A shift in how people use their mobile devices is causing wireless carriers to reassess their existing revenue models as the sea change puts pressure on their profitability.
According to respondents to a survey conducted by PwC US titled “No wires attached: Changing trends in the North American wireless industry,” more smartphones are hitting the market and rising data usage. Along with the expense of expanding 4G networks and a drop in mobile voice calls, the wireless industry is reexamining their business.
The results of the survey, covering all major U.S. and Canadian carriers, indicated that prepaid and mobile broadband services will become increasingly important revenue opportunities for carriers as the industry continues to mature.
Smartphone sales accounted for 48 percent of total device sales, an increase of 30 percent from the 2010 survey. Smartphones also represented 51 percent of upgrades, a rise of 36 percent from the previous year’s survey.
With consumers choosing less expensive, no-commitment wireless plans, prepaid plans are a significant, growing proportion of carrier revenues. These services now account for an average of 29.2 percent of total service revenue, up from 22.5 percent in previous survey.
The survey found that mobile voice usage is declining for the first time. The average number of minutes of use per postpaid customer dropped from 720 to 638 per month.
Around 82 percent of carriers who responded to the survey said at least 90 percent of their subscriber base was covered by 3G technology, up from 67 percent in 2010. Meanwhile, seven carriers said they are deploying 4G technology, up from three companies in the previous survey.
"The mobile industry has reached a point where the economics of the current subsidy model, associated with upgrading new and existing customers to costly smartphones, have become increasingly difficult to sustain," said Pierre-Alain Sur, global communications industry leader at PwC. "Customers are becoming less loyal and the average length of postpaid customer relationships has declined to 48 months in the 2011 survey, from 59 months in the 2010 survey. Carriers are revisiting their approach to customer relationships and considering new ways to retain subscribers such as device buyback initiatives, leasing programs and 'bring your own device' approaches."
With almost a third of people suggesting their phones are more helpful to them than their significant others, it’s clear the wireless industry still has a bright future. However, perhaps it would behoove carriers to listen to their customers on how to save.
Edited by Braden Becker