HSDPA not viable for operators, warns analyst

3 Apr 2007

Mobile operators who offer their own unbundled DSL services could achieve strong service uptake, research firm Analysys has predicted. It warned that HSDPA (high-speed downlink packet access) could not profitably support usage levels of 2GB a month per customer.

“DSL services can generate nine times the ARPU [average revenue per user] earned by many mobile operators today from mobile data services,” said Dr Mark Heath, co-author of the Analysys report, entitled Mobile Operator Strategies for Fixed Broadband.

“However, the challenge is to offer such services profitably. If 10pc of its customers subscribed to DSL services, a large mobile operator with could achieve a 16pc cost saving in the provision of DSL services by investing in its own LLUB (local loop unbundled) network,” added Heath.

The Analysys report found that there is a strong case for mobile operators to unbundle fixed broadband with their traditional mobile services.

However, as investors increasingly focus on bottom-line performance as well as on revenue, operators are under pressure to ensure that broadband services do not damage their profitability.

Analysys warned that with the wrong implementation choice, margins could be wafer thin.

It said that while wireless technologies like HSDPA and WiMax have been touted as viable ways for mobile operators to offer fixed-broadband services, DSL is the most appropriate method in the short term in developed countries.

Analysys said that HSDPA could not profitably support average monthly usage levels of 2GB or more per customer.

While some operators, such as Vodafone UK, have chosen to resell the DSL services of BT, local loop unbundling can achieve greater profitability.

“If fixed-broadband services are to be profitable and to make a noticeable difference to mobile operators’ revenue, a typical mobile operator must encourage at least 10-20pc of its customer base to subscribe to its DSL services”, said Dr Alastair Brydon, co-author of the report.

“While there are risks involved, investment in LLUB could pay back in less than three years,” said Brydon.

By John Kennedy