Mobile broadband business model 'unsustainable'

Increasing use of mobile data services is putting pressure on network infrastructure

Cheap flat-rate mobile data broadband plans are unsustainable and will not last long, according to broadband comparison web site Broadband Genie.

Despite falling prices and higher bandwidth for fixed-line broadband services, two recent reports from broadband industry analysts Omnitele and Strand Consult concluded that the cost of rolling out and maintaining mobile broadband technology means that the current business model is losing providers money on what should be a cash cow.

"UK broadband providers are no mugs. Prices are currently low as companies fight for numbers in a growing market, but they realise that the situation is not sustainable and will be looking to change packages and turn a profit in the near future," warned Chris Marling, editor of Broadband Genie.

"Raising prices for heavy users, who are typically early adopters of new technology, makes financial sense. This will leave more leeway in prices to attract casual mainstream users who may still need some convincing."

The increasing adoption of mobile data services, thanks in part to the growing number of feature rich and advanced mobile phones and 3G-enabled notebooks, is putting increased pressure on the operators' network infrastructures. However, low flat-rate data plans are not providing enough revenue to sustain investment, particularly as voice revenues are dwindling as well.

Antonios Drossos, vice president of Omnitele's business consulting unit, believes that "controlling busy hour traffic of heavy users" and "adjusting retail pricing" are two of the most straightforward options for changing business models.

Broadband Genie believes that, while pricing models are certainly going to change, it may not be a bad thing for everyone, as heavy users will be charged for the amount they download and less bandwidth intensive consumers may see prices fall.

John Strand, chief executive at Strand Consult, agreed. "We expect that mobile broadband operators will launch products which cannot be used with voice-over-IP and peer-to-peer services. However, the connection will be cheap and far below what we pay for home broadband," he said.

"You will see this pricing change in a number of European countries this year, and I expect it will happen in the UK by the first quarter of 2010. These price developments in the mobile broadband market will put pressure on home broadband providers, as a lot of customers will disregard fixed-line for a mobile solution."