Mobile's broadband danger

The great broadband disruption is about to hit cellular. That might threaten voice revenues, but is a high-speed boost to the data segment

The device trail

The HSDPA device market has kicked off, with PC cards from Motorola and Novatel already on the market.
If you haven't seen them, it's because live HSDPA networks operate in only eight markets - two in Austria, and one each in Sofia, Bulgaria, Hannover, Germany, Isle of Man, the UK, Kuwait, Madeira (Portugal) and the US.
Some 18 PC cards will ship by the end of 2006, according to the GSM Suppliers' Association.
Handsets are due out from BenQ-Siemens, LG and Samsung this year.
Samsung showed off its SGH-Z560 at the 3GSM show in Barcelona and promises it will ship in the second quarter. For early adopters, it's a quad-band, quad-mode delight - GSM/EDGE 900/1800/1900 WCDMA-HSDPA 2100.

These are precarious times for mobile operators. The old voice business is declining and the new 3G networks have not created the anticipated bonanza.

Too bad. Now cellular must face the biggest disruption of all: broadband. The coming of HSDPA is going to up-end the mobile business as we know it.

From one end, the arrival of mobile broadband spells danger. It means voice over IP over cellular, and all that follows for conventional voice and roaming revenues.

But it also means genuine high-speed Internet access speeds for music, video and other downloads.

Cellcos will be able to seize the broadband initiative from Wi-Fi hotspots by offering wide area coverage, and in some markets even challenge fixed-line players.

But broadband is about to descend on an industry facing increasingly tough conditions.

Cellular's woes were ably illustrated by the boardroom battles at Vodafone last month, culminating in founder Sir Christopher Gent resigning his honorary post in acrimonious circumstances. These battles were the result of weak operational performance, with the company forecasting zero or negative EBITDA growth this year.

After years of investment, 3G amounts to only 7% of revenues, while the biggest growth last year was in the emerging markets of Romania, Egypt and South Africa.

Meanwhile, UMTS vendors have been enthusiastically promoting 3.5G in the form of HSDPA.

The CDMA version of broadband, EV-DO, has been in play in Korea, Japan and the US for the past two years, enabling download speeds of 600-700 kbps and above (see story 'US carriers bet on convenience', p.20).

The W-CDMA answer to that, HSDPA, hits the market later this year in the form of a PC card, offering typically 1-1.2 Mbps bandwidth (see box p.19).

Some 70 operators have committed to HSDPA, says the GSM Suppliers' Association, though to date only eight are operating commercially. The first handsets will not arrive until later this year, which means volume shipments of attractive and affordable phones are at least 18 months away.

The first disruption from HSDPA is broadband data.