Mobile phone companies want everyone to know you can use cellphones for more than talk. The message is becoming loud and clear as competition...
Mobile phone companies want everyone to know you can use cellphones for more than talk.
The message is becoming loud and clear as competition drives down the price of a voice minute and carriers look to fill the revenue gap with new data services, including e-mail, video games, music, TV and Internet access. So far, the plan is working.
With quarterly reports of the top four U.S. wireless carriers now in, it’s evident that each saw revenue from data services grow substantially, compared to the same period last year.
Lewis Ward, an analyst with IDC, the market-research company, said the trend is accelerating.
Most Read Stories
- 2017 NFL draft: Live Seahawks updates from the final day, rounds 4-7
- First reaction: Seahawks select 6 players in second and third rounds of NFL Draft
- Starbucks' Dragon Frappuccino is new 'secret' drink craze
- Seahawks trade with Falcons, 49ers to move out of first round of 2017 NFL Draft, now have 10 picks WATCH
- Woman stabbed to death in Ballard
In 2003, he said the average U.S. wireless subscriber dished out $50 a month on wireless service, with 97 percent spent on voice and the remainder on data. By the end of next year, Ward predicts consumers will spend $51 a month, with 90 percent for voice and 10 percent for data.
“While data grows from 3 percent to 10 percent, it’s filling the gap and then some,” he said.
Revenue from voice usage continues to fall because of competitive price pressures, Ward said. Because the top four carriers essentially all offer the same service — minus a few dropped calls — price differences have become the primary way to lure customers. That is reflected in the number of specialized calling plans each carrier offers these days, from family rates to free incoming calls.
“There is a clear sense that data services and nonvoice services are where the revenue growth is as you see the carriers continue to compete with brutal pricing for voice plans,” said Mark Donovan, an analyst with M:Metrics, a Seattle-based research firm.
Still, data revenue has a long way to go, though the upward growth curve is attractive to carriers.
Cingular Wireless, the largest U.S. carrier, said 22 million of its customers spent $689 million on data in the third quarter. That works out to $4.33 a month for each customer, compared with $1.75 a month a year ago.
No. 2 Verizon Wireless said 21.6 million customers spent $613 million, or $4.23 a month on data, up from $2.44 a year ago.
The growth has been equally dramatic for both Sprint Nextel and T-Mobile USA (see accompanying chart).
Although the revenues are still modest — overall, each carrier brings in billions each quarter in revenue for its services — Donovan said the signs are encouraging.
“It represents hooking subscribers up to a recurring charge to watch TV, and it represents their repositioning of their companies to be something more than a voice provider, but into a provider of an enterprise tool or an entertainment platform,” he said.
One difficulty in getting more insight into this growth is that none of the carriers defines what a data customer is, or how each data service contributes to the revenue stream. It does appear that much of the money comes from text messaging, one of the oldest and least complex data applications carriers offer.
Cingular said customers sent 5.2 billion text messages during the third quarter. Verizon Wireless customers sent slightly more, about 5.9 billion. (Sprint Nextel and T-Mobile USA did not report how many text messages were sent in the quarter.)
The push to sell more data is coming at a price. All the carriers are spending billions upgrading their networks to handle higher speeds. The new networks, called 3G for third-generation wireless technology, make surfing the Internet or replying to e-mail more tolerable.
“People are now expecting to not just get a call, but to do e-mail, download music, games and ringers,” said Nick Sweers, a spokesman for Sprint Nextel, which plans to spend $5.6 billion on upgrading its wireless and long-distance networks next year.
Kelley Kurtzman, president of the Pacific Northwest region at Verizon Wireless, said customers are demanding data services at a time voice has become a staple.
“It’s growing in popularity as we launched our broadband network, and it has become accessible to a lot more customers,” she said.
Tricia Duryee: 206-464-3283 or firstname.lastname@example.org