Will the iPad be a revenue driver or bandwidth killer for mobile operators?

Disclaimer: This author has no business relationship with Pyramid Research or parent company Light Reading.

Introduction:

Mobile operators will be among the biggest beneficiaries of the Apple iPad's success, thanks to the iPad's use of mobile data services to access applications and digital content, according to a new report from Pyramid Research (www.pyr.com), the telecom research arm of the Light Reading Communications  (www.lightreading.com).

Pyramid believes the iPad has created a new mass market for tablet devices. "Early adoption of the iPad has been promising, and device competitors will release products to fit different price points and feature requirements," says Jan ten Sythoff, Analyst at Large and author of the report. "Content is already widely available in a number of forms, including e-books and iPhone applications (both iPhone-specific and iPad-specific), while development of new content categories shows much promise.  These factors will drive demand for data access, and the iPad along with similar devices provide a compelling new opportunity for mobile operators to increase data subscriptions and hence revenues," says Sythoff. Mobile operators are already lining up to sell mobile data packages for the iPad. "The first will be AT&T, which will enjoy device exclusivity in the U.S. market, as it has with the iPhone, while Hutchison 3G Austria announced it will subsidize the device on a two-year contract, charging €29.90 for 5GB per month; it will include a 3G/WiFi modem to allow iPads with only WiFi built in to connect to the mobile network."

Apple launched the Wi-Fi-only versions of the iPad in the US market on April 3. It is available with 16GB, 32GB or 64GB of memory; the company will launch the dual-mode Wi-Fi/3G versions toward the end of May, in partnership with AT&T.   Electronic readers (e-readers) and tablet computers have long been talked about, and several have been launched, with mixed success. Initial announcements suggest that adoption of the iPad will be strong, with launches outside the US delayed by a month because of unexpected demand. Because the iPad is compatible with the iPhone, a wide range of applications were readily available from the start, including a number of iPad-specific applications. Books were available through the iBookstore from many of the major publishers, including Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster.

This Pyramid report analyzes the impact of the iPad primarily on mobile operators, but also on device vendors, publishers and developers. It summarizes the impact the device has already had on mobile communications providers and looks into possible future developments. The report looks at the impact on the device industry, comparing the iPad against other e-reader products, and expected competitor reactions. The impact on the book publishing industry is examined, comparing it to the impact Apple made on the music industry with the launch of the iPod. Pyramid also looks at the impact of the iPAD on other content industries, and the reaction of game developers, online video service providers and newspaper publishers, and how whole new content categories are already emerging.

Analysis:

What impact will the iPad have, given what Apple has been able to do with its revolutionary iPhone device?

Pyramid believes that this new device category will produce a wide range of competing products addressing different requirements, while developers and publishers are faced with an attractive new opportunity for software and content. As a result, we believe that the iPad along with similar devices provide a compelling new opportunity for mobile operators to increase data subscriptions and hence revenues.

Here are a few of their key findings:

1. Product shortages, broad content availability and strong operator interest suggest the iPad will enjoy strong success.

2. As a new device category, the tablet is an attractive opportunity for mobile operators to drive subscriptions and revenue. They can also look to leverage their own application stores by selling their own devices, or partner with other device vendors and gain a portion of the content revenue.

3. Differences between the book and music industries suggest that the iPad and similar devices will not have the same revolutionary impact that the iPod did on the music industry.

4. Content developers and publishers are presented with a new opportunity to distribute content and attract advertisers. Moreover, the iPad and follow-on devices will spawn a wave of content innovation, combining books with games, interactivity, video -and animations.


But we find it odd that there is no mention of the iPads potential to overload 3G networks via massive downloads of books, video and multi-media content.  When the iPhone was announced in January, parent company Light Reading had this to say:

Will the Apple iPad Crush 3G Networks?

The new Apple Inc. (Nasdaq: AAPL) iPad has the potential to be even more of a bandwidth hog than the iPhone, so can 3G networks cope with a new data onslaught? (See Scenes From the Apple iPad Launch.)

The iPhone maker unveiled its latest touchscreen creation in San Francisco Wednesday. The keyboard-free device looks like an overgrown iPod Touch and runs a reworked version of the iPhone operating system. The iPad supports both 3G and WiFi connections.

An unlocked 3G-capable tablet won't be cheap: The top-of-the-line 64GB model will run you $829 with 3G onboard; the 32GB model comes in at $100 less. Apple will charge $130 extra for 3G; otherwise, you buy it as a WiFi-only device, starting at $499.

Apple CEO Steve Jobs described the devices as "unlocked," but AT&T Inc. (NYSE: T) is so far the only announced service provider. Apple says that an unlimited data plan will run users $30 a month, while $15 will buy 250MB of downloads.

