Consumers are falling out of love with mobile broadband, ditching their "dongles" and returning to fixed-line services. Amid dissatisfaction with the speed and limited coverage of wireless internet access, they are also switching to a pre-pay package instead of a long-term contract.
The rise of smartphones, such as the Apple iPhone that can access the web and send emails, has also helped to cut short the mobile dongle boom, while many business travellers - a core market for sellers of mobile broadband services - are finding that most hotels, conference centres, trains and airports offer much faster Wi-Fi access which they can use instead.
Carphone Warehouse said that its TalkTalk internet service provider business added a much better than expected 77,000 new fixed-line broadband customers in the three months to the end of September. Many analysts had expected the recession to bring residential broadband growth to a stuttering halt, but its second quarter performance means that TalkTalk, which this year snapped up rival Tiscali to become the UK's largest residential ISP, has hit its annual growth target in only six months.
Chief executive Charles Dunstone said the fixed-line broadband market is growing and fears that mobile broadband would tempt people to substitute their fixed line for a mobile phone and dongle have been over-played, not least because mobile broadband speeds are nothing like as fast: "We get a sense that the mobile broadband thing has peaked. We are seeing some of those people begin to realise that the bandwidth you get on mobile is so much less than you get on a fixed line.
"Mobile broadband is increasingly a supplementary rather than a substitutional thing, and an increasing proportion of Carphone sales are of pre-pay dongles. I carry one around with me and am also surprised now how much free Wi-Fi is available: on the train, a lot of hotels have it, bars etc. I'm using Wi-Fi more when I am out and about than mobile broadband."
Mobile broadband sales have ballooned over the past two years, driven by a fierce price war between the five UK networks which saw prices plunge from more than £30 a month in 2007 to as low as £10. But customers have become increasingly dissatisfied with speed and coverage.
In this summer's communications market report, Ofcom said satisfaction levels are lower for mobile than fixed broadband. Meanwhile, as the fixed-line ISPs have increased their headline speeds, dissatisfaction seems to have increased. This month independent information website Thinkbroadband.com ran its own research showing that 76% of mobile broadband users were unhappy with the speeds they were receiving, and 60% felt mobile broadband coverage was poor. Only 3% thought mobile broadband coverage was "excellent".
For people such as students who do not want to be tied to an annual contract, mobile broadband is being used as a supplement to fixed-line, which is available in locations such as work or college, so are opting for a pre-pay service that only charges them for the time they spend online. Last month, Tesco Mobile said pay-as-you-go mobile broadband sales rose 71% as students started university. But sales of mobile broadband contracts are on the wane, a worry for the networks as contract customers are more lucrative and their usage easier to forecast.
John Petter, managing director of BT's Consumer division, maintains that mobile broadband was never a replacement for fixed-line: "We certainly believe there's a role for mobile broadband. But we've always marketed our mobile broadband as a way of taking your broadband out of the home, rather than as a substitute for fixed broadband. For a stable and reliable broadband service, we believe fixed is best."
Virgin Media has seen a steady increase in sales of its flexible mobile broadband service, which requires a minimum two- month contract, but a spokeswoman added: "We've always said that mobile broadband is complementary to fixed line not a replacement."
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