US Mobile
Data Market Update Q2 2010
http://chetansharma.com/usmarketupdateq22010.htm
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Executive Summary
The US wireless data market grew 6% Q/Q and 22% Y/Y to exceed
$13.2B in mobile data service revenues in Q2 2010 - on track so
far to meet our initial estimate of $54B for the year.
Having narrowly edged NTT DoCoMo last quarter for the first
time, Verizon Wireless maintained its number one ranking for the
1H 2010 in terms of the operator with the most mobile data
revenues (though the difference was thinner than the amoeba
membrane). The total wireless connections for Verizon were
almost 100M with 92.1M being the traditional subscriber base.
Rest of the 3 top US operators also maintained leading positions
amongst the top 10 global mobile data operators.
Sprint had the first positive netadd quarter in 3 years and has
been slowly and steadily turning the ship around. T-Mobile did
better on the postpaid netadds but overall additions declined
again. The larger question for the market is if 4 large players
can stay competitive. Generally, the answer is no. But these are
different times and there are a number of permutations and
combinations that are possible.
The US subscription penetration crossed 95% at the end of Q2
2010. If we take out the demographics of 5 yrs and younger, the
mobile penetration is now past 100%. While the traditional
net-adds have been slowing, the “connected device” segment is
picking up so much that both AT&T and Verizon added more
connected devices than postpaid subs in Q2 2010. Given the slow
postpaid growth, operators are fiercely competing in prepaid,
enterprise, connected devices, and M2M segments.
Data traffic continued to increase across all networks. By 1H
2010, the average US consumer was consuming approximately 230
MB/mo up 50% in 6 months. US has become ground zero for mobile
broadband consumption and data traffic management evolution.
While it lags Japan and Korea in 3G penetration by a distance,
due to higher penetration of smartphones and datacards, the
consumption is much higher than its Asian counterparts. Given
that it is also becoming the largest deployment base for HSPA+
and LTE, most of the cutting edge research in areas of data
management and experimentation with policy, regulations,
strategy, and business models is taking place in the networks of
the US operators and keenly watched by players across the global
ecosystem.
As we had forecasted, the tiered pricing structure for mobile
broadband touched the US shores with AT&T becoming the first
major operator to change its pricing plan based on consumer
consumption. We will see the pricing evolve over the next 2-4
quarters as the US mobile ecosystem adjusts to the new realities
and strategies for mobile data consumption.
In the connected device category, iPad like its flashy cousin
dominated the headlines, the sales numbers, and the industry
profits. The device sent every slate maker back to the drawing
board, many projects were cancelled and strategies are still
being formulated to capture a new burgeoning space and Apple
again has a massive lead of mindshare and pocketbook.
Kids of the now generation
are growing with connected electronics that is fundamentally
altering the behaviors and expectations of interaction,
communication, consumption, and monetization.
All this has setup an absolutely fascinating period in the
communication/computing industry. Convergence is everywhere and
is leading to fundamental reset of the value chains and
ecosystems. We are going to be discussing the ins and outs of
how the industry is going to evolve in the next decade in our
Sept 8th event – Mobile
Future Forward which
is bringing exceptional industry thought-leaders, inventors, and
doers to brainstorm, discuss, and debate what’s next. Hope you
can join the discussion.
What to expect in the coming months?
31% of the US subscription base is now smartphones.
The pace of product introduction is accelerating with each
quarter. Devices of all shapes and sizes are coming into the
market literally every week. Players are having to re-evaluate
their businesses and long-term strategies. Several new
impressive devices got introduced during the course of 1H of
2010 including the iPad and EVO.
There are several players whose future is at stake (to put it
mildly). The competition has grown fierce and companies are
finding it hard to take ideas from R&D to products in market in
a short amount of time.
Microsoft announced its comeback with the W7 commercial launch
imminent. The change in UI was refreshing and the expectations
are quite high. W7 v2 is likely around the corner to update on
the flaws of v1. HP acquired Palm in an attempt to become
relevant again in the mobile device space. It has been an action
packed 1H 2010 and we can expect more of the same for the
remainder of the year.
