Mobile broadband business models: free dongles as retention tools for voice contracts

The comment from a reader called Thomas on this post of mine tallies with other anecdotes I'd heard and seen.

Some operators in the UK are now heavily discounting 3G USB dongles and monthly contracts - or after rebates, actually giving them away to existing voice/phone customers. In other words, they're using them as customer retention tools to reduce churn. Buy one contract, get one free.

He reports on Vodafone giving him a free HSUPA dongle, and discounted £7.50 / month connectivity, offset with a £75 bill credit. I also regularly see adverts in the window of my local 3 UK shop offering half-price dongles to phone customers, and I guess some hard negotiation could yield some sort of extra rebate as well.

My view is that not only are these type of deals commoditising mobile broadband pricing still further, they make some of the other business models look really inflexible and old. I think that the "traditional" 12/18/24 month standalone monthly contract for mobile broadband will become a minority option - whether it's for a dongle or an embedded-3G PC.

At the moment, I estimate that these traditional post-paid monthly billing models account for about 80% of all mobile broadband subscriptions. But by the end of 2010, that will have fallen to 50%. And further out beyond that, I expect to see various new options, like 3rd-party sponsored "free mobile broadband", to reduce the monthly-bill segment to below 20% of users by 2014.

Anyone who is working on basic "per month" revenue models for their mobile broadband services needs to rethink them. The term "subscriber" will swiftly become meaningless, as most 3G users won't have classical subscriptions for their PC connectivity.

My new Disruptive Analysis report, Mobile Broadband Computing, has full forecasts for these different business models, broken out by 3G vs. WiMAX, and for dongles, embedded notebooks and MIDs. It is published this week. Please email information AT disruptive-analysis DOT com for more details.