A network hog in the making?
Jobs has already talked up all the wonderful multimedia activities that will be enabled by this "third category" of devices, such as watching movies and playing online games. As such, Heavy Reading senior analyst Gabriel Brown believes that the amount of data that the iPad can pull down from a carrier network will be "about the same as a netbook," rather than a smartphone.

A single high-end phone like the iPhone generates more data traffic than 30 basic-feature cellphones, according to a study Cisco put out in 2009, while a wireless-enabled laptop generates more data traffic than 450 basic-feature cellphones. (See Cisco: Video to Drive Mobile Data Explosion.)

AT&T Inc. (NYSE: T) has already admitted that it has had trouble supporting all the data traffic generated by iPhone users in NYC and San Francisco. U.K.-based mmO2 plc (NYSE/London: OOM) also said recently that iPhone users had brought down its network in London.

What could a popular device that generates significantly more traffic than an iPhone do to carrier's network? Independent technology analyst Carmi Levy believes that the iPhone episodes illustrate that carriers will have up to bolster network capacity over time to support more powerful devices.

"If the iPhone experience is anything to go by — and we have every reason to believe that it is — then wildly popular, data-rich mobile devices will become serious drains on network performance only after they've hit critical mass in the marketplace," he tells Unstrung.

"But failure to plan in advance for this new reality of high speed wireless access could permanently damage a carrier's brand in much the same way AT&T has suffered because of its iPhone-related 3G network slowdowns and outages."

Levy says the iPad could take up to two years to hit that critical mass. The device, however, is not the only high-capacity broadband device hitting the market now. Along with the iPhone, Google (Nasdaq: GOOG) Nexus, and Nokia Corp. (NYSE: NOK) N900, there are a slew of new wireless-enabled notebooks and netbooks competing for bandwidth.

http://www.lightreading.com/document.asp?doc_id=187187

We'll leave it to the reader to sort out whether iPad can be a boon to mobile operators if the huge traffic load generated has the potential to shut down their networks.  Let us know what you think by commenting below.

Purchase information: 

Apple's iPad: No Revolution, but a Potential Revenue Driver for Mobile Operators  analyses the impact of the iPad primarily on mobile operators, but also on device vendors, publishers, and developers. The 12-page report summarizes the impact the device has already had on mobile communications providers and looks into possible future developments. : This Telecom Insider report is priced at $595 and can be purchased online (http://www.pyramidresearch.com) or through Jennifer Baker via email at jbaker@pyr.com or telephone at +1 617 871 1910. You may also contact: sales@pyr.com or info@pyr.com.

0 thoughts on “Will the iPad be a revenue driver or bandwidth killer for mobile operators?

  1. Does anyone see a contradiction between Pyramid Research conclusion that iPad will be a mobile operator revenue driver vs parent company Light Reading's article on iPad being a bandwidth hog?

  2. Is the Apple iPad 3G worth the sticker shock?
    Interested in picking up an Apple iPad 3G? Here are the pertinent stats: Like the regular old iPad, the iPad 3G is compatible with Wi-Fi, but also works with a 3G signal, so you'll be able to surf the web in the airport, or the street, or the beach, or wherever you can get a cellphone signal. The cheapest 3G iPad costs $629; that'll get you 16GB of space. The 32GB iPad 3G costs $729, and the 64GB model sells for a whopping $829.
    Obviously with the 64GB iPad 3G you're moving into laptop/desktop territory in terms of price – and we can't imagine too many folks will go with that option, especially considering that you'll also need to buy a data plan to get your Apple iPad 3G up and running. The data plan is only available through AT&T – a network regularly skewered by many members of the media, including recently Jon Stewart – and comes in at two price points.
    There's a $15 per-month plan, which puts the download cap at a relatively hefty 250MB of data. Or you can go whole hog, as it were, and buy unlimited data for $30 a month. Again, this stuff could add up pretty quickly. For instance, we already pay about a hundred bucks a month for our iPhone voice and data plan. If we bought an Apple iPad 3G with an unlimited data plan we'd be forking over upwards of $1,500 a year to AT&T.
    Talk us down. Are we getting it wrong? Is the Apple iPad 3G actually a better choice than the Apple iPad with regular old Wi-Fi? Let us know in the comments.
    http://www.csmonitor.com/Innovation/Horizons/2010/0430/Is-the-Apple-iPad-3G-worth-the-sticker-shock

  3. Queues form for the iPad 3G
    Apple had said it would make the 3G version of the iPad — which costs $130 more that the Wi-Fi-only model — before the end of April, and it seemed determined to make good its promise with at least seven hours to spare.
    It wasn't clear ahead of time how many iPad would be available on Friday. Supplies were sufficiently limited that according to Apple's online store, units ordered Friday would ship "by May 7."
    http://tech.fortune.cnn.com/2010/04/30/queues-form-for-the-ipad-3g/
     

