A couple of weeks ago, I picked up an EV-DO ExpressCard for my MacBook Pro. For about $50 per month, I can now get broadband access anywhere I go in the Chicagoland area, along with just about every other major metropolitan area in the US. The problem facing cellular companies, and not just in the US, is that I'm in the minority. A new report from Parks Associates shows that for the most part, consumers are unwilling to pay significantly more for mobile broadband access.
When asked about the desirability of a mobile broadband service for $35 per month, only 19 percent of Internet users in the US were interested. The story is the same in most other countries, except for the UK. Residents of the UK who were surveyed by Parks Associates indicated that they would pay as much as 28 percent more than the price of a fixed broadband connection (e.g., cable and DSL) for mobile broadband access. Consumers in most other countries were even less likely to be interested in mobile broadband than those in the US at its current price points.
US consumers, on the other hand, drew the line at a 6 percent premium over fixed broadband. With 1.5Mbps DSL and cable Internet bundled with a video package running around $20 per month these days, that works out to a price threshold of just $21.20. Most cellular data plans start a fair bit north of there. AT&T's SmartPhone Connect Unlimited Plan, which only works with a limited selection of devices, is the least-expensive data plan at $19.99. Going to a dedicated data plan for a PDA, Smartphone, or a 3G laptop card will set you back a minimum of $39.99 per month.
There is still a fair amount of interest in mobile broadband access, but much of that comes from corporate users, those who need high-speed Internet access at their fingertips no matter where they are. But most Internet users are content with having broadband at home and at the office; they don't need it on the go.
"Wireless broadband access services marketed by mobile carriers today resonate with road warriors and are having success in that segment," said Yuanzhe Cai, director of broadband and gaming, Parks Associates. "But the majority of Internet users primarily access the Internet at home and work and are unwilling to pay more for a subscription service they won't use on a frequent basis."
The study's conclusions echo a theme we've seen recently: mobile broadband has potential, but the high cost of data plans are dragging it down. Our readers tell us that they chafe at the thought of spending another $50 per month for mobile Internet access. That mindset presents a challenge for cellular carriers looking for a solid return on the investment they have made in 3G wireless networks. It also makes selling value-added services like television programming that require a data plan even more difficult. Third parties that would also like to cash in on mobile broadband applications are finding it tough going as well.
The solution is simple, according to Parks. If cellular carriers want to extend their reach beyond what Parks describes as the "road warrior market," carriers need to provide "application-centric rather than access-centric mobile broadband services and offer flexible business models that fit consumers' usage patterns," said Cai. Under that model, cellular providers would charge consumers a flat fee per month for access applications that require mobile broadband—like push e-mail—rather than requiring them to subscribe to a broadband data plan.
Here's another idea: lower the charge for mobile broadband to the point where it's attractive to more consumers. Assuming the network capacity is there, cheaper mobile broadband has the potential to lure new users, giving carriers new targets for broadband-enabled services.