ISPs lose out as mobile internet users increase

More Internet users are opting for mobile than fixed broadband, a trend that is set to increase competition and squeeze the earnings of traditional service providers (ISPs).

Internet users on the mobile platform or those using modems and data cards, overtook fixed internet subscribers by 100,000 to stand at 3.8 million subscribers in Africa in the fourth quarter of last year, according to International Telecommunication Union (ITU) figures.

In this quarter, ITU estimates mobile internet subscribers on the continent has hit 4.2 million compared to 3.9 million fixed internet users.

Analysts say the performance of the local internet market mirrors that of the continent, with mobile internet subscribers standing at about 1.8 million compared to a total of about 10,000 dial-up and leased line data subscribers, according to June 2009 data from Communications Commission of Kenya.

“This euphoria is mainly due to the flexibility of the service with both prepaid and postpaid offerings marketed by operators as well as its user-friendly aspects -mobility, top-up to name a few,” ITU says, adding that mobile broadband adoption grows at twice the pace of fixed broadband with an average net additions of over 400,000 new subscribers on a quarterly basis.

Internet consumption has been the domain of large organisations but recent infrastructure improvements, including the landing of fibre optic cables, coupled with rising competition in the hitherto benign internet business has helped push uptake in homes and small businesses.

With revenue from voice services falling, mobile operators pioneered internet access through modems, offering internet on the go to consumers who pay for the services in small bundles akin to airtime top up or at the end of the month.

Competition among mobile firms in the past several months has pushed down the price of data bundles, boosting the appeal of the services to individual consumers.

Faster and bigger

Analysts say the fact that mobile firms are shareholders in the fibre-optic cables gives them access to cheaper, faster and bigger bandwidth which they are able to sell on several platforms at competitive prices.

“We will differentiate ourselves by offering first-class managed services (IT outsourcing) and converged solutions from fixed and mobile data services. This gives us a very strong pitch and a peerless service menu in this market,” Safaricom CEO, Michael Joseph, told Business Daily in an earlier interview.

While the global trend plays into the strategy of mobile operators who are positioning themselves as integrated communications providers, offering mobile telephony services, mobile, and fixed broadband, is set to pile pressure on players who have traditionally focused on corporate clients, slowing down their entry into the new growth opportunity.

As part of stimulating this market, mobile service providers have been offering laptops at subsidised prices along with modems tied to respective networks.

“While integrated operators are perhaps in the best position to exploit a smart broadband service, we believe that any operator embracing smart broadband will deliver greater value to customers and distance itself from the competition,” says Cisco, a leading technology firm in its analysis of the trend.