  4. Quiet build up for 3G-enabled iPads
    As previously announced, the Wi-Fi + 3G models will cost $629 (16 GB), $729 (32 GB)and $829 (64 GB), respectively, compared to $499, $599 and $699 for same-capacity models without 3G. AT&T's is charging $14.99 a month for 250 megabytes of monthly data for the iPad, or $29.99 for unlimited data. No contract is required, so customers can come and go as they please.
    Be aware of a few downsides, compared to the Wi-Fi + 3G model. I'm paying Verizon Wireless about $60 a month for 5GB of data, double the AT&T tab for unlimited data. And while Apple says you'll get about 9 hours of surfing the Web on the 3G iPad, the Mi-Fi battery itself in my experience generally dies out in roughly half that time.
    http://content.usatoday.com/communities/technologylive/post/2010/04/quiet-build-up-for-ipad–3g/1
     

  5. I think most iPad users will eschew the 3G version and use the WiFi only product.  That product can connect via a personal WiFi router (e.g. MiFi) to any 3G network supported.  The Sprint MiFi can also connect to their "4G" mobile wimax network

  6. Very timely article, Alan.  Time will tell whether the iPad becomes the iFad and how important the convenience of connectivity (3G) versus the lower cost of WiFi.  It definitely has a low hurdle to use, as evidenced by an elderly couple I saw on a flight this week; they were playing board games on the iPad and there appeared to be no user interface issues.  It was as easy to use as a board game.  It reminded me of the Surface Computer that Bill Gates talked about in this video interview.  

    http://www.viodi.tv/2007/06/04/surface/

    Unfortunately for him, Steve Jobs executed on this vision.  

  7. There is one huge issue here that hasn't got a lot of publicity:  Mobile video on the iPAD.  Steve Jobs has clearly stated that Adobe's Flash would not be allowed and that Apple is using somehting called HTML 5 for video.  Many say that technology is not ready for prime time. 
    In general, the video players that work well for stationary PCs will not work for mobile devices.  So the question of what mobile video player will dominate the market still remains to be answered.

  8. I wonder if that all the big notebook PC players, e.g. HP, Dell, Lenova, Sony, Fujitsu, etc will develop their own tablet PCs to compete with the iPAD?  If so, what mobile OS will they use?  What microprocessor- ARM, AToM, proprietary, MIPs, etc?  And what video player(s)? 

  9. IPad 3G: How Much Does 250MB Get You?
    If anything is revolutionary about the iPad, it's that Apple persuaded AT&T to do away with the standard lengthy contracts for cellular service in exchange for a month-to-month commitment. Equally impressive, Apple also managed to wrangle a cheaper data plan out of AT&T, still sans contract: $15 for 250MB of monthly data. But on the iPad Wi-Fi + 3G, a device with a powerful Web browser, a hot App Store, a YouTube app, and more, how much will 250MB actually get you?
    Not much! 
    In a nutshell: even just Web browsing can eat up bandwidth fast, and the meters for both the iPhone OS and AT&T (when it updates) seem to either not register very small portions of data, or update in at least 1MB chunks. Tumblr, a site rich in media and fancy JavaScript interface magic, eats up anywhere from 1 to 3MB each time I visit (depending on whether Tumblr users I follow post a lot of images). Facebook is usually 1 to 2MB. Tapping through to a friend's Facebook status to see any comments sometimes doesn't register on the bandwidth meter, but sometimes racks up another megabyte. GelaSkins.com's online store boasts a number of images and a rotating banner showing off skins for various gadgets–it weighed in at 2MB. Opening the iPad section's first page was another 1MB, and visiting a specific skin was yet another 1MB. See what I mean about bandwidth adding up fast?
    When it comes to news feeds, I tested NewsRack with both my custom settings and without. When I turned on some features like downloading images from the latest 10 articles, my first refresh in the morning of my 349 feeds took 15MB. After reinstalling NewsRack to clear out all feeds and use the default settings (with images turned off), an initial download of the 100 most recent articles in each feed took 8MB. Subsequent refreshes to update these feeds later in the day took 5MB with images, and 2MB without.
    Toss in a couple of short YouTube videos and small app updates, and I hit the 250MB ceiling in just three days after activating my month-to-month plan.
    Read the whole article at: http://www.pcworld.com/businesscenter/article/195762/ipad_3g_how_much_does_250mb_get_you.html
     

Leave a Reply

Your email address will not be published. Required fields are marked *

I accept that my given data and my IP address is sent to a server in the USA only for the purpose of spam prevention through the Akismet program.More information on Akismet and GDPR.

This site uses Akismet to reduce spam. Learn how your comment data is processed.