The wireless industry is poised at a precipice between the potential for incredible growth and a recession that could deepen and set wireless data adoption back, according to analysis by Chetan Sharma of Chetan Sharma Consulting. He writes in his 2008 year-end and fourth-quarter analysis that data revenue in the U.S. hit $34 billion for the year, while the global wireless data industry crossed 4 billion in subscriptions and $1 trillion in total revenues.
But continued gains are less certain, given the drag from the economy fighting against consumer demand for mobile connectivity — people want it, but can they afford it? Sharma argues the economy is already affecting some subscriptions as data card subscription revenues fall, affected by layoffs in the corporate sector. Data card revenue, which accounts for 10-12 percent of the overall mobile data revenues in the U.S., has fallen as enterprises drop access cards as they lay off employees.
Other worrying signs include a decrease in certain kinds of content downloads on handsets, and the possibility of declining sales of data subscriptions for the first quarter, which won’t include the holiday boost fromconsumer devices such as iPhones and subsequent activations.
However, the positives currently outweigh the negatives, and the biggest positive so far is the growth in smartphones, which should comprise 30 percent of the handsets chipped in 2009. A smartphone’s utility is determined by its data plan, so those sales will likely help offset the loss of data card subscribers. Another, smaller positive is the continued replacement of land lines with mobile phones — now at 20 percent, and a trend Sharma calls irreversible unless new experiences are introduced.
In the coming quarters, expect concessions to the economic reality, such as flat-rate pricing and prepaid cell phones, to help determine how quickly mobile data adoption grows in the United States. Should the industry be in the midst of an economic reset, cheap pricing is one way to handle a decline — but it isn’t a way to ensure that wireless data remains central to some people’s lives. For that, we need innovation. Apple (s AAPL), some handset makers and certain carriers are offering that, but will the rest of the industry take them up on it?