3G and for-pay Wi-Fi services face tough sell

February 13, 2006

Lack of perceived value by consumers for 3G bandwidth indicates continued downward pressure on cellular data pricing, and will also dampen prospects for for-pay Wi-Fi service providers and aggregators, reports In-Stat. Nevertheless, because consumer enthusiasm for free Wi-Fi is ample, Wi-Fi hotspot operators do have an opportunity to exploit the technology's low barriers to entry and its horizontal business model.

"Both cellular and Wi-Fi are currently serving mobile data users," said Allyn Hall, In-Stat analyst. "However, so far, neither service has found the sweet spot, the perfect balance of speed, coverage and price."

A recent report by In-Stat found the following:

-- Among Wi-Fi users, more than 60% sometimes or always plan their travel with Wi-Fi availability as a consideration.

-- 1Q04-1Q05 year-on-year Wi-Fi revenue and shipment growth was strong, but quarter-on-quarter growth figures show an overall slowdown.

-- According to an In-Stat consumer survey, laptop/notebook computers are used for mobile data almost twice as often as cell phones.

-- More than one-third of Wi-Fi users use only free Wi-Fi connections, and 18.9% use Wi-Fi only at home or at work. Nearly two-thirds (61.7%), however, also said they use commercial hotspots.

The report, "3G and Wi-Fi: In Search of the Sweet Spot", covers the market for wireless data services. It features the results of a proprietary consumer survey covering their use of and preferences regarding 3G and Wi-Fi data services. It also includes data concerning consumers' willingness to pay for these services.