By Howard Baldwin, Contributing Columnist
Changing global demographics are going to boost mobile broadband adoption significantly, according to a recent presentation by Wally Swain, senior vice president of the network research group at Yankee Group. Swain not only leads the emerging markets team, he has a front-row seat to emerging markets from his office in Bogotá, Colombia.
In his presentation, entitled “Fixed and Mobile Broadband Compete and Cooperate in Emerging Markets,” Swain revealed some intriguing insights about where mobile broadband is headed: nowhere but up.
In established markets, he noted, operators tend to offer mobile broadband as a complement to fixed broadband. That begs the question regarding emerging markets – because there are smaller installations of fixed broadband, will mobile broadband become a substitute for fixed broadband? Swain believes that mobile will be favored in emerging markets because of three issues:
Demographics. “Younger people with lower salaries are more likely to have mobile broadband,” said Swain, citing Yankee Group research in the U.S. and Ofcom Communications Research in the UK (see graphic). The younger the respondent, the more likely they were to have mobile broadband. The poorer the respondent (represented by the bar labeled “DE”), the more likely they were to have mobile broadband. Those who rented their home were more likely to have mobile broadband.
All these characteristics are found in greater numbers in emerging markets, Swain argued. “Think about the demographics of emerging markets: they’re more likely to have consumers who are younger, more people at the bottom of the pyramid, and a lower level of home ownership.”
Service. Among those demographic characteristics, Swain added, there is less formal employment, and a lower level of usage of credit cards. That translates to a greater uptake in prepaid contracts. In contrast to ongoing contracts related to fixed broadband, prepaid contracts represent a big boon to lower socioeconomic populations.
On the subscriber side, they don’t have to wait for a telecom operator to install a fixed broadband line to their residence. On the operator side, they’re likely to boost offers for mobile wireless service through prepaid phones. “It costs telecom companies a lot to install broadband, which is why they want an ongoing contract” to support those costs, he says.
Rural Coverage. Operators can’t justify the cost of installing fixed broadband in rural areas. “Fixed broadband won’t work because subscriber density is too low,” says Swain. He sees the solution as increased government support. “There’s a strong impetus by governments to increase broadband penetration in rural areas. We’re seeing incentives to deal with what’s considered most difficult part of rolling out broadband into the hinterlands,” he adds.
Some governments are offering spectrum to operators at reduced rates, with the caveat that they must install better backhaul in rural areas in order to ultimately support mobile broadband.
There are still challenges to overcome. Much of what subscribers are consuming on mobile devices, no matter what their demographic category, is video – sports highlights, movie previews, YouTube clips. Video still isn’t highly viable over mobile broadband.
But global demographic trends point to one safe bet: telecom service providers are going to boost their efforts to serve mobile broadband demand among emerging markets.