One of our goals at MobilityTechzone is to keep an eye out for resources that can provide comprehensive views of country, regional and global markets and granular insights into each. And, while the explosive Chinese market has gained more than its fair share of attention in regards to all things mobile, the fascination, bordering on fixation, with what is happening in the United States remains and for good reasons. It is thus with great anticipation that I look forward to the quarterly updates from the folks at Chetan Sharma Consulting. It is out with its latest analysis, U.S. Mobile Data Market Q3 2012 (available for viewing as a slide show and free downloading on its website), and for anyone looking to get an accurate temperature read on this market this is a must-read.
The 36-page report is full of important statistics that highlight significant industry trends. A few highlights summarized below include:
- Service Revenues: The U.S. Wireless data service revenues grew 3 percent Q/Q and 17 percent Y/Y to $19.9B in Q3 2012. For the year 2012, we are forecasting that mobile data revenues in the US market will reach $80 billion.
- ARPU: The Overall ARPU declined by $0.15. Average voice ARPU declined by $0.58 while the average data ARPU grew by $0.43 or 2 percent Q/Q. Average industry percentage contribution of data to overall ARPU is now at the 43 percent mark in Q3 2012 and is likely to exceed the 50 percent mark early next year.
- Subscribers: The U.S. operators added 400K postpaid subs and over 2.4M total. It was the lowest net-adds quarter in the U.S. mobile history (barring the early days of tepid growth)
- Applications and Services: Messaging revenues in the U.S. market might have peaked. For the first time, both the overall messaging volume and the revenues declined Q/Q. However, there are appreciable increases in mobile commerce and payment services as well as in various industry verticals like healthcare, retail and education.
- Handsets: Smartphones accounted for almost 80 percent of the devices sold in Q3 2012 with Android dominating though iPhone leads in revenue and mindshare. U.S. continues to sell more than 40 percent of the world’s smartphone every quarter, thus making it the most attractive market for OEMs.
- Mobile Data Growth: The overall data consumption in the U.S. market in 2012 is expected to exceed 2000 Petabytes or 2 Exabytes. The smartphone data consumption at some operators is averaging close to 900 MB/mo. Some devices are averaging close to 2 GB/mo. As we move into 1GB range along with the family data plans kicking in, expect the data tiers to get bigger both in GBs and dollar amount. Plus:
- The Signaling traffic has increased 3x.
- Mobile data traffic growth is likely to slow down to roughly 80 percent after doubling for the last five years. Voice traffic will dip below 10 percent of the overall traffic in 2012.
As you can see from the above, the report is a page turner. While it is crammed with interesting tables and discussion, it seems appropriate to discuss two finding that highlight the operators’ dilemma.
The first is that Chetan Sharma is predicting that by Q4 2013 average ARPU for voice services will have declined to roughly $45 while average ARPU for data will have increased to the same amount. Without predicting in graphic form what happens afterward, it is obvious. Voice will continue its decline as a percentage of total mobility spend and profits. The report also shows an even more interesting view of the decline of voice and ascendency of data in it very last chart. As recently as 2009, voice services accounted for roughly 40 percent of all mobile traffic. However, by the end of 2013 it will have dipped below 10 percent.
Chetan Sharma says this demonstrates why mobile operators need to be offering what they call the “4th Wave” of value-added services. This is particularly true since not only is the voice cash cow going away, but messaging is flattening out as people use social media more and more to interact with each other in real- time. The ramifications are immense, not because of the trends but rather because of the speed at which all of this is happening.
The dilemma the operators are facing is how to build out the broadband infrastructure fast enough to accommodate the change in the nature of traffic (including finding the spectrum and finding the sites for small cells and the power and backhaul to connect them) and how to charge for the network expansion while remaining profitable as competition from OTTs, public Wi-Fi operators, etc. increases. The latter is non-trivial. This is not just because on the projected growth in the number of multi-gigabit households and the coming tidal way of more and more connected devices of all types and for all types of applications, but in large measure because the value-added of all this traffic is not assured as going through mobile operator billing systems.
In short, the irony here is that the mobile operators are facing the same type of “dumb pipe” scenario that the landline operators have been struggling with. Chetan Sharma sees 4th Wave services such as M2M applications, femtocell deployments to accelerate the “digital life” and mobile as operator of preference, the connected car and electronic wallet/payments markets are the places mobile operators will have to not just look but likely dominate if they are to have sustainable competitive advantage. Pundits agree that this is true, but whether in the race to get there the operators can move at the speed of the market remains the big question. They risk not catching the next wave.
As noted at the top, the nice thing about such reports is they give us a lot of food for thought. The good news is that Chetan Sharma publishes on a quarterly basis. It used to be that market stats in this depth were issued less frequently. In what I have characterized in the past as “The Age of Acceleration,” have access to quarterly information like this is extremely valuable. Take a look and see for yourself.