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Mobile broadband boom brings dilemmas for UK cellcos

Mobile broadband is poised on the edge of mass consumer adoption, with the trend led by the UK, but for operators, this will come at the cost of lower margins and vanishing customer loyalty.

Mobile broadband is poised on the edge of mass consumer adoption, with the trend led by the UK, but for operators, this will come at the cost of lower margins and vanishing customer loyalty.

These are the conclusions from two very different new studies, by consultancy Logica and by comparison site Top 10 Broadband. The latter, as reported by vnunet.com, sees a rapid rise in demand for flexible terms for notebook and dongle services, based on short contracts or no commitments at all. This pattern has already been seen in home broadband and is now spreading to mobile. By year end, one-month mobile broadband deals will account for 20% of all sales in this sector in the UK, and other countries will follow suit, says the survey.

“One-month mobile broadband deals are soaring in popularity during the current recession, as wary users shun long term broadband contracts in favour of ‘light’ commitments,” said Jessica McArdle, marketing manager at Top 10 Broadband. “Last year, mobile broadband changed the UK broadband industry forever. Now, with new one-month deals, mobile broadband is continuing to cause game changing shockwaves.” O2 has led the way, and is currently the only UK cellco to offer short term deals, with a one-month option for £29.35 ($42) upfront for the modem or dongle, and then download rates of £5 ($7) per Gbyte, significantly less than pay as you go rates, which are offered by most operators and were pioneered by 3.

According to Logica, such trends will put an end to the subscriber loyalty (or lock-in) on which many cellco models still rely. Advertising revenue will be increasingly important to redress this balance, but operators are handling it badly. Logica found, in a survey of UK consumers, that operators failed to target almost half of them with the right marketing messages. It also found that 40% used the mobile internet ‘heavily’, but 42% found mobile advertising ‘relevant to no-one’. Also, 77% say they would switch operator if dissatisfied with their service. About half of the respondents said their mobile usage patterns would be unaffected by the recession.

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