2010 has also been active on the regulatory front as the
national broadband plan was unveiled in March and the subsequent
debate over the course of nations broadband future kept the
spectrum, net-neutrality, and exclusivity issues at the
forefront.
To start planning for 4G, 5G, and beyond, US should think about
rolling a 50 year broadband plan. While more spectrum is always
helpful, will we have all the spectrum we need in 2050? or do we
need to invent new technologies and business models that use
spectrum more wisely? This topic will keep the industry occupied
for some time to come. (We will be going in-depth into this
subject at our Sept event with some
very
senior and experienced executives)
2010 is also the year of network rollouts. T-Mobile has been
rolling out HSPA+ at an impressive rate, Clearwire announced its
intention to move to LTE, Verizon is betting big on LTE and
looking for competitive marketing advantage over the course of
the next 12 months. AT&T has been adding backhaul, upgrading to
HSPA+ and planning for LTE all at once. Even the smaller
carriers like MetroPCS are looking for competitive advantage
with quicker LTE launch and beat others by carrying the first
LTE smartphone. (We will be releasing the next edition of our “State
of the “Mobile” Broadband Nation”
paper later this year)
As we had mentioned last year, the mobile data traffic kept on
growing disproportional to the revenues. A series of solutions
have come into the market from players big and small. We
released the second edition of our in-depth research paper on
data growth - "Managing
Growth and Profits in the Yottabyte Era"
last quarter.
We will be keeping a very close eye on the micro- and
macro-trends and reporting on the market on a regular basis in
various private and public settings.
Against this backdrop, the analysis of the Q2 2010 US wireless
data market is:
Service Revenues (Slides 7, 16)
-
The US Wireless data service revenues grew 6% Q/Q to $13.2B
in Q210. Compared to Q209, the mobile data service revenues
grew 22%.
-
Verizon and AT&T accounted for 75% of the increase in data
revenues in Q2 2010.
-
T-Mobile’s 3G drive is starting to pay off. While the
net-adds were still in the red, its data growth is starting
to match with its peers. The 20% 3G smartphone base
definitely helps.
-
Verizon Wireless again nudged past NTT DoCoMo in overall
mobile data revenues by a whisker. By the end of the year,
China Mobile and AT&T are also likely to cross their
Japanese counterpart in quarterly mobile data service
revenues.
-
AT&T and Verizon now account for 70% of the market data
services revenues and 62% of the subscription base.
ARPU (Slides 8-11)
-
The Overall ARPU increased by $0.46 reversing the declining
trend of the past three quarters. Average voice ARPU
declined by $0.13 while the average data ARPU grew by $0.58
or 4% Q/Q.
-
The average industry percentage contribution of data to
overall ARPU is now 31% in Q210.
-
Verizon led in data ARPU with $17.37 followed by AT&T and
Sprint. In terms of % contribution, all the top three
operators exceeded the 30% mark. T-Mobile ended the quarter
with approximately 25% of its revenue coming from data
services.
Subscribers (Slides 12-14)
-
Overall netadds stayed stable at just over 3M with AT&T
gaining the lion-share (though their count now includes the
connected devices while other operators don’t specifically
include that in the calculations).
-
The texting see-saw between US and Philippines continued in
Q210. US averaged around 639 messages/user/mo marginally
behind Philippines.
-
For the third straight quarter, AT&T reported more net-adds
from connected devices than postpaid subs. Connected devices
are now 7% of AT&T’s subscription base.
-
Sprint got back into the positive net-adds territory again
after 3 years. T-Mobile’s net-adds continued to decline.
T-Mobile’s 20% and Sprint’s 23% subscriber base is now
prepaid. The national prepaid penetration is touching 20%.
Applications and Services
-
Non-messaging services continues to grab 60-65% of the data
revenues for the US carriers.
-
There is a significant shift taking place in terms of app
revenues. In 2010, there will be more revenues generated
(globally) from off-deck than on-deck for the first time and
while the on-deck revenues are in billions, the decline
trend looks irreversible. In the US, this shift will occur
next year. (We released our mobile
apps economy research paper earlier
this year)
-
The usage and data consumption trends are enabling carriers
to accelerate their 3.5G/4G plans and develop long-term
business and technical strategies.
