September 15, 2008, 2:19 PM — Fast cellular modems for laptops are flying out the door as business users hit the road and tire of looking for wifi hotspots, an ABI Research analyst said Friday.
Unit sales of the modems grew about 300 percent from 2006 to 2007, and annual revenue should surpass US$22 billion by 2013, according to analyst Dan Shey, who wrote a report on the trend released Friday. That's up from $3 billion in 2007.
"Growth has been phenomenal," Shey said in an interview. Falling prices for devices and services is one factor, he noted. The hottest type of laptop modem for 3G (third-generation) and 3.5G connectivity is the USB (Universal Serial Bus) dongle, Shey said. Internal Mini-PCI modems as well as cards that slide into PC Card slots are also available.
There is still pent-up demand for such modems, largely for the convenience of being able to use them across a broad coverage area, Shey said. The availability of fast cellular networks has been steadily growing, and in many cases they can deliver multimegabit speeds that are comparable to home broadband. But it is still primarily business users who snap them up, because of the cost of data plans that go with them, he said. For example, in the U.S., Sprint Nextel, Verizon Wireless and AT&T Mobility each offer monthly plans costing $59.99 per month for 5G bytes of data usage.
However, prices for laptop modems have gone down: Verizon offers a USB dongle for $29.99 with a two-year contract. The major PC makers also sell laptops with 3G modems built in. Some carriers, such as Vodafone in Europe, are also planning to resell 3G-equipped laptops themselves.
Eventually, the growing availability of fast cellular networks and modems will eat into the popularity of Wi-Fi hotspots, Shey predicted. Mobile network consolidator iPass already offers access to Sprint's 3G data network along with admission to many Wi-Fi hotspots.
Some carriers are exploring the alternative of 3G phones "tethered" to laptops via USB or Bluetooth. For example, Sprint recently cut its rates for tethered access. But that approach will only go so far, Shey believes. Tethering drains the handset's battery and may cause customers to use phone-based services less often, which lowers the carrier's incentive to push that approach, he said.
One downside to a PC-based modem is the concern of getting locked in to a certain carrier for the life of the laptop. But that worry is reduced now, according to Shey. Multiple-mode radios, namely the Qualcomm Gobi chipset now beginning to appear in notebooks from Hewlett-Packard and others, give users the freedom to switch from one carrier's network to another. In addition to investment protection, the flexibility allows users to get connected in other countries with different types of networks, such as when U.S.-based CDMA (Code-Division Multiple Access) users travel to GSM (Global System for Mobile Communication) markets in Europe or Asia.