Blog Post

Mobile Broadband: You're Gonna Pay for the Convenience

We all know by now that people treat their mobile broadband connections like they treat their wireline connections — downloading as much data and expecting the same rapid performance. But Sandvine (you may remember it as the company that helped Comcast (s cmcsa) block P2P files) has released data showing exactly how much people use mobile broadband — and concluded that for carriers, such use is neither sustainable nor profitable (GigaOM Pro, sub req’d).

Since the carriers are positioning themselves for the implementation of usage-based pricing schemes for mobile broadband, Sandvine is merely telling its future customers what they want to hear. But Sandvine’s data also paints a very clear picture (one we’ve been painting for at least a year) about the economics of mobile broadband demand and use (GigaOM Pro). From its report:

While significant, these numbers are dwarfed by projections suggesting between 1 billion and 2 billion users by 2014, and revenues well in excess of $100 billion. And therein is one of the points of concern for wireless providers – while the number of users is expected to triple or even quadruple in the next five years, revenue is predicted to only double.

Sandvine offers several charts showing why this is the case, starting with the quality of our phones in the U.S. (the report also covers Europe and Latin America, but I took only U.S. charts):

In other words, the proliferation of high-end phones that can handle bigger applications and deliver faster speeds when it comes to downloading photos or watching video changes the types of things one can do on the mobile network (even when folks aren’t on a computer). Check out the top applications that Sandvine sees being used during peak times on U.S. mobile networks:

So what does this mean for consumers? It means many of us will end up paying more for mobile broadband that we do under unlimited plans. Sandvine’s software offers carriers the ability to look at data usage on the network and set pricing tiers to ensure that, for example, only a certain percentage of users will fall into a basic tier (or be subject to overage charges). We’ve written about the downsides of having tiers as opposed to metering, but in the end we are going to pay for the convenience of being mobile. I can only hope that myriad hotspots and competition from Clearwire’s (s clwr) WiMAX network can keep the big cellular carriers competitive.

10 Responses to “Mobile Broadband: You're Gonna Pay for the Convenience”

  1. the figure 27 shown doesn’t make sense. You say that you took only US data but it shows Nokia phones as downloading more data than any manufacturer – including Apple. How does it come about ?
    Admittedly I haven’t seen the actual report but I don’t see how this can be true US. Maybe Europe ?

  2. Heather Tishman

    This is silly, “And therein is one of the points of concern for wireless providers – while the number of users is expected to triple or even quadruple in the next five years, revenue is predicted to only double.”

    It should not be a point of concern. It’s a basic premise of a downsloping demand curve. It certainly shouldn’t be a concern in a market with such massive economies of scale and scope.

  3. Definitely not good news! But have you ever waited for a table in a restaurant for example and noticed how many people were online. That usage costs money and if we are all on unlimited plans it can really add up.

    If usage is projected to stay so far ahead of revenue, it makes sense as much as I don’t like to hear it. ( I do question if the numbers are accurate though )

    I remember when just having a cell phone was expensive and not available to the average consumer. Advances in technology changed all that and I am hoping for the same thing here.

  4. Has Sandvine or the carriers bothered to find out whether or not customers have wireline access home? Other than satellite, the only ISP I can use is VZW. I try to hold our usage down to a dull roar but I have a teenage daughter who takes classes online and my husband is an adjunct professor. If I had access to DSL or the equivalent I’d be a subscriber.

  5. The carriers are preparing us for higher prices.

    That said,’the smartphone is the computer’. If America wants to compete in the 21st century, we must enable mobile broadband nationwide as affordable as possible as fast and reliable as possible.