Handsets
-
Nokia sold 111M units in Q2 2010 amounting for 36% of the
market share. Samsung again had a solid quarter with 64M
devices sold with the share at 21%. LG Electronics at 10%,
Sony Ericsson and RIM at 3.6% rounded up the top 5.
-
Apple shipped 8.4M iPhones in Q2 but the criticism over the
antenna design took some shine out from yet another home
run.
-
Smartphone penetration increased to 31% in the US market
Data Traffic (Slide 15)
·
As we noted in our last update, the data traffic is now
significantly more than the voice traffic. By 1H 2010, the
average US consumer was consuming approximately 230 MB/mo up 50%
in 6 months. The good news is that there are several solutions
available and are being invented that will help manage the data
growth starting with the tiered pricing plans.
To discuss all these
trends and more, we are putting together a unique
Mobile Future Forward Executive Summit and are fortunate to
have the company of some of the sharpest minds in the industry,
folks who both have the vision to shape the evolution and the
authority to invest billions of dollars this decade to make
things happen. Hope to see you in Seattle on Sept 8th.
Abhi Ingle, VP, AT&T; Amir
Mashkoori, CEO, Kovio; Anand Chandrasekhar, SVP & GM,
Intel; Bob Azzi, SVP - Network, Sprint Nextel;
Christopher Dean, Chief Strategy Officer, Skype; Danny
Bowman, President, Sprint Nextel; David Weiden,
General Partner, Khosla Ventures; Dr. Boris Nikolic, Sr.
Program Officer, Global Health & Discovery, Bill & Melinda Gates
Foundation; Dr. Genevieve Bell, Intel Fellow & Director,
User Experience, Intel; Dr. Greg Brandenberg, CEO,
Columbia Basin Health Association; Dr. Sailesh Chutani,
CEO, Mobisante; Dr. Suzanne Clough, Chief Medical
Officer, WellDoc; Erick Tseng, Head of Mobile, Facebook; Glenn Lurie, President, AT&T; Hank
Skorny, SVP, Media Mobile Cloud Computing, Real Networks;
Jack Kennedy, EVP, News Corp; Joe Sims, Lead Partner
- Digital Convergence , Booz & Company; Jon Stross, VP &
GM - Babycenter, Johnson & Johnson; Ken Denman, CEO,
Openwave; Krishna Vedati, SVP & GM - Mobile, AT&T
Interactive; Lirong Shi, President, ZTE; Louis Gump,
VP Mobile, CNN; Mario Queiroz, VP - Product Management -
Android, Google; Mark Selby, VP, Nokia; Matt Bross,
CTO and Vice Chairman, Huawei; Michael Sievert, Chief
Commercial Officer, Clearwire; Neville Ray, Chief Network
Officer, T-Mobile ; Omar Javaid, CEO, BBDO; Paul
Palmieri, Founder and CEO, Millennial Media; Rob Glaser,
Chairman, Real Networks and Partner, Accel; Sean Cai,
VP - Advanced Technology, ZTE; Stephen David, Former CIO,
Proctor & Gamble; Subba Rao, CEO, TataDoCoMo; Takayuki
Hoshuyama, CEO D2 Communications; Tim Chang, Partner,
NVP; Tony Lewis, VP,
Verizon; Wim Sweldens, President, Alcatel-Lucent
Each panel discussion will involve
luminaries/experts on specific topics, for e.g.
|
Opportunities in Mobile
Mike Sievert, CCO, Clearwire
Dr. Genevieve Bell, Fellow, Intel
Shi Lirong, President, ZTE
Subba Rao, CEO, Tata DoCoMo |
Evolution of Communication/ Engagement
Christopher Dean, Chief Strategy
Officer, Skype
Erick Tseng, Head of Mobile, Facebook
Mario Queiroz, VP, Google
David Weiden, General Partner,
Khosla Ventures |
The size of the panel will be small and
the time duration long so we can delve deep into the issues and
questions. For more panel, speaker, sponsor, and program details, please visit
http://www.mobilefutureforward.com
Your feedback is always
welcome.
