The current trend in Europe is for mobile operators to become internet service providers (ISP).  Recently, an Austrian operator told me that this year it has sold more ISP connections than mobile connections.  In Sweden, mobile broadband is being offered at a price similar to that of fixed broadband, suggesting that Austria is not unique.

Over the last decade, mobile operators have slowly but surely eroded the hold that fixed operators have had on the consumer.  First, it was voice, and now it seems the same is happening for the Internet — witness the exponential rise in the popularity of the USB dongle.  The attraction for the user is obvious: one relationship for all services, no installation charges and the ability to be truly mobile.  Today, many operators offer a free laptop in exchange for an 18-month commitment.  How can you lose?

How will fixed line operators respond to this threat?  They have already made their network investments, so all they need to do now is utilize their assets.  With multimedia rapidly becoming a pervasive force, network capacity and effective bandwidth will be critical factors.  In such circumstances, won’t the fixed line operator have the upper hand?

I’m not so sure.  Mobility is a key criterion.  Freedom is something that users will always want; once they have it, they will never give it up.  For the vast majority of consumers, mobile networks will impose no bandwidth restrictions.  Operators are constantly investing in their networks.  Thanks to data optimization and media transcoding, most users will be hard-pressed to discern the difference between a fixed network and a mobile network — nor will they even care.  For mobile operators, there is also an effective one-to-one brand relationship with end users.  Thus, they can deliver a truly personalized and relevant consumer service across an entire portfolio of offerings — something that fixed line operators will find difficult if not impossible to match.

Infrastructure providers offering service delivery platforms to the consumer will turn up the heat on the ISP market.  When that happens, we should all expect some dramatic changes in the road ahead.

- Graham Carey

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Linksys (a Cisco company) recently published the results of its Connected Life Consumer Trends Survey conducted by YouGov. The Linksys survey shows that 59% of the U.K. population that has broadband internet service uses a wireless network.

Penetration of 59% indicates that the mass market has finally taken to home Wi-Fi networks. Until a few years ago, we had to plug our Wi-Fi cards into PCMCIA slots and endure complicated installation and configuration processes. After battling for a few hours, we would finally succeed in setting up a home Wi-Fi network. Today, Wi-Fi cards and drivers come pre-installed in laptops, thereby eliminating critical barriers to user adoption.

On the supply side, aggressive marketing and promotion by U.K. broadband service providers has played an important role in making Wi-Fi a mass-market phenomenon.

Mobile broadband will head in the same direction with both Dell (along with Ericsson) and Acer announcing pre-installation of 3G modules in their next- generation laptops, which will be distributed by mobile network operators.

USB dongles for mobile broadband are already growing impressively in both the U.K. and Austria, thanks to aggressive pricing and marketing by the regional operators in those countries.

Now, how will this impact Wi-Fi hotspots?

Let’s start with pricing. Typically, Wi-Fi service providers charge £4 to £5 per hour for access and £10 for a day pass. They also offer a long-term contract for £10 per month.

On the other hand, a leading 3G service provider in the UK is charging £10 per month on a 1GB monthly plan for mobile broadband access. Since cellular networks are much more pervasive than Wi-Fi networks, the business case for Wi-Fi hotspots may lose their price/performance appeal for consumers.

What do you think?

- Saurav Chopra

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