Mobile data users still overwhelmingly prefer USB modems for keeping PCs and other devices connected on the go, but they may turn more to built-in cellular radios and portable Wi-Fi hotspots over the next five years, according to ABI Research.
Despite the growing market for connected tablets and the availability of laptops and netbooks with high-speed cellular modules built in, worldwide shipments of USB modems still surpass embedded 3G and 4G modules by three to one, ABI said in a report Monday. But by 2016, that ratio may change to near parity, said ABI analyst Jeff Orr.
Mobile operators including AT&T, Verizon Wireless and Clearwire give shoppers the option of buying a laptop or netbook with an integrated cellular module. Those computers let subscribers go online almost anywhere without using up a USB port or carrying around a separate piece of hardware that sticks out of the side of the system.
Built-in modems lock buyers into one carrier or network technology for the life of the device, which most consumers and enterprises don't want, Orr said. They buy USB modems because they can be easily discarded when a better network comes along, he said. Prices are low and often there is no early termination fee for getting out of the carrier data contract.
"That device becomes almost disposable," he said.
One problem with built-in modems is that wireless technology changes faster than most users want to change computers. For example, the past three years -- a typical PC lifetime -- have seen the construction of both a WiMax and an LTE network in many cities around the U.S., offering 10 times or more the speed of 3G networks.
The market for embedded modems is still fairly small, according to ABI. In 2010, only about 5 percent of laptops worldwide shipped with built-in cellular modems, Orr said. Among netbooks, 17 percent came with modems, but overall shipments were much smaller for netbooks than for laptops. Meanwhile, 40 percent of tablets came with such modems, but the overall tablet market was smaller still.
But embedded modems could start to gain popularity as tablet sales grow and as the incremental cost of the modems shrinks, Orr said. One thing that could cut that price is shifting some of the cost to an activation fee paid only if the customer decides to sign up for service, he said. There are already laptops available from U.S. electronics retailer Best Buy with WiMax built in, with no requirement for the buyer to sign up for Clearwire service.
Meanwhile, portable Wi-Fi hotspots that use cellular data networks may dwarf both embedded and USB modems by 2016, Orr said. These allow users to connect several devices to the 3G or 4G network simultaneously and pay only for one data plan. All that's needed on each device is Wi-Fi.
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