In Emerging Markets, Mobile Broadband Will Substitute for Fixed Broadband

April 3, 2009

Broadband penetration of households differs widely between developed and emerging markets; it already exceeds 53% in countries across Western Europe and North America, whereas it doesn’t even reach 15-20% in most emerging markets. We argue (see our recent report on mobile broadband computing services) that mobile broadband networks can close this huge gap in adoption of high-speed access to the Internet. Indeed, an increasing number of mobile operators have already begun to position their 3G and WiMAX networks as viable alternatives to fixed broadband, particularly since these networks can match low-end 1-2Mbps DSL, which constituted 70% of broadband lines in emerging markets in 2008. Furthermore, the coverage of fixed broadband networks is generally inadequate in these markets, presenting pent-up demand for broadband connectivity that can be addressed by mobile networks, which are generally faster and less expensive to deploy.

Fixed services in emerging markets have often suffered from a lack of competition, resulting in poor service quality, high prices, long waiting periods for service installation and low customer satisfaction. The plug-and-play nature of mobile broadband computing services, which entails rapid service delivery and activation, as well as the larger presence of MNOs should quickly distinguish mobile from fixed alternatives. In our report, we go so far as to assert that mobile broadband networks can offer better quality of service and better quality of experience than fixed broadband networks in many emerging markets. Otherwise, they will at least up the ante on network availability, reliability, bandwidth and user experience, and spur investments by fixed network operators in enhanced coverage, capacity and overall service.

The adoption of mobile broadband computing services in emerging markets will undoubtedly hinge upon the affordability of the service plans as well as the devices. For the mass market, it’s critical that operators introduce low-denomination prepaid plans for mobile broadband to replicate the successful penetration of mobile voice services. A good pricing benchmark is the average revenue per mobile voice subscriber. However, we see the current pricing of computing devices as a major barrier to adoption. In Africa and the Middle East, for instance, a $300 laptop costs about 10% of GDP per capita, whereas it costs less than 1% in North America and Western Europe. Sure, PC manufacturers have been responding, rolling out low-cost netbooks and such, but there is a need for still less expensive devices. Meanwhile, operator subsidies and financing opportunities will be necessary even for sub-$100 devices to penetrate beyond the high-income customer segments in most emerging markets.

— Daniel Locke, Senior Analyst

Related content:

Mobile Broadband Computing Services: Complement or Substitute for Fixed Broadband?
Research Report published March 2009
This report examines mobile broadband services enabled by 3G and WiMAX networks on a global, regional and market-by-market basis, focusing on service plans offered for computing devices (mainly netbooks, laptops and MIDs). It assesses the positioning of mobile broadband relative to fixed alternatives, helping to identify the best strategies for both developed and emerging markets. Built on extensive case studies, the report provides a five-year outlook on mobile broadband computing trends, including subscriber numbers, penetration levels and revenue expectations.

Regional and Country-level Mobile Data Forecasts, Q1 2009
Forecasts published March 2009
Updated on a quarterly basis, our Mobile Data Forecast products provide complete pictures of demand trends for 81 geographical markets worldwide. The Excel output includes five years of historical data and five years of market projections for metrics such as penetration, mobile subscriptions (by type of package, by operator or MVNO and by network technology), users of specific data services (SMS, music, etc.), MOU, ARPS (by operator, by subscription type, by service, by application) and revenue (by messaging and non-messaging applications). The Forecasts are based on extensive field research and use a consistent methodology, aiming to capture the total spending on mobile data services in each market.

Mobile Advertising in Emerging Markets: Market Trends and Strategies for the Third Screen
Research Report published February 2009
Leading operators are pushing a variety of advertising methods, from sponsored messaging and alert services to more sophisticated content over mobile portals, and mobile advertising will markedly boost mobile data service revenue. This report looks at mobile advertising initiatives and the revenue potential in emerging markets, with a particular emphasis on Brazil, China, India, Indonesia, Mexico, Romania, Russia, South Africa and Turkey. We also put our findings in context by making comparisons with global trends and developed markets, such as the US and UK.