Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Mobile broadband has seen something of a marketing revival with the arrival of new device formats such as embedded netbooks, tablets, hot-spot routers and e-readers, as well as evolution prepaid and contract free models. In the United States, the arrival of attractive unlimited and high-end offerings from prepaid and regional carriers such as Virgin Mobile USA Inc. and Leap Wireless International Inc., as well as prepaid and contract free plan options from tier-one carriers increased the service’s potential user base and relevance dramatically. In Europe, fixed-mobile bundling and “off-peak” usage incentives are also changing the competitive landscape. This report reviews the major trends across these two regions this year.
Contract free or no-commitment plans
Contract free or no-commitment plans gained recognition as a service model in the United States and Europe in 2010 with the arrival of SIM-only tablet devices and Apple Inc.’s iPad. The no commitment plan, also known as “the 30-day plan” in some markets, allows users to drop their broadband service when they don’t foresee using it and re-subscribe again with minimum (or no) additional charges. While AT&T Mobility and Verizon Wireless offered their no contract broadband plans only to their tablet users, T-Mobile USA Inc. extended the privilege to all its broadband users via its Even More Plus offering and several European operators have now adopted the model as an alternative to standard postpaid contracts. Contract-free plans are ideal for ancillary devices such as Wi-Fi-enabled tablets, which have yet to take the spot as the user’s primary wireless device and are attractive to users who are already forking out a substantial wireless voice and broadband services bill (for their laptops/netbooks) by providing them with control over their wireless bill, even if it means having to buy the device at full cost. It is important to note here that unlike prepaid mobile broadband plans, most contract-free services are packaged similarly to their postpaid services and include perks such as unlimited Wi-Fi access.
Bandwidth reductions, versus out-of-bundle (overage) charges
Despite several tools that help users keep track of their usage levels, some still end up exceeding their data access limits primarily due to the lack of a concrete understanding of what a megabyte of data constitutes and the amount of data each type of online activity consumes. Overages are a greater concern in the mobile broadband space than in the handset arena as the data consumption potential on a laptop is far higher. In the U.S. mobile broadband arena most high-end broadband plans are capped at five gigabytes (some carriers offer 10 GB and very few regional and prepaid carriers offer unlimited access) with steep overages to the extent of $100 per GB. To overcome this stipulation and to differentiate its service from competitors, Leap Wireless became the first in the U.S. space to institute throttle mobile broadband solutions with no overages essentially marketing its entire portfolio as “unlimited.” This strategy was soon followed by T-Mobile USA, albeit only for its high end 5 GB plans. While not ideal, bandwidth reduction offers a less harsh punishment to bandwidth hogs while ensuring the carrier’s networks are not clogged, creating a win-win situation for both parties. This trend is likely to be adapted by more U.S. prepaid and regional carriers who are beginning to extend their services in the mobile broadband sphere and will help them differentiate their services from tier one carriers instituting strict data access limits and attract value centric consumers.
U.S. prepaid trend
Late 2009 marked not just the launch and expansion of mobile broadband-centric plans from traditional prepaid and regional carriers, but also the rise of prepaid-centric offerings from tier-one carriers. Armed with the knowledge that the postpaid market was stagnating and that prepaid is where the growth is at these days, tier-one carriers launched prepaid broadband portfolios to expand the relevance of their service and to also compete with prepaid carriers who were starting to lure in penny-pinching consumers to their turf.
Presently all tier-one carriers in the United States offer prepaid broadband options to their users (Sprint Nextel Corp.’s prepaid wing, Virgin Mobile USA offers attractive broadband solutions to users) which include flexible daily, weekly and monthly options. Like prepaid options on the voice side, prepaid mobile broadband portfolios lacked diverse and exciting devices in the beginning, but that’s changing as well. Lately, T-Mobile USA has announced that its Samsung Telecommunications Americas’ Tab users can opt for prepaid plans and prepaid carriers such as Virgin Mobile USA offer hotspot devices enabling users to share their mobile broadband connectivity with up to five Wi-Fi capable devices (including tablets, iPods and iPhone devices), a strategic move as prepaid options from national carriers lack high end and unlimited access.
