Mobile broadband no magic pill

This article was authored by Joseph Waring, and was originally posted on telecomasia.net.

Ovum reported on Jan 3 that “mobile broadband presents the single largest opportunity for telcos to gain back revenue.” It expects the sector to grow 19% annually until 2016.

While that might sound promising to some, the reality is that pace of revenue growth is unlikely to have a positive impact on cellcos’ bottom line because as Ovum itself states: “the fundamental challenge mobile operators face is to increase new sources of revenue fast enough to offset the decline in mature services.”

Given the continued decline in voice revenue and the impact of OTT messaging services on SMS revenue (Ovum estimates the cost was $23 billion last year and forecasts it at $54 billion by 2016), coupled with the infrastructure investment required to support rising mobile broadband usage, 19% revenue growth just isn’t going to cut it for most telcos.

I recently read that in some countries the use of SMS falls 40% when a user adopts a smartphone, so with smartphone penetration well below 50% in developing Asian markets, the full impact of the social messaging threat isn’t even close to peaking.

And let’s not forget about mobile tethering, which enables a mobile phone to work as a modem or router to establish an internet connection on another mobile gadget. ARCchart estimates that the loss of carrier broadband subscription revenues caused by user adoption of mobile tethering will reach $50 billion by 2016.

Almost every telco executive I’ve spoken with in the last year is searching for the next big revenue generator — be it the enterprise/SMB sector, M2M, cloud services or m-paymenets — and mobile broadband certainly isn’t at top of their list.

Let’s hope that prediction is off the mark and there are better opportunities out there to fuel future revenue growth, otherwise it’s going to be very tough going for the next five years!

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Categories: Internet Traffic · Wireless