Did LTE Supply Drive Demand, or Did Demand Drive Supply?

It is hard to say whether U.S. LTE users consume more data because they have access to LTE, or whether they simply consume more data. Some data might suggest U.S. users simply consume more of everything.

In other words, demand creates supply, more than supply creating demand.

Mobile subscribers in North America are using significantly higher volumes of mobile services compared to users in other developed markets, both in terms of traditional mobile services (voice/SMS) and mobile data services, according to GSMA.

On a per-connection basis, time spent on voice calls is five times as high as in Europe, while over twice as many text messages are sent.

Data from Cisco indicates that North America in 2013 accounted for over a quarter of global mobile data volumes, despite the region having just over five per cent of total mobile connections, GSMA notes.

Between 2008 and 2013, mobile revenue in North America grew by 4.7 percent a year compound annual growth rate (CAGR), above the global average of 4.5 percent, and well ahead of Europe, where revenue declined at a CAGR of three percent.

But service provider policies might also play a role. Innovations such as tiered pricing, shared data plans and diverse and plentiful device supply arguably have helped boost usage and revenue.  

GSMA also argues that a generally supportive regulatory regime also matters. “For example, the U.S. market saw the early allocation of digital dividend spectrum in 2008, which was the key factor in establishing its 4G leadership,” GSMA says.

“Regulators have also looked more favorably on market consolidation between operators than has been the case in other developed markets,” GSMA notes. Between 2003 and 2012, the U.S. Federal Communications Commission approved 20 significant mergers and other mobile license transactions, with a total value of US$288 billion, according to GSMA.

These efforts, and consumer behavior, “have allowed operators in the region to deliver healthy revenue growth over recent years, at a time when many operators in other developed regions have seen revenue trends in decline,” GSMA says.

That conclusion was part of a study on LTE economic impact that perhaps predictably suggests LTE has a positive effect.

“Our latest Mobile Economy report reveals how the widespread deployment of 4G networks in North America is creating a virtuous circle, stimulating adoption of new mobile technologies, applications and services that are unlocking new revenue streams for operators and enriching the mobile experience for consumers,” said Michael O’Hara, GSMA chief marketing officer.

In the end, the interplay between demand and supply is hard to separate. Some might argue the way supply is brought to market makes a difference. Because usage charging in the U.S. mobile market is "receiving party pays," customers cannot control charges the way they can in a "calling party pays" regime.

So, to encourage usage, mobile service providers arguably have created service plans that alleviate user concern about such uncontrollable inbound traffic. One might argue that has lead to bigger usage buckets and lower retail prices.