Faster services and lower prices herald mobile broadband arms race

7 Aug 2008

Does 3G technology offer a viable alternative to fixed-line broadband?

When it comes to broadband, Ireland scarcely figures on most European league tables – with one exception. According to research by the telecoms consultancy Analysys Mason, Ireland is second only to Austria in adopting mobile broadband.

That’s no mean feat for a technology launched just last year and a country that, according to the telecoms regulator ComReg, has around 800,000 fixed-line broadband connections in total.

There are currently more than 230,000 mobile broadband subscribers in Ireland; 3 claims 90,000 users, Vodafone some 84,000 and O2 some 60,000. Such is the demand that one operator says customers are signing up at the rate of over 200 a day.

Unlike many other European countries, 3G mobile broadband is an extremely strong competitor to fixed-line services in Ireland.

This may be because the services are closer to parity; while internet users elsewhere can typically avail of speeds of more than 20Mbps, most broadband subscribers here rely on a version of DSL which varies between 1Mbps and 3Mbps in many areas.

According to Pat Kidney (pictured), head of Analysys Mason Ireland, several factors explain the high uptake of mobile broadband here.

One is the slow progress to date of rolling out fast, fixed-line broadband and another is the high proportion of rural dwellers – close to 40pc of the population.

“The difference in price isn’t massive and the fact that there are three operators – once you have coverage, of course – means there is choice,” says Kidney.

All three operators, O2, Vodafone and 3, say many of their customers use mobile broadband as the primary means of internet access.

“It mimics the trend we saw with mobile phones,” says Rachel Channing, head of PR and communications with 3. “You can see the potential for mobile to plug the gap in coverage where there are no other providers.”

Strong competition is leading to aggressive price cuts. Earlier this summer, 3 dropped its broadband offer to €19.99 per month, with the modem costing €49.

O2’s service sells for €19.99 per month, with two modems available to buy online for €19 and €49 – the more expensive modem offers a faster upload speed.

“We are currently reviewing our pricing and should be in a position to make an announcement on this in the very near future,” an O2 spokesman confirms.

Vodafone offers the first three months’ service for €14.99, costing €29.99 for a 12-month contract thereafter. A spokesperson says Vodafone “regularly reviews pricing”. The company also has a free modem offer while stocks last, or a lighter USB ‘stick’ modem for €89.

While there may be room for further price cuts, Kidney believes the mobile operators will compete on speed and higher data download limits. “What you’ll see is the price staying the same and the capacity going up,” he says.

Speed is a thorny issue where mobile broadband is concerned. Some users complain that mobile broadband connections are nowhere near the advertised 3.6Mbps.

“Many of those criticisms hold true for DSL and cable as well,” Kidney points out. “Headline speeds are dangerous. Every technology over-promises and under-delivers; the difference with mobile broadband is, the under-delivered product isn’t bad.”

Although the mobile networks all say they are satisfied with 3G broadband sales to date, Kidney believes they were caught off guard by the sheer demand.

A case in point is that the operators boast their upgraded networks will be able to offer higher speeds of 7.2Mbps. O2 has already upgraded its network and also offers faster upload speeds than its rivals. 3 is “on the cusp” of launching its 7.2Mbps broadband service and Vodafone will begin upgrading its 3G base stations in the coming months.

One mobile industry source suggests users will see an incremental improvement rather than a doubling of connection speeds.

These upgrades will help operators to address issues of capacity and handling large numbers of users on the network at any one time.

“The percentage of mobile-only households is continuing to increase and PC and laptop ownership is also continuing to grow strongly. Both of these trends indicate that there is an opportunity for growth in the mobile broadband market,” says a Vodafone spokesperson.

If adoption continues along the same steep curve, the operators are likely to need that extra capacity very soon.

By Gordon Smith

Gordon Smith was a contributor to Silicon Republic