Research Notes

The mobile industry has many taboos

– one of them is the business models needed to create the future foundation for mobile broadband
The mobile industry is an industry with many taboos, each representing problems that ought to be thoroughly analysed in order to find the correct solutions. But the fact is that many players in this industry spend most of their time looking for the next wave they can ride, rather than paying attention to the runaway surfboard that is coming right at them. One of the areas that is getting an enormous amount of attention, but where most people are forgetting the downsides, is mobile broadband.
A product like mobile broadband contains everything that this industry loves. The product is easy to market, sell and purchase and an increasing number of customers are demanding this product. In countries like Austria, Finland and Sweden, it is growing so quickly that operators are having difficulty comprehending their success. Simply put, report after report are publishing figures on how many customers have now chosen to use mobile broadband as an alternative, or a supplement, to traditional broadband. Mobile broadband is the next wave that operators around the world have been looking for – the product that will result in the growth in customer bases and that represents the next business area that will give growth to operators.
At the Mobile World Congress 2008 in Barcelona operators queued up to present their fantastic mobile broadband sales figures and announced how important this product is for the industry in the short, medium and long-term, despite mobile broadband launching at a high price and then seeing  prices quickly falling as penetration grows.
But in reality, the development of the mobile broadband market is extremely similar to the development we have seen on the traditional broadband market, with the small difference that things in the mobile world have developed much faster than they did in the stationery world. The biggest challenges that we are now facing is the fact that most mobile operators are not willing to address the taboos in connection with the developments we are seeing on the mobile broadband market. There are many problems that need to be addressed, but that are getting very little attention.

Problems such as
What strategy should one use when penetration is high, competition increases and prices plummet? In countries like Sweden and Finland where mobile broadband penetration is currently around 5-7%, they have already experienced that a mobile 3G/HSDPA broadband connection with unlimited data consumption (fair use) has decreased in price to around 12 – 17 euro – a price far under what customers are paying for a traditional broadband connection. Our question is; how will these prices develop in the future and will they be high enough to cover the costs to expand the mobile networks?
Infrastructure providers are talking about an operator on a fully penetrated HSDPA market being able to produce 1 GB data for 1 Euro – what will this product be sold to on a high penetration market and will competition result in prices dropping to a level corresponding to the company’s marginal costs? Will 1 GB data cost 2, 4 or 10 euro in the future?
What new add-on products should be developed for mobile broadband? Almost all the mobile broadband connections that are currently being sold are not being used for mobile phones, but instead being sold to customers that need mobile Internet connections for their portable PCs. It is not mobile telephones, the mobile telephone manufacturers, or mobile services that are making this market grow – it is the increased number of portable PCs that customers are buying.
If there are going to be new mobile broadband, services, what type of services should they be? Should they be services that the operators’ manufacturer, market and sell, or should they be IP based services residing on a random network and that are manufactured by various companies and marketed and sold completely bypassing the mobile players? On today’s Internet, services like MSN, Skype, Yahoo and Google are operator independent and can be used by customers regardless of where they are – and additionally customers can choose to use these services on the network that offers them the cheapest data traffic. Do the mobile operators stand a chance to do business when they are up against the traditional Internet service providers?
When – and if – mobile network centric services become available that offer more than Skype, Google, MSN and Yahoo can offer and that give the mobile operators a larger role than only delivering a data connection, who will sell these services and how will they be purchased? Should it be the operators themselves that handle the marketing, sales and distribution? Should they be sold via the traditional distribution channels, or will it be totally new third-party players, as it was on the premium SMS market?
The services that customers will use on the mobile broadband in the future need to be developed, marketed, sold, purchased and used, but which new business models are needed for this to happen? Will we see business models similar to the ones we know from premium SMS, or will new business models be developed that create a new value chain, allow new types of services to be developed and sold and that result in mobile operators gaining revenue that can completely or partially compensate for the price reductions there will be on mobile broadband access. What will these business models look like in the future?
How will mobile broadband development influence the traditional broadband market? Will we see a future where mobile broadband stifles the traditional broadband access, in the same way that the fixed line telephony is today suffering due to the success of the mobile telephone? Or will we experience that mobile broadband in the future will be a supplement to traditional broadband access? There are many questions, but the million-dollar question is who will come out the winner on the broadband market – the mobile or the traditional providers?
If no new mobile services are specifically developed for mobile broadband, there is without a doubt a large risk that mobile operators will evolve into dumb mobile broadband pipelines, with customers choosing the operator that can offer the highest bandwidth at the lowest price – just as we have seen on the traditional broadband market. If you examine the way most mobile operators are marketing and selling mobile broadband today, they are already behaving as dumb pipelines, in the same way as many ISPs have evolved. So which are direction do you think mobile operators are most likely to take in the future – towards being a dumb pipeline, or towards being an intelligent pipeline?
How will the mobile broadband development influence the future mobile industry? Will and increasing pressure on prices combined with large demands for network expansion result in a consolidation of the market, resulting in operators that are not cost efficient giving in and merging with other weak market players? Will we move from four to three operators, or from three to two operators? How many operators – and which operators – will give in and close down on a market with massive price reductions?
What are the alternatives to consolidation? Is it possible that the increased competition could result in an alternative to consolidation, an alternative with operators cooperating in the expansion, operation and servicing of mobile broadband networks? We know that many operators have initiated formal cooperations regarding the expansion of 3G networks, but how close will these corporations be in the future and how will the regulative authorities react to this type of cooperation, if operators experience so large price reductions that their only real option will be to merge mobile companies on certain markets?Many of the above issues are part of the taboos surrounding the mobile broadband market, taboos that many players in the mobile industry would prefer to avoid having to address, despite the current fast paced development of mobile broadband in countries like Sweden, Finland and Austria. Strand Consult has created a workshop that targets these mobile broadband taboos and that gives a number of suggestions regarding how the market will evolve, what it will look like in the future and what possibilities mobile operators have on the mobile broadband market.

The mobile broadband market is one of the many areas that we describe and analyse in our strategic workshops and that are in consistent demand from a great number of the world’s most dynamic mobile players. During the past 12 months we have held our workshops in over 25 countries for many thousands of employees. The purpose of our workshops is to increase our customer’s level of knowledge of the mobile industry, giving them a competitive advantage on their market.

All our workshops are adapted to our customer’s requirements and demands and based on the market situation that they are a part of. You can read more about our unique workshops here: and request an offer of what we can do for you.

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