3G technologies have come a long way since NTT DoCoMo launched the world's first commercial UMTS network in 2001 with peak theoretical speeds of 384 Kbps. The HSPA+ networks of today are promising downlink speeds of up to 21 Mbps, and eventually 42 Mbps. Japan will once again be in the limelight this year with the advent of LTE, which will break the 100-Mbps barrier over a wireless medium.
While not all Asian markets will have such state-of-the-art networks in the near future (and there are close to two billion people in the region who still do not have 3G coverage), these new speeds are opening doors for mobile operators to effectively compete with fixed broadband access via external 3G devices such as dongles and data cards.
Despite the challenges associated with offering these devices, the region witnessed substantial growth in dongle and data cards use in 2008, and we predict that by 2013 as many as one-third of all net broadband additions in the region will be accessing the internet via a 3G device.
There are two main factors that are pushing external device usage. The first is that the technology matured substantially in 2008, with HSPA networks mushrooming all over the region. In a real-world environment you can now realize speeds of around 1-2 Mbps. This is a watershed for 3G - for the first time wireless technologies can effectively compete with the basic broadband offering in most markets.
The second factor is pricing. The cost of 3G dongles has fallen substantially over the past year, largely due to vendors like Huawei and ZTE realizing economies of scale and bundling devices with network deployments. A Frost & Sullivan survey of over 40 mobile operators in the region found that 90% of the operators were offering the devices at less than $150 with a two-year contract, while nearly half of the operators were fully subsidizing the device.
Subsequently, monthly service pricing has also fallen significantly, with operators in markets as diverse as Australia, China and Singapore all under-cutting fixed-line services to spur adoption. Only markets with ubiquitous high-speed broadband service like Japan, South Korea and Hong Kong are still charging a high premium for 3G broadband service, hoping to tap the high-margin enterprise segment.
Selling dongles and data cards still isn't a slam dunk in many parts of Asia, as there are still significant challenges. Issues over the quality of service, since a wireless technology will always offer more variability in actualized speeds versus a fixed offering. As mentioned, actual 3G speeds vary due to a myriad of factors, and online technical forums are filled of horror stories from users who buy a 7.2-Mbps dongle and experience speeds of 56 kbps or less, and end up dropping the service without hesitation. These problems will always exist with wireless technologies, and the mass marketing of peak download speeds is highly counter productive.
Another concern is the high operational cost often associated with 3G broadband service, as mobile backhaul is monopolized and expensive in many emerging markets. This in turn often causes operators to throttle traffic, which is not always explained to customers in some markets. Finally, PC penetration remains direly low in many markets, and while many operators are trying to get into the PC distributor business and much faith is being put into netbooks, this will also remain a significant barrier for the near future.
At the end of the day, the numbers speak for themselves. In Malaysia HSPA mobile broadband additions represented 28% of the total market additions for the first three quarters of 2008. PLDT has more wireless broadband customers than fixed-line customers, and Telstra has proven that there is a case for wireless broadband in a developed market with its 'Next G' network.
With 3G coming to India, China, Vietnam, Pakistan, Bangladesh and several other markets this year, there is cause for optimism that 3G mobile broadband services will start to make an even bigger impact in the region going forward. We also believe that the future of wireless will be ultimately lie in embedded devices. Hence, we believe that 3G external device access will represent an important stepping-stone toward the industry's vision of a truly mobile and connected world.
Marc Einstein is a senior industry analyst for Frost and Sullivan and is based in Singapore.