Mobile broadband’s double-edged sword

Demand for bandwidth intensive features on mobile handsets is only increasing as consumers are beginning to realize the potential of a mobile Internet presence. ABI Research predicts that worldwide shipments of mobile Internet devices will rise from under 3.5 million this year to nearly 90 million by 2012. It is great news for those service providers, including location-based services and mobile social networking companies looking to capitalize on the trend. It is potentially precarious news, however, for the mobile carriers faced with a bandwidth crunch.

Yankee Group’s Vince Vittore today posed the question, are we are nearing the end of all-you-can-eat Internet data pricing? From the mobile point of view, wireless carriers have different varied opinions. On the one side, AT&T has stuck with an unlimited data-pricing plan, despite rumors of an impending data cap for AT&T’s mobile Web users. Verizon, historically one of the most restrictive U.S. carriers, on the other hand, has again suggested that wireless data caps are here to stay.

Among rumors that an announcement made today would include the release of the 5-gigabyte data cap, mobile Web users were largely disappointed when the cap was kept in place. While both AT&T and Verizon today announced an all-you-can-talk calling plan, Verizon said its broadband access data plan would include either 50 megabytes of downloaded data per month or 5 gigabytes per month, at $40 or $60, respectively. The wireless carrier said the new data plan options allow more customers to experience the freedom of mobile broadband, yet the cap remains in tact. Verizon also said it has invested $44 billion since it was formed, averaging about $5.5 billion each year, to increase the coverage and capacity of its national network, as well as to add new services.

Mobile broadband use has been growing, as more mobile users are getting online. Multimedia handsets with bigger screens and more intuitive user interfaces like the iPhone have made the browsing experience more compelling for consumers on the go. Telecom analyst Jeff Kagan predicted that this number will continue to grow primarily due to more TV channels becoming available over mobile and the increasing ability to download movies.

With YouTube now fully mobile (although still working out the kinks), anyone can access any video from its mobile Web site, m.youtube.com or a downloadable Java client in some handsets. Furthermore, more fixed-Internet phenomena including social networking sites, peer-to-peer sharing and games are increasingly among the bandwidth-intensive applications going mobile.

With the amount of bandwidth-intensive mobile features and increasing prevalence of Web-enabled handsets, carriers are left with the decision: offer capped data plans at a price break, like Verizon, or continue to offer unlimited data plans, like AT&T, with the risk exceeding bandwidth capacities. Data caps have the potential to discourage mobile Web usage, even if a user doesn’t reach 5GB each month. Carriers need to continue to make the investment in bandwidth for mobile Internet or downplay their marketing campaigns that promote Web usage and Internet features. Bandwidth-intensive features such as social networking, location-based services and video are only going to increase in popularity. Mobile carriers have to keep up one way or another.

E-mail me at sreedy@telephonyonline.com.