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Summary:

Mobile data consumption continues to surge, as Chetan Sharma notes in his latest update of the U.S. mobile industry, but data revenues aren’t keeping pace. That explains why AT&T and Verizon — which dominate mobile the mobile data market — are moving toward metered billing.

U.S. mobile users consumed almost 400 petabytes of data last year, up 193 percent from 2008, according to a new report from analyst Chetan Sharma. But carrier revenues aren’t keeping pace.

Sharma, who also serves as a member of the GigaOM Pro Analyst Network, reported that U.S. data traffic exceeded voice traffic by almost 400 terabytes in 2009; and he expects that the ratio between the two voice and data traffic to double this year. U.S. mobile data services revenues grew at only 24 percent year-over-year, though, and are expected to grow just 20 percent in 2010.

And while voice ARPU declined by a substantial 98 cents for U.S. carriers, data ARPU increased by a mere 4 percent to 53 cents as overall ARPU decreased 45 cents on the year.

Interestingly, Verizon and AT&T accounted for 88 percent of the increase in data revenues in the fourth quarter of 2009 — a fact that helps explain why the nation’s two largest carriers continue to separate themselves from their competitors.

Sharma notes that the market penetration of mobile in the U.S. is 99 percent for people older than the age of five. So as Stacey pointed out earlier today, carriers are running out of growth options. The key for the most lucrative operators, then, will be more effectively monetizing data traffic while limiting the impact that traffic has on their networks. Which is why both AT&T and Verizon are moving toward metered billing and away from flat-rate data plans.

Related Post On GigaOM Pro:

Metered Mobile Data Is Coming and Here’s How

  1. How effect does Wi-Fi local connection have on the revenue stream? If I am at home using my smartphone but connected to my wi-fi at home and streaming data through my Wi-Fi does this not increase data transfer usage but has no effect on the revenue side?

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    1. Good question, Sanjay, but Chetan’s figures refer to data being moved across carrier networks, not via Wi-Fi and your home Internet connection. So that data isn’t clogging carriers’ networks, but they can’t monetize it.

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  2. Colin;

    Another interesting manifestation in the evolution of the devices and user behavior is the decline in voice minutes per sub. I ran an analysis of AT&T’s numbers awhile back, and for the period from Q2/2007 to Q2/2009, average minutes per subscriber declined over 9%, dropping from 760 minutes per month to 691 minutes per month.

    Anyone with kids will attest to the fact that these are not “phones” anymore, which also begs the question, “How did Microsoft get the branding of Windows Phone Series 7 so wrong?!?”

    That’s my .02!

    Martin Suter

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    1. Interesting figures, Martin. And yeah, in an era where we’re struggling to come up with a name for the high-tech devices we’re carrying, branding your OS as “phone” is an odd strategy.

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  3. “more effectively monetizing data traffic” simply means charging the consumer more money for the same or less service.

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  4. Noooo! This would be a major blow to the iPhone. I mean, I already pay $110 a month. I can’t imagine paying more.

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  5. The disconnect is only going to grow even further…Take a look at some of the advanced (in telecom) nations in Europe…Mobile data is highly unlikely to follow a linear relationship between usage and revenues…Price rises are only part of the solution. Intelligent capacity management and tariffing will play a big role…

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    1. Traffic is increasing while revenue is not. But at the same time the cost for the traffic is decreasing. The equipment can handle more traffic at the same cost, pretty much along Moore’s law.

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      1. Hmm…Not sure I agree completely with this assessment. True, cost of carrying traffic is declining. But not at the same rate as the increase in consumption. Moreover, am not sure the costs of leased backhaul are declining at the same pace. Atleast that is how it is in markets where mobile broadband has seen strong uptake. There’s no reason to believe this wont replicate in the US.

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      2. Mike – While Moore’s Law may apply to the cost/capability of silicon, the cost structure for mobile operators is way more complex. Spectrum costs don’t follow Moore’s Law, and one could certainly argue that scarcity of supply will drive spectrum costs up. Site acquisition costs don’t follow Moore’s Law, and one could argue that the cost to acquire and deploy a much larger number of microcells will be far higher than a fewer number of tower-based macrocells.

        The use of substitute networks, like Wi-Fi, offer some (limited) relief in that the cost/bit is lower than traffic over cellular, but the point being made is that there is a decoupling between revenues and traffic, which is hard to argue. Obviously, this is most acute in an operator like AT&T, which has rolled out “all-you-can-eat” flat rate plans, but as we have seen in the wired Internet world, monitoring and charging for usage is difficult to sustain and I expect that all operators will be forced to migrate to flat rate plans.

        That’s my .02!

        Martin Suter

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  6. Bring it on — find a way to make more money, without turning off your customers. That’s what the big ticket folks in marketing get paid for.

    I know you’re an experienced telco trade reporter, Colin. But I have to agree with the previous commenter, you need to see both sides. “Effectively monetizing data traffic while limiting the impact that traffic has on their networks” translates to charging more for less.

    Not exactly a pro-consumer attitude, esp. when the voice performance of my iPhone already leaves so much to be desired. And I’ll probably have to watch Europeans get more for less faster, just like a few years ago.

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    1. You’re right that “charging more for less” will be part of the equation when it comes to better monetizing data traffic, Chris. But like the above commenter noted, there are plenty of other factors, too, including offloading data traffic to non-cellular networks and moving non-urgent data during non-peak hours.

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  7. Wrote about the decoupling of data and revenue at wireless operators in depth on my blog. Must reads

    Why Your Cell Service REALLY Sucks
    http://stevecheney.posterous.com/why-your-cell-service-really-sucks-0

    The Ultimate Killer App – Mobility
    http://stevecheney.posterous.com/the-ultimate-killer-app-mobility

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  8. Are the mobile carriers making money on mobile data?

    Or are we saying that the mobile carriers would not longer be able to make the good margins that voice allowed them to?

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  9. [...] trends, however. As Chetan Sharma, a contributing analyst for GigaOM Pro, recently pointed out, during the last three months of 2009, “voice ARPU declined by a substantial 98 cents for U.S. carriers” and “data ARPU [...]

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  10. 400 TeraBytes of disparity between data types on a nationwide network? I have 2 Terabytes of data on a computer in my closet…

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