Consumers want 3G modems, but at half-price

IDG News Service - Nearly half of U.S. consumers are interested in cellular modems, but only at half the price that service providers are charging for plans, according to survey results announced today by ABI Research.

One reason those consumers don't want to pay the going rate for broadband on the go is that they are already paying for high-speed Internet access at home, ABI said. Another report out today, from Leichtman Research Group, suggested the market for those fixed-line services is nearing saturation.

Cellular modems have been available for several years in the form of PC Card or USB add-ons for laptops and increasingly are available built into netbooks, e-book readers, navigation devices and other products. The cost of the modems themselves is often subsidized, but in most cases, service still costs about $60 per month.

ABI surveyed 1,000 consumers and found that 47% don't have a cellular modem and are interested in using one, but only if the service cost $30 per month or less. Some said they would be willing to pay less than $10 per month.

Mobile operators traditionally have aimed cellular modems primarily at business users' laptops, but more recently they have moved toward a wider range of devices with broader appeal. AT&T and Verizon Wireless both offer 3G-connected netbooks at subsidized prices with a two-year commitment. AT&T is selling the Acer Aspire netbook for $99 at the consumer-focused RadioShack electronics chain, and Verizon sells the HP Mini 1151NR at its own stores and online for $199.99.

The growing popularity of data services on smartphones, such as the iPhone and numerous BlackBerry models, suggests expanding the range of devices that can use fast mobile data networks is a good idea. But the data plans offered with smartphones typically are bundled with voice plans and cost less than the pure data services sold with cellular modems and pre-configured computers. For example, AT&T's monthly data plan for the iPhone costs $30 per month in addition to a required voice plan. An AT&T data plan for a cellular modem, with a 5GB monthly usage cap, costs $60 per month. A service with a 200MB cap sells for $40 per month.

One service provider, Clearwire, is already offering mobile data service for about $30 per month (with a usage cap of 2GB) and what it calls "unlimited" mobile data for $40. But its WiMax network is only commercially available in four major cities, with 10 smaller markets going live next month. To get service beyond those areas, traveling users need a dual-mode 3G/WiMax modem and an $80-per-month service.

Leichtman Research reported that the major U.S. carriers and cable operators gained only 634,000 net new subscribers in the second quarter of this year, the lowest number since the company began tracking broadband growth eight years ago. Together, the service providers only added 71% as many new subscribers as they did in the second quarter of 2008.

Part of this drop may have been caused by the recession, but mostly it reflects the increasing saturation of the U.S. broadband market, said Bruce Leichtman, principal analyst at Leichtman Research. The second quarter historically has been the weakest of the year for broadband additions, but comparative results from a year earlier have been similar in other recent quarters, he said.

"That's about the trend we're at, in overall net adds," Leichtman said.

Only about two-thirds of U.S. households have high-speed Internet access, Leichtman said, even though his company's phone surveys show only that 3% of Americans say they can't get it. One reason home broadband penetration may be topping out at such a seemingly low percentage is that 86% of U.S. households have a computer, Leichtman said.