Are Mobile Broadband and Smart Phone Internet Distinct Market Segments?

Strictly speaking, observers consider the use of dongles as "mobile broadband," while use of smart phones for Internet access is considered something else.

In the U.K. market, for example, about five percent of surveyed respondents say they use mobile networks for Internet access to their PCs. 

About 33 percent say they use their smart phones for Internet access. Of course, many smart phones feature personal hotspot features, making the distinction fuzzy, at best. 

But it always is possible to identify "market segments" that some might say are distinct, and others believe are parts of a single market. Are triple-play services a distinct market from the markets for constituent services?

Is business high-speed access a different market from consumer high-speed access? Is 3G data access a different market from 4G data access?

The answers are more difficult because there always are some customers who use their services as though the choices (mobile broadband or smart phone access versus fixed network access, for example) are in fact clear substitutes.

In other words, some consumers make their own decisions about what products are functional substitutes, and which are not, even when regulators and service providers consider the products separate markets. 

Ofcom, for example, does not consider fixed wireless access a functional substitute for fixed high speed access supplied by either cable companies or over BT's network, since Ofcom is largely concerned with wholesale offers. 

And fixed wireless networks are not especially well suited to wide scale wholesale operations, Ofcom believes. "Deployment of broadband services using fixed wireless access so far has been limited to specific geographic areas or specific circumstances," Ofcom says. 

"In the short term, given the costs involved in providing fixed wireless access and the lower quality of the service, it is unlikely that an increase in the price of wholesale broadband products will lead a substantial number of CPs (communications providers) to switch to fixed wireless access at the wholesale level," Ofcom says. 

The point is that although there are reasons to consider mobile broadband as a distinct product from smart phone Internet access, the boundaries are fuzzy, and likely will become more fuzzy, as personal hotspot capabilities obliterate the differences in capability.