Page Impressions Ltd Blogcetera: October 2008

Monday, October 06, 2008

The Mobile Dongle is becoming mainstream

The fastest growing segment broadband internet access in the UK is the mobile dongle.  Almost overnight - well the last 12 months - the dongle has become the preferred method of access for new internet users. 

The term dongle has traditionally referred to any USB device; however, with the rise of mobile broadband it has become synonymous with mobile broadband modems.

Mobile broadband dongles are portable modems that plug into the USB port of your laptop or computer providing internet access via 3G signalling. Dongles are popular with business and personal users alike as they offer greater flexibility and increase communication opportunities.

All dongles come with “plug and play” technology so there’s no need to install any software; you just insert your mobile broadband sim card and plug in your dongle. The software will automatically be loaded onto your laptop and you’ll be able to connect to the internet within minutes.  The recent introduction of Pre Pay PAYG (Pay as you go) dongles from the leading mobile players has resulted in accelerating their adoption with price having traditionally been the main barrier to the roll-out of the mobile internet amongst personal users.  Pre-pay dongle sales have jumped from 10% to 25% of the market in just two months.

The market leader in the UK with 40% of the market is Mobile player 3 who were the first to enter the market and introduce the PAYG option.  T-Mobile have established themselves as an innovator in the traditional mobile phone tariffs and have been quick to grow their position in the UK to take 24% of the market.  Vodafone having largely missed out on the Internet market in the UK, have been quick to adopt the dongle as their preferred approach and have been the fastest growing player in the UK achieving 21% of the market today.

O2 has only a very small share of the market with 4% market share, but has largely focused its attention to growing its fast 24M Broadband fixed line service based on their acquisition of Be last year.

3G broadband modem has increased in popularity by an 18 per cent growth rate every month since February 2008. If this trend continues then around 300,000 mobile broadband devices would have been sold by December this year.  This suggests a mobile dongle market somewhere in the region of 500,000 users across the five operators offering the dongle service.

Whilst the mobile dongle has a long way to go to challenge the traditional fixed line broadband access with an installed base of in excess of 16 million lines in the UK, the pre-paid PAYG dongle could well become the de facto gadget for students and users on the move.

UK ISP Numbers in October 2008

Here is an update of the UK ISP market covering DSL and Cable Access market in the UK. I have used ITU published data for Broadband usage numbers and Neilson Ratings to get an accurate picture as well all the reports and disclosures for each of the ISPs shown below. I believe these figures represent a reasonably accurate representation of the genuine adoption of broadband either via DSL or Cable. Broadband connections included in this data cover download speeds equal to or faster than 256kbit/s. Dial-up continues to collapse and very few of the ISPs offer any user numbers.

ISP Total % of UK Accts.
BT 4,500,000 26.64%
Virgin Media 3,836,000 22.71%
CPW (inc AOL) 2,800,000 16.57%
Tiscali UK 1,838,000 10.88%
Sky 1,628,000 9.64%
Orange 1,063,000 6.29%
Royal Mail 500,000 2.96%
Kingston 195,255 1.16%
O2 (Be)    194,220 1.15%
Thus 126,000 0.75%
Entanet 92,000 0.54% UK 72,000 0.43%
Breathe 15,000 0.09%
Supanet 6,000 0.04%
Others 28,000 0.17%
Total 16,893,475 100.00%

There continues to be consolidation of the UK market over the past year. As I predicted last year C&W have made a move on Thus.  This is likely to close in thenext few weeks.   One imagines that Kingston would make a good fit for C&W or Sky as they make their play to achieve 3 million broadband users.  The sale of Tiscali seems to have hit the buffers just at the moment.  As CPW has been excluded from bidding by Tiscali, the most likely buyer is either Sky or Vodafone.  Vodafone has made a number of major ISP acquisitions in Europe including various Tele2 assets and Arcor in Germany.  A move into the UK might be a long overdue play.  

One area that is frequently overlooked in the UK is the growth of the “Internet Dongle” market.  T-Mobile, 3 and Vodafone are all significant players in this growing market, but as yet numbers are hard to come by.  

Perhaps one the most interesting challenges will be for BT to maintain their top position over the coming year.  With the imminent roll out of the 21st Century Network (21CN), BT Retail is hoping to be able to launch a range of additional services to grow their user base.  However, if they persist with serves such as Phorm, they may well risk this pre-eminent position by encouraging the BT Wholesale business to syphon off business through their support of major VISP operators such as Royal Mail, who in the last year came from nowhere to grab almost 3% of the UK Broadband market.