Intelligence – the key to tackle competition from low cost alternatives

Intelligence – the key to tackle competition from low cost alternatives

The virtual PC from Option is a USB modem that, apart from connecting to the Internet, also provides access to users' applications, documents, MP3 collections or any other content via a ‘one click' launch pad from any PC. The applications run from the USB modem and, when disconnected, Option's zero footprint technology ensures no trace is actively left on the host computer. This cloud computing like device allows users to travel light, still bringing all their applications and documents.

Novatel Wireless's MiFi intelligent mobile hotspot is a small portable wireless router that creates a personal cloud, which could be shared between up to five Wi-Fi enabled devices such as laptops, MIDs, smartphones, cameras, gaming devices or portable media players. The device, which comprises a battery and an HSPA modem, allows users to access the Internet anywhere. It runs an on-board Linux-based operating system that enables a range of intelligent features. In addition, the router is equipped with storage up to 16 GB and an embedded GPS chip which opens up for a wide range of future applications such as location-based functions and storage of personal content such as music, video and pictures.

A few years back, the mobile broadband device market was dominated by the wireless trio Option, Sierra Wireless and Novatel Wireless, all located in North America and Europe. At the time, the market consisted mainly of business users wanting to stay connected on-the-move and were willing to pay the price for this exclusive service.

The European mobile broadband market reshaped dramatically in 2007 and 2008 when the operators slashed prices and shifted their focus to consumers.

Despite a soaring market, the incumbent hardware providers have suffered from poor growth and reduced margins, mainly as a result of the entrance of China's Huawei into the European market. With its new innovative and flexible USB devices, the Chinese low-cost provider managed to ship an estimated 5.2 million devices in 2007, up from 900,000 in 2006, capturing about two thirds of the device market.

The incumbents had neither the right form factor nor the right cost structure to face the new competition. The industry has been waiting for a response, and, two years after the tipping point, Novatel Wireless and Option revealed their plans – integrating intelligent functions into the hardware.

The response of the third incumbent, Sierra wireless, has been a shift towards M2M, with the acquisition of Wavecom significantly strengthening the company's position in the M2M device market.

Author: Marcus Persson, telecom analyst, Berg Insight

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