As prepaid options gain steam, we will continue to see high end plan options from tier-one carriers (Verizon Wireless already set the ball rolling a few months ago with the launch of a 5 GB plan for its prepaid users) and the extension of new devices types at launch time to the prepaid segment.
Off-peak trend in Europe
Several European carriers offer services allowing users an additional quota of data usage – or even “unlimited” usage – during the night, off-peak weekday hours, weekends and public holidays, although there is still a great degree of variety in the structure of such propositions. In Europe, the off-peak usage incentive is treated both as an inclusive component of a standard postpaid service and a premium bolt-on option, with the first model the most common.
In Q3 2010, off-peak propositions became a key competitive issue in Poland, where market innovator iPlus was forced to revise its offer after a counter-attack from Orange Poland (“Happy Hour” from midnight to 8 a.m. inclusive with certain Orange Free products).
France, however, was still Europe’s key innovation market for off-peak usage incentives. In Q3 2010, all three French mobile network operators marketed services offering off-peak unlimited usage of some description – either over the weekend (Orange, SFR and Bouygues Telecom) and/or off-peak weekday – essentially evenings to early morning (Bouygues Telecom), not to forget Orange France’s innovative bundle of off-peak weekend and international data roaming (“Forfait Cle 3G weekend et vacances”).
Other examples of off-peak incentives can be found in Greece (Wind Hellas’ “Student Data” plan), in the United Kingdom (Orange UK’s “Happy Hour” surfing options), in Romania (Orange Romania’s inclusive “Happy Hour” from midnight to 7 a.m. on key Colibri Internet plans) and in Portugal (Optimus’ bolt-on “Happy Hour” from 2 a.m. to 9 a.m.).
Still, the number of such propositions did not increase significantly from Q2 to Q3. None of these services, with the exception of the new “Happy Hour” additions from Orange Poland and Orange Romania, were new in Q3 2010.
Mobile/ Fixed Bundles
In Europe, it is increasingly common to see market incumbents with both a fixed and broadband sales unit award their existing fixed broadband customers with mobile broadband discounts and benefits, communicated and channeled through both their mobile and fixed brands.
In Q3, for example, Telia in Sweden positioned its entry-level mobile broadband package as a free inclusive for its fixed broadband customers, with significant discounts on other mobile broadband packages. In the Netherlands, KPN launched a specific mobile b
roadband proposition including free usage per month for new fixed broadband subscribers. Belgacom launched both mobile broadband discounts and free weekend and holiday mobile broadband for its own fixed broadband customer base. A1 in Austria launched an entirely new bundle concept for its fixed broadband customers.
In all of these innovations, the leading fixed-mobile market incumbent sought to offset the FMS impulse by rewarding fixed broadband customers with a low volume of free, discounted or off-peak mobile broadband usage, and as has been seen in some markets, this strategy has had a quite disruptive impact on the broader, entry-level mobile broadband market.
To compensate for this, competitors have been forced either to follow the market incumbent in its bundling strategy or to revise pricing to ensure their own entry-level mobile broadband packages remain attractive. Outside the market incumbent leaders, Vodafone Group plc is a disruptive force in this area, with a strong fixed-mobile broadband package in most of its key markets.
Emma Mohr-McClune is responsible for the content and development of the Consumer Services Europe research unit at Current Analysis. Her specialist areas of coverage include fixed-mobile converged services, mobile voice and data, applications, content and media services.
Deepa serves as a Senior Analyst for the Wireless Services – U.S. module. In this capacity, she is focused on wireless data in the U.S. markets. Coverage areas include messaging, access, content, multimedia, pricing and plan features. Deepa’s coverage also extends to wireless data trends including mobile social networking mobile advertising and location based services.