New analysis shows that the rate of growth of mobile data use in the US has slowed down considerably in the third quarter, and the US may finally be feeling the affects of OTT messaging services. Guy Daniels reports.
If you want to find out what’s happening in the US telco market, you ought to keep an eye on Chetan Sharma’s blog. He has just posted an update on the US mobile data market for the third quarter, which shows a mere 3 per cent growth from the previous quarter to reach $19.9bn. However, year-on-year growth was up 17 per cent. So what’s going on? Is the US reaching a plateau for mobile data growth? How does that affect the so-called “spectrum crisis” that has got AT&T and its trade association friends so worked up about?
First of all, Chetan Sharma Consulting has calculated that data now represents almost 43 per cent of the US mobile industry service revenues, and that data should reach $80bn for the year. This percentage could well exceed the 50 per cent mark early next year. No surprise that Verizon and AT&T dominated the quarter, accounting for 69 per cent of the mobile data services revenue and had 66 per cent of the subscription base.
The overall ARPU for US mobile operators in Q3 declined by 15 cents. But whilst voice ARPU declined by 58 cents, data ARPU grew by 43 cents – almost a like for like replacement.
Chetan has calculated that the overall data consumption in the US market in 2012 will exceed 2,000 Petabytes (or 2 Exabytes, as we move into the age of big data and even bigger numbers). Smartphones are of course responsible for this growth. He believes that smartphone data consumption at some operators is averaging close to 900MB per month per subscription, with some devices responsible for use close to 2GB per month.
This is good news for the operators, as higher data usage leads to higher tariffs and revenues. There’s also the effect of ‘family data plans’, with shared usage, that he thinks will encourage the use of more data. The bad news though is that mobile data traffic growth is likely to slow down to roughly 80 per cent after doubling for the last five years.
Whilst 80 per cent growth is nothing to be sniffed at, it’s a sign of a slowdown, and that means reduced revenue forecasts.
Incidentally, he believes that US voice traffic will dip to below 10 per cent of the overall traffic by the end of 2012. Quite a turnaround.
Operators must take comfort though in the fact that smartphone adoption is still far from over. US penetration now stands at just over 50 per cent of all mobile subscribers, concentrated in only 30 per cent of households. There should therefore be plenty of opportunity to encourage the switch from feature-phone or dumb phone to smartphone, and hence more data usage.
This data growth comes against a backdrop of declining messaging revenue. Chetan notes that most western markets have seen the net revenue in the messaging segment decline, although the US has resisted this trend thus far. In Q3 2012 though, for the first time, there was a decline in both the total number of messages as well as the total messaging revenue in the market:
“It might be early to say if the decline has begun or the market segment will sputter along before the decline takes place. Once the market segment reaches the 70-90 per cent penetration mark, the decline begins and we might be seeing the start of the decline in messaging revenue. The decline is primarily due to the rise in IP messaging and operators have been slow to evolve their strategies in the segment.”
The interpretation of this data depends on which side of the spectrum debate you sit. There are those that will see the slowdown in data growth as meaning that there is no spectrum shortage and that existing resources (coupled with performance and capacity improvements to networks through new technologies, small cells and offloading, for example) will be adequate to cope with the demand – especially as growth in connected devices has been slower than expected at around just 5 per cent per quarter. But equally there are those that see the slowdown as being temporary, or a market adjustment to the reality of the economic doldrums – after all, it’s still growing by 80 per cent – and with smartphone penetration still a long way from saturation point, there’s much more data usage out there.
What’s going to be helpful for the entire industry is a move towards reporting average margins per account (AMPA), rather than average revenue per user. If shared family accounts are the way forward, and operators can bundle connected devices onto our phone subscriptions, then “account” becomes more useful than “user”. As do “margins” rather than “revenue” – it’s easy to make revenue, but far more difficult to make profit. Just how profitable is mobile data?
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