Data now 85% of mobile traffic but 39% of revenue: What gives?

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A whopping 85 percent of the traffic traversing the four nationwide mobile operators networks is pure data, according to a new study by wireless analyst Chetan Sharma, showing that the U.S. mobile industry long ago abandoned its voice mantle to become a data-driven juggernaut. Or has it? Sharma also found that data only accounted for 39 percent of all mobile data revenues carriers collected in the fourth quarter. Operators may be running what are primarily data networks, but they are still getting paid mainly for voice minutes.

The detailed report (check out Kevin Tofel’s first pass on Sharma’s numbers in his tablet post) also shows that overall revenues for operators are increasing, driven by data use, which will grow from a $67 billion market in 2011 to an $80 billion one at the end of this year. But the average revenue carriers collect per customer is declining: For every 52 cents of new data fees operators took in last quarter, they lost 96 cents in voice fees.

Taken at face value, these numbers paint a rather foreboding picture: Mobile operators’ future clearly lies in replacing voice minutes with data megabytes on the earnings sheets, but voice revenues are declining faster than data revenues are increasing. In addition, operators are using far more network capacity to deliver one dollar’s worth of data than they are using to deliver one dollar’s worth of voice.

But the numbers also don’t paint a precise picture. While 85 percent of traffic may be data, the networks that carry it are orders of magnitude more efficient than they were in the past. For the same infrastructure and spectrum investment, operators can deliver multiple megabits of capacity where they once could only offer dial-up modem speeds or a few dozen phone calls. Those network efficiencies mean operators can make money off data even if it takes over 100 percent of their traffic — as long as they keep upgrading their networks.

But the loss of voice revenue is the bigger problem. Voice accounts for so much of their revenue stream yet so little of their network resources that carriers are obviously using it to pad their profits. If some over-the-top VoIP service were to get widely adopted, it could wipe out a good percentage of customers’ bills, forcing operators to build their business models primarily on data. That doesn’t mean they couldn’t make money on data; it just means they would make a lot less.

What would really do the operators in is if they were forced to charge customers only for the data they consume. Sharma reported that only the top 30 percent of smartphone users consume more than 1 GB per month. Yet the data plans operators sell are designed to give average consumption a wide berth. The smallest smartphone data bucket Verizon sells contains 2 GB for $30 per month. Under AT&T’s new pricing structure, customers can buy a 300 MB plan for $20, but the next tier is 3 GB for $30. That means the vast majority of U.S. smartphone customers are coming in way under their caps, buying a lot of data they will conceivably never use.

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