Laptop computers are being used more and more to access the
Internetover a cellular connection, whether with a PC card,
USB modem or with an embedded modem.

There are more than 600 million people in the world using a 3G network and, as these networks evolve to support even higher data rates in the coming year, more subscribers are going to be using notebook computers to access the Internet.

In October, Verizon Wireless began selling Novatel’s USB727 modem. The EV-DO Rev. A modem features an integrated Micro SD slot, allowing for storage and transport of up to 4 GB of files, photos and videos.

Right now, most people who use a laptop to access the Internet or a corporate intranet through a cellular network are using a PCMCIA or PC Express card that slides into a slot on the notebook. That’s rapidly changing, however, as USB modems gain popularity, but in a few years notebooks with embedded modems may be the rule.

Dan Shey, an analyst with ABI Research, expects the cellular modem market to take off over the next few years, growing at a compound annual growth rate of 53% with sales of $10 billion by 2012. He also sees a faster switch to USB modems than he had expected, caused to some extent by a number of new companies getting into the market.

ABI is forecasting that cellular modem shipments will rise from 5.2 million units in 2006 to 68 million units by 2012.

Shey says the expansion of 3G networks, especially in North America and Europe, has increased consumer interest in using cellular notebook modems. Another factor, he says, are the pricing options operators are tempting consumers with, although he says prices are still too high for significant modem adoption.

Data cards for Verizon Wireless’ Broadband Access.

ADVANTAGES
PC cards and the newer USB modems have several advantages over embedded solutions, the analyst says, but those advantages will shrink over time.

First, notebooks with embedded cellular modems are primarily for enterprise users because consumer electronics stores are not going to carry multiples of the same notebook to satisfy every carrier possibility. They’d have to carry the same notebook model with a different radio scheme for AT&T, Verizon Wireless, Sprint Nextel, T-Mobile USA, and on down the list.

But, Shey says, many enterprises have been reluctant to order notebooks with cellular modems because wireless technologies have been changing so rapidly.

Why spend $2,000 or more on a bunch of laptops when you know a new revision of the wireless access technology is around the corner?

CDMA Rev. A and UMTS/HSPA networks are launching this year and next and are expected to provide enough bandwidth and relative stability – the next network evolution is not expected for three or four years – that enterprise IT departments can justify the expense of an embedded solution. The GSM Association says there already are at least 128 commercial HSPA networks in 61 countries.

Sierra Wireless’ 875 and 881 aircards

Shey says PC cards currently have a 3:1 lead over notebooks with internal modems, and lead USB modems by 14:1.

By 2012, the analyst says, internal modems will lead all sales, followed by USB modems and then PC cards. By that year, internal modems will lead PC card shipments by 4:1 and USB modems by a little less than 2:1.

Novatel and Sierra Wireless both confirm that USB modems, which started appearing in 2006, have quickly caught on with consumers. Jon Driscoll, a Novatel vice president, says USB modems will exceed all others the company sells this year. For Sierra Wireless, USB modem sales were 45% of its total revenue in the second quarter.

Sierra Wireless believes PC cards and USB modems will remain the dominant force in notebook access and that it will be at least 2011 before embedded notebooks challenge their dominance, according to spokeswoman Sharlene Myers. “We’re seeing embedded grow strongly but not as quickly as some analysts predicted,” she says.

Qualcomm’s recent announcement of its Gobi chipset, which uses software and multiple radios, could affect consumer electronics store sales of embedded notebooks, Shey says. Gobi-enabled notebooks could access either a UMTS/HSPA or CDMA Rev. A network, so the buyer would not be tied to one technology or operator.

NEW COMPETITORS
The interest from 3G operators and their subscribers in embedded notebooks has resulted in a number of new faces among PC card manufacturers, Shey says. Most of these are in the Asia Pacific, China and South Korea. The industry was once dominated by Option, Novatel, Sierra Wireless, Kyocera, and Sony Ericsson. However, some of the newer players include AnyData, Huawei, ONDA, Pantech, Sungil Telecom, Suntech Technologies and ZTE.

Sony Ericsson’s PC300 Mobile Broadband PC card offers speeds up to 3.6 Mbps

This increased competition could drive down prices and force consolidation in the industry, Shey says. He doesn’t expect consolidation while the market is still growing as rapidly as it is, however.

The GSM Association and Microsoft recently recognized the spreading interest in notebooks with embedded access. They published results of a study by Pyramid Research which suggests there is a potential market of 70 million embedded modem notebooks worth $50 million in 2008. Those figures are more optimistic than ABI Research’s estimates.

“With the right form factor, price and ‘out-of-the-box’ connectivity, the research has unearthed substantial demand for mobile broadband embedded notebooks that is not yet being met,” according Rob Conway, CEO of the GSMA.

The GSMA says it is asking notebook manufacturers and OEMs to propose new designs for mass-market-priced mobile broadband laptops. The association is couching its request as a competition, with the winner of the PC design being showcased at the Mobile World Congress (formerly the 3GSM World Congress) in Barcelona in February.

Among the notebook manufacturers working with the GSMA are Asus, Dell, Fujitsu Siemens, Lenovo, Twinhead and Vestal. The operators directly involved in the GSMA plans include DTAC, Maxis, MTN, Orange, Smart Communications, Telecom Italia, Telefónica O2, TeliaSonera, Turkcell, Vimplecom, Vodafone and Wind.