London, 17 September 2009 - A new report from global advisory and consulting firm Ovum, finds that mobile broadband in emerging markets is a very different proposition to that seen in mature markets. According to the report titled, "Operator strategies for mobile broadband in emerging markets", low fixed-line and PC penetration provide an opportunity for mobile broadband to become a viable fixed-line alternative. However, Ovum believes that for operators to succeed, ‘pragmatism' must be the watchword in terms of access technology, devices, deployment and market approach.
Operators today are taking a far more pragmatic approach to mobile broadband in emerging markets than in developed markets, focusing more on the service offered (web access) than the technology or device. According to this report, operators are selling mobile broadband services based on everything from GPRS to WiMAX.
That said, HSPA will undoubtedly be the dominant technology in emerging markets for the next five years, accounting for two-thirds of next-generation access connections in 2014. "The opportunity for mobile WiMAX in emerging markets is certainly greater than in developed markets, but the more rapid adoption of LTE will see the two next-generation technologies almost on parity by 2014", says Steven Hartley, senior analyst at Ovum and co-author of the report.
Another crucial practicality to consider is the cost involved in launching and running mobile broadband services, as with all emerging market services. "It is vital that operators build and then run highly efficient networks to handle the resulting data traffic," Hartley explains. "ARPU will be low and margins negligible without a clear understanding of the building and operational costs associated with these services. Nonetheless, costs will not be solely in the network. The additional support needed for more complex services and devices should also be carefully considered."
Pragmatism is also evident in the approach to deployment; however, the competitive landscape will dictate the strategy that operators should adopt. "Operators should take a more conservative view of technology and service rollouts to ensure demand and profitability before committing too much finance, where competition (or the threat of it) from fixed and mobile operators is limited." This may seem counterintuitive to operators with a mature market background, but those operating in markets with low ARPU and potentially high costs (such as fuel supplies to remote base stations or international connectivity) must be sure that a new service launch is viable. Therefore, operators are best ‘skimming' the most profitable segments of the market if they can. "If competition already exists in the market then they may be forced into a broader, mass-market approach from launch".
As a result of the heightened cost-consciousness and careful deployment of mobile broadband in emerging markets, customer segmentation is critical for success. The services, marketing and pricing for small-screen (handset) and big-screen (PC) devices will differ depending on the customers targeted. And the segments targeted will depend on the strategy adopted.
Unfortunately, the success or failure of mobile broadband in an emerging market may still be outside an operator's control. "Governments have a major role to play in providing an environment conducive to success; spectrum policy is the clearest example of this, either through its release to operators or through global harmonisation to benefit from economies of scale", says Daniel Subramaniam, analyst at Ovum and co-author of this report.
Governments also hold the keys to unlock several other stimuli for deployment and uptake. "Reducing taxes on telecoms services, encouraging competition and boosting investment in power supply and international connectivity could all result in lower prices to end users", adds Subramaniam. Universal service obligations to bridge the digital divide can also be implemented to boost uptake. These may be less attractive to operators, but could be the stick compared to the carrot of the former measures.