Combination of Credit Crunch and Capacity Crunch will dramatically slow take-up

London, 10th December 2008: The near-term importance of new embedded-3G and embedded-WiMAX notebooks has been significantly over-estimated, according to a new research report published by Disruptive Analysis. Even in three year’s time, laptops with built-in wireless access will only be used by 30% of total, active mobile broadband subscribers globally. External USB modems (or “dongles”) will account for 58% - almost twice as many.

However, the report, “Mobile Broadband Computing: Device Market Forecasts & Business Model Scenarios” predicts that in the long term, embedded mobile broadband will indeed overtake separate modems, in terms of both shipments and the active user base. By 2014, there will be 150m users of notebooks and the smaller “netbooks” with embedded mobile broadband worldwide. In terms of device shipments, 100m wireless-enabled laptops will be sold annually by then – although not all of them will actually be activated.

The study identifies numerous reasons for the slower-than-anticpated growth of embedded WWAN (wireless wide area networking). Key reasons include: the global recession impacting notebook purchases, unfavourable pricing differentials; the limitations of the sales and support channels for mobile-enabled notebooks; and the typical two-year monthly contract payment model, which does not fit with much of the target market for these devices. This makes comparisons with the rapid rate of adoption of WiFi in laptops appear over-simplistic.

The report’s author, Dean Bubley, said “Mobile-embedded notebooks are very elegant in concept – but suffer from practical and business-model limitations that will restrict their near-term growth, especially during a period of economic uncertainty when buyers will be especially conservative.”

Other findings from the report include:

• The new market category of “Mobile Internet Devices” (MIDs) will grow only slowly. Only 3m will be sold in 2009, although by 2014 this should grow to ten times that figure.
• By 2012, there will be 45m users of WiMAX mobile broadband computing devices. 11m of these will also use 3G or LTE connections in various hybrid or multimode approaches.
• An increasing proportion of subscribers will use their 3G handsets as “tethers” for their PCs, instead of using separate modems or built-in modules. However, fewer than 10% of people will use tethers as their sole access method.

The report also predicts that 2009 will be a much more difficult year for mobile broadband, compared with the huge growth experienced in 2008. The recession and non-availability of credit will drive a softening of demand for laptops generally, as well as a focus on value. For most people, built-in 3G or WiMAX is a “nice to have”, not a “must have”.

Some mobile operators, especially in Europe, have over-sold the 3G dongle proposition, experiencing huge uptake at very low prices, threatening congestion and worsening user experience. On some networks, 90%+ of data traffic comes from PCs, with tariffs as low as $10-15 per month barely covering the underlying costs. Huge growth in traffic from Apple iPhones and other smartphones is adding to the operators’ pain. Despite upgrades to higher peak speeds for HSPA, the total capacity is still limited by a range of network bottlenecks.

Finance officers at the operators have been happy about getting back some revenue on their existing, expensive and under-utilised network assets. However, they are much less enthusiastic at spending on upgrades. This combination of Credit Crunch and Capacity Crunch will have a marked effect.

One outcome will be a shift to new business models for mobile broadband. As well as revised prices and bandwidth caps, Disruptive Analysis expects to see new payment mechanisms emerge. Prepay (“pay as you go”) accounts are already popular in some markets and this will increase. In addition, new session-based, sponsored or “free” mobile broadband models will start to mirror the WiFi hotspot business – especially where network congestion can be lowered by the use of new “femtocell” access points. Conventional, long-term, monthly contracts will account for only 40% of worldwide mobile broadband subscribers by the end of 2011.

The report, “Mobile Broadband Computing: Device Market Forecasts & Business Model Scenarios” is available to buy from Disruptive Analysis. It includes detailed analysis of new product sales (3G laptops, netbooks, dongles, MIDs), installed base and mobile broadband service uptake by device type, network technology and business/payment model.  Details are available at www.disruptive-analysis.com.