobile broadband service paid for by their employer.

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