December 01, 2008
U.S. Wireless Data Prospects in 2009: Up, Down or Flat?
By Gary Kim, Contributing Editor
The U.S. wireless data market grew 7.3 percent sequentially in the third quarter 2008 and 37.5 percent year over year to reach $8.8 billion in data services revenues. For first nine months, mobile data revenues of $24.5 billion were equal to the revenues generated for all of 2007.
The big question is what happens in the fourth quarter and after, as it appears handset upgrades and sales, for example, already are slowing. Some observers think wireless data service revenes will hold up. Analyst Chetan Sharma, for example, notes that text messaging represents 40 percent of all data revenues, and that the texting habit is unlikely to change.
In the third quarter, U.S. messaging volumes grew 38 percent while messaging revenues grew six percent. Use of wireless dongles and cards for mobile PC access has been a big driver of revenue of late, and Sharma thinks that could an area of softness though, for the simple reason that many former users will fall victim to layoffs, while managements might be less generous in providing such technology to their remaining employees.
As logical as that thesis is, others think there is evidence mobile data card use could grow substantially in 2009. Taking a look at data card growth in Western Europe, CCS Insight now projects there will be more than 36 million laptops connected to mobile data networks in Western Europe in 2009, compared to the 26 million estimated for 2008.
Packages that combine fixed and wireless access could play a big role in sustaining that growth, says Paolo Pescatore, CCS Insight analyst. In Sweden, cable operator Com Hem (News - Alert) is collaborating with three to offer subscribers mobile as well as cable broadband. The goal is for them to become one-stop shops for broadband.
"Many mobile operators also have fixed-line assets, so they are very much in a position to package multiple access technologies and compete quite aggressively," says Pescatore.
Mobile operators also will start to package mobile phones and laptop connectivity as a bundle, a way of increasing mobile broadband growth even during tougher economic conditions.
Still, it is conceivable that mobile data growth in the U.S. market will flatten out in 2009, says Sharma. "If the job loss rate increases substantially, more than it has been in the third quarter and into the fourth quarter, we might, just might, start to see flattening of data revenues in the first quarter of 2009 and gradual decline over the course of the year," says Sharma.
Mobile providers probably can counteract economic issues by emphasizing sales of sub-$200 smart phones bundled with data plans, Charma says. To the extent there is an economic effect, it is likely to be on average revenue per user, Sharma suggests.
That likely will be the case for wired network providers as well, as price and bundle promotions increase.
Operators in Europe have already started to feel the pinch, Sharma says. Vodafone (News - Alert) and Telefonica recently have seen a decline in overall revenues. Though overall service revenues declined 1.7 percent, data revenues grew 30 percent. That suggests the importance of data plan, handset and bundling programs.
Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary's articles, please visit his columnist page.
Edited by Jessica Kostek
