Virgin sets off mobile broadband as new prepaid battleground

Virgin Mobile USA (NYSE: VM) today introduced a new wireless broadband service over the Sprint (NYSE:S) 3G EV-DO network. Dubbed Broadband2Go, the service offers pay-as-you-go cards with no contracts, subscriptions, roaming charges or activation fees. Virgin is the first national contract-less carrier to make this move, but it could quickly become the next frontier in the increasingly competitive prepaid market.

The service will mirror Virgin’s prepaid voice calling plans in how it approaches overages and expiration dates, according to a Virgin Mobile spokeswoman. Consumers can purchase cards ranging from 100 megabytes to 1 gigabyte. They all must be used within 30 days, except for the $10 100-MB card, which only works for 10 days. For a $20 Top-Up card, consumers can purchase 250 MB, or the equivalent of roughly 12 hours of Web browsing for that 30-day window. Cards with 600 MB will cost $40, and those with 1 GB retail for $60. Rather than being charged per megabyte of overage, consumers can monitor their accounts online and use their credit or debit card or Virgin’s Top-Up cards to add megabytes when needed.

“It’s probably good for them in that it’s yet another product that people don’t expect,” said Bill Ho, research director of wireless services at Current Analysis. “People expect Virgin to be voice-only. It changes the playing field to say we offer prepaid broadband, something that is empty in the national scheme of things.”

The only operators who offer true contract-less mobile broadband service are Clearwire (NASDAQ:CLWR) and Leap Wireless, but their coverage is limited. Clearwire has launched WiMAX in only two markets. Leap Wireless’ Cricket (NASDAQ:LEAP) also offers a $40 plan, but that service, while growing, is still a regional play. When Virgin enters this space this month, Ho said he expects them to attract a fair amount of subscribers, as Cricket has. T-Mobile also has the spectrum to offer mobile broadband, but Sprint’s other value arm Boost Mobile won’t likely enter the market since it is on iDEN and Sprint has already given that wholesale relationship to Virgin, Ho said.

“From AT&T and Verizon, there could be a possibility [for prepaid mobile broadband] if it gets sticky,” he said. “Verizon already has postpaid with netbooks, so it remains to be seen if they don’t encroach on postpaid revenue. Like in voice, AT&T and Verizon balance that line between encroaching on postpaid, which is more profitable.”
Virgin’s plans are aimed at casual broadband users or travelers looking for connectivity without a contract. Virgin’s spokeswoman said it’s targeted at anyone looking to bridge the gap between their home and office, not the consumer who needs consistent Internet access. She identified traveling small business owners, truckers, vacationing families, freelancers and students as potential consumers. “It’s for people out and about and either have a smartphone but need a little more functionality in terms of having a full keyboard for writing a memo, or they don’t have a smartphone,” she said. Heavy broadband users, however, would be likely to consistently reach the megabyte limit.

The Broadband2Go device was developed by Novatel Wireless (NASDAQ:NVTL), maker of intelligent mobile hotspots for carriers including Verizon Wireless (NYSE:VZ) and Sprint. The pocket-sized device is the world’s smallest EV-DO Rev. A modem, according to the companies. The device will retail exclusively at Best Buy Mobile for $149.99 beginning in June.

Sprint, still a major shareholder of the mobile virtual network operator (MVNO), sells its broadband cards with 5 GB at $60 per month. On Monday, Sprint said it would also offer enterprises a 500 MB 3G broadband access plan for $40, more than doubling the data cap offered by VZW and AT&T’s similarly priced plans. VZW has approached the market by easing up data caps, increasing its $40 plan to 250 MB and lowering overage charges. At $60, Virgin’s 1 GB plan might not encroach on these postpaid plans, but Virgin’s $40 600 MB plan could give them a run for their money, Ho said.

Boost and Virgin represent a one-two punch for [Sprint] against MetroPCS and Leap on the voice side because of the $50 plans and now the mobile broadband side to compete against Leap and give them an alternative from the perspective of nationwide capability versus regional capability,” Ho said. “At the same time, Virgin represents an alternative to postpaid.”

The small card includes an integrated microSD slot for storing and transporting up to 16 GB of files, photos or videos on a removable SD storage card, which consumers have the option of purchasing. The device works with any laptop, table PC or desktop running Windows or XP operating systems and equipped with a Type-A USB port.