Increased usage of mobile data networks was once the holy grail for mobile operators. Now that HSPA+ has enabled them to offer a service users want, they are starting to suffer the consequences of escalating usage. In CEE, for example, mobile broadband was embraced because of the lack of fixed connectivity. But heavy mobile broadband usage and the consequent deterioration in user experience is now putting fixed back in the frame.
Two reports out this week highlight the growing burden on mobile broadband networks in Europe, as consumer usage escalates. And the situation is not about to get any easier: another report continues to drive home the message that smartphone take-up is still growing, and there is little sign that this situation will change any time soon.
Indeed, the impact this will have on mobile networks is not to be underestimated, as outlined by Nokia Siemens Networks in a recent European Communications article. Nokia Siemens predicts that smartphones will be the far bigger challenge for mobile broadband networks in future, outweighing dongle and PC usage.
Meanwhile dongle and laptop-based mobile broadband has been a hugely successful product in Europe to date, with growth set to continue further.
According to a research note from Yanli Suo-Saunders, senior analyst at Analysys Mason, mobile broadband will contribute almost 10% of total mobile service revenue by 2015. The research and analyst firm forecasts that total mobile broadband revenue in Europe will increase from €6 billion in 2009 to €17 billion in 2015, at a CAGR of 18.7%. Total mobile broadband connections, meanwhile, will increase in number from 32 million in 2009 to almost 120 million in 2015.
This growth is a challenge and an opportunity for operators as they look to drive revenue but also to balance out and manage demand on their networks.
But in certain parts of the European market the situation is getting pretty serious already: according to a report from Andrei Tchadliev, research analyst at Analysys Mason, the continual rise in the number of mobile broadband consumers in Central and Eastern Europe has severely strained network capacity, resulting in a deterioration in the user experience.
"In the first three years after the launch of mobile broadband, a number of markets in CEE are expected to achieve triple-digit annual growth in subscriptions, putting significant strain on network bandwidth," said Tchadliev. "The effect of this on subscribers has important implications for operators. We believe that average mobile broadband traffic per subscriber has already started to level off, as users find that connection speeds are slower than advertised and the reliability of networks is poor."
Now, the reverse of what is happening in Western Europe, where users are tending to at least supplement and sometimes replace fixed broadband with mobile broadband services, is becoming evident in CEE, where mobile broadband was initially popular because of the lack of fixed connections.
"Up to 70% of datacard users in Poland are considering supplementing their mobile connections with fixed broadband offerings," noted Tchadliev.
In other words, it looks like mobile broadband in CEE is finally starting to face some real competition from fixed providers: "The easing of regulatory restrictions, and the subsequent increase in competition, has helped to accelerate investment in broadband networks, improving coverage and exerting downward pressure on tariffs," said Tchadliev. "The speed and price of Internet packages from some providers in CEE now rival those of packages available in Western European markets. Between 2006 and 2009, residential broadband penetration in CEE rose from 10.3% to 27.1%."
In Europe as a whole, while users have adopted mobile broadband in their droves, Analysys Mason still expects most users to retain their fixed services at home.
But the company adds: "There is still a substitutive threat for fixed telcos, as mobile-only households in Europe will rise to 7.3% of total broadband households by 2015. Some markets, such as Sweden, have experienced strong growth in mobile broadband, while fixed broadband penetration has stagnated. The ongoing roll-out of LTE in Europe will improve the user experience, increasing the appeal of mobile broadband."
The greater challenge for operators in future will be to manage the growing usage of smartphones as devices proliferate in the market: AT&T and O2 UK have already introduced capped pricing for smartphone use, for example. According to a recent report from Frost & Sullivan, consumers are increasingly seeking well-designed devices with innovative features and applications such as touch screen technology, WiFi and location-based service (LBS).
The company said by the end of 2008, 147.8 million smartphones were shipped in North America, Europe, Asia Pacific and Latin America. "This is expected to grow to 442.9 million by 2014. By 2014, Asia Pacific is likely to ship 161.9 million smartphones, with Western Europe accounting for 85.4 million devices," said senior industry analyst, Saverio Romeo.
Romeo added that users are moving towards a complex and rich mobile experience made of communication, entertainment and productivity services. "The smartphones are the right devices for this experience," he commented. "Their role will increasingly become vital in the mobile communications market driving diffusion of new services and applications."
But smartphones are only the half of it: Ericsson, for example, is predicting that 50 billion devices ranging across all sectors of the consumer electronics space will be connected to networks by 2020. The vendor will be discussing the impact on networks of mobile broadband services and multiple device connectivity in the forthcoming broadband special report in the next issue of European Communications magazine.