Is the MiFi Model the Future of Mobile Broadband?

In January 2009, I got my first glimpse of a new device from Novatel Wireless (s nvtl) called a MiFi. The MiFi, with its credit-card sized footprint, uses a wireless 3G signal to access the Internet and then transmits a Wi-Fi signal that can be shared with multiple devices. Yet we still see new notebooks arriving with an embedded mobile broadband radio. Just today, for example, Toshiba introduced four new laptops, some of which have integrated WiMAX radios. I’m sure some customers want 3G or 4G radios in their notebooks for connectivity nearly everywhere, but nearly two years after the birth of the mobile hotspot, is it time for the embedded model to die off?

From a hardware-maker’s standpoint, adding internal mobile broadband radios can be a product differentiator. If Dell (s dell) opts not to include such connectivity, and Toshiba does, the latter has a value-add feature to advertise. Based on that, I don’t expect notebook or netbook makers, for example, to simply stop adding 3G or 4G radios to their devices. But from a consumer’s standpoint, such options are likely to find less favor over time because people simply don’t want to pay for multiple connections.

Long gone are the days of consumers and enterprise employees using just one device while mobile. We’re carrying a range of devices that want to be connected to the web: notebooks, iPads (s aapl), smartphones, even cameras and portable media players. A single device such as a MiFi, or a smartphone that offers Wi-Fi / USB tethering, can act as the Internet on-ramp for any and all of our gadgets. And those MiFi devices aren’t limited to 3G any longer: Clearwire offers a 4G unit while Sprint’s (s s) Overdrive is a dual-mode mobile hot spot that works on both 3G and 4G networks.

Of course, our connected world has another player besides the hardware makers and the consumer: The wireless providers provide the third point to this connected triangle, and therein lies the rub. Every device with an embedded cellular radio is a revenue opportunity for the carriers. Want to connect that notebook to the web? No problem, that will be $60 a month for the next two years. Oh, you have an iPad that you’d like to use at the local park? Carriers have you covered for $25 each month. Before mobile hotspot devices, consumers had no real choice in the matter: Connecting a device to the web while on the go either meant paying for multiple data plans or finding ways to share the connection through software means. I spent most of 2006 using my smartphone as an unsanctioned 3G modem, for example. Today I use the wireless hotspot feature in my Android handset, which turns my phone into a portable hotspot as a backup Internet connection, all for no extra charge.

Earlier this year, I noted that MiFi sales were down in 2009, likely because consumers didn’t know what the devices were or what they could do. I’m still asked by curious passer-bys about the MiFi I use on my travels. Nearly every time I explain what the device is, what it costs and how it can be used with multiple gadgets, the light bulb goes off. “Why wouldn’t I buy one?” is the most common response I hear. Even with data plans that are capped at 5 GB, it comes down to this: Do you want to use that 5GB with one device or spread it out over all of your gadgets that have Wi-Fi functionality?

Knowledgable consumers are starting to see the light: in the second quarter of this year, Novatel Wireless reported MiFi sales of $25 million, an 85 percent increase from the same quarter in 2009. Sure, there are still valid cases for integrated wireless radios in computers and other gadgets, but it’s a mobile hotspot world; embedded devices just live in it.

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