Forget contracts for mobile broadband, prepaid key in W Europe

Operators should look to prepaid offerings to maximise the mobile broadband opportunity in Q4 2008, rather than pinning their hopes on mobile broadband substituting fixed services. This is one of the key conclusions to be drawn in a new report by Ovum, Mobile broadband operator strategies in Western Europe.

The research highlights the options available to operators to maximise mobile broadband, finds they are best positioned as complementary to fixed.

This is because fixed broadband penetration across Western Europe is simply too high. Mobile broadband can not compete with fixed on speed or capacity, particularly as high bandwidth applications such as IPTV take off.

There will be some consumer segments for which mobile broadband could be a realistic substitute for a fixed service, such as students and itinerant workers; those in short-term shared or rented accommodation; and those simply unable to access a fixed services..

However, the scope of this substitution is limited and are becoming saturated. Understandably, operators in Western Europe have maximised the potential of mobile broadband through contract-based offerings as it provides a stable revenue stream.

The trouble is, the pool of customers willing to commit to an average of a two year contract for mobile broadband will shrink. This is particularly true where mobile broadband is most likely to be used in addition to a fixed broadband service.

Furthermore, as the cost of USB modems  (dongles) continues to fall a major barrier for entry is removed for the consumer. For the operator this also means no hardware subsidy to recoup.

As a result, Ovum predicts that the next opportunity for mobile broadband in Western Europe will be prepaid offerings. With a prepaid approach operators can attract users who appreciate the mobility and simplicity of mobile broadband on some occasions, but are unwilling to commit to a long-term contract. As such, it is a model in which mobile broadband complements the already high fixed broadband penetration in Western Europe.  

What's more the timing for a focus on prepaid is perfect. With Christmas approaching everyone wins  those purchasing a bundle as a gift have no contract commitment, end users have a flexible mobile broadband service and operators gain new customers and revenues.

Steven Hartley, senior analyst, Ovum

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