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Mobile operators mourn death of embedded 4G

Is that a Wi-Fi hotspot in your pocket?

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Mobile operators are giddy at the prospect of doubling, tripling or quadrupling the number of devices connected to their networks over the coming years. Next generation portable devices such as tablets, laptops, cloudbooks and Ultrabooks are seen as candidates for 3G/4G integration that will help shore up the carrier position now that handset penetration has hit the saturation ceiling. However, considering that these gadgets will be used overwhelmingly on Wi-Fi networks, it's difficult to justify integrating cellular functionality now that most consumers are walking around with a Wi-Fi hotspot in their pocket: their smartphone.

According to industry analyst Chetan Sharma, about 90 per cent of tablets sold in the US towards the end of 2011 were Wi-Fi only. This is not surprising considering the ubiquity of Wi-Fi. And for the occasions when Wi-Fi isn't available, there's tethering.

Mobile operators are giddy at the prospect of doubling, tripling or quadrupling the number of devices connected to their networks over the coming years. Next generation portable devices such as tablets, laptops, cloudbooks and ultrabooks are seen as candidates for 3G/4G integration that will help shore up the carrier position now that handset penetration has hit the saturation ceiling. However, considering that these gadgets will be used overwhelmingly on Wi-Fi networks, it's difficult to justify integrating cellular functionality now that most consumers are walking around with a Wi-Fi hotspot in their pocket - their smartphone.

According to industry analyst Chetan Sharma, about 90 per cent of tablets sold in the US towards the end of 2011 were Wi-Fi only. This is not surprising considering the ubiquity of Wi-Fi. And for the occasions when Wi-Fi isn't available, there's tethering.

All major smartphone platforms now support tethering – the ability to share the phone's mobile broadband connection – normally with up to five devices. Tethering effectively turns the handset into a Wi-Fi hotspot, using the 3G/4G connection as backhaul. The normal limit of five devices is a bit of a joke since, unless a user plans on running their own internet café, it's hard to imagine a use-case which would require sharing so many concurrent devices.

The beauty of tethering on these smartphones is the simplicity. On most platforms tethering can be activated in under five taps – on iOS it's just three taps from the homescreen (Settings-->Personal Hostpot-->ON). Once activated, any device which has been previously authenticated onto the hotspot will reconnect automatically. The result is that connecting a non-cellular gadget (like a Wi-Fi-only tablet) to a cellular broadband network can typically be carried in a few seconds.

So the question is: why do I need a cellular modem inside my tablet or ultrabook, especially when integrated cellular broadband comes at a significant cost premium and normally requires an additional mobile data plan?

Admittedly, there's a catch with tethering. A concessionary gifts which the likes of Apple and Microsoft and have made to mobile operators with their respective smartphone OSes is the ability to easily detect tethering activity, as well as the option to disable the tethering function. As a result, subsidised smartphones sold by carriers can have the tethering function hidden, unless the subscriber is on a tariff which allows tethering. Or the subscriber can be pushed onto a more expensive tariff if tethered usage is detected.

There's something fundamentally wrong with operators charging for something I'm already paying for. If I'm on a mobile plan with a 1GB limit, I should be able to use that data allowance for whatever I want. Imagine if DSL service providers dictated which devices in your home, or how many, could use your residential broadband connection! The tethering premium can be steep. In the UK I'm paying Vodafone an additional $8 a month to have tethering enabled on my iPhone, but AT&T's premium in the US is $20.

From my experience, tethering is policed by carriers with the iPhone, but less so with Android. In the past six months, I've used my Android phone with six operators in six different countries in Europe, the US, South America and the Caribbean, using prepaid SIMs and I was able to tether on all of them.

So, tethering can cost in the vicinity of an extra $200 a year or, in the case of Android, as little as zero. Ultimately, my suspicion is that in the coming years the tethering premium will drop to even disappear, either through price competition amongst carriers, or through backlash from consumers who grow to resent their carrier intentionally handicapping their smartphone.

Apple surprised no one by offering its new iPad in the same flavours as before – two colours, three memory options, and Wi-Fi + 4G or Wi-Fi only. The model with integrated cellular sells for a $130 premium ($160 in the UK) and it'll be increasingly hard for consumers to stomach this extra cost in an era when they're all walking around with their own personal Wi-Fi hotspot.

Amazon's decision not to release a 3G flavour of its Kindle Fire tablet shows that Wi-Fi as the dominant use-case – with tethering as a Plan B – is accepted by OEMs.

For sure, cellular enabled portable computing devices will continue to find an enthusiastic base of supporters, such as road worriers who spend long periods outside predictable Wi-Fi areas and don't want to hammer their smartphone battery on tethering. Enterprises will also want to supply certain employees with devices which can connect everywhere, without tethering. But this limited base of users will likely translate into a limited volume of mobile broadband enabled devices.

Copyright © 2012, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

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