It's a Cellular World

Carl Weinschenk

In one of the more anticlimactic assessments of the past few years, analysts say that American households now spend more on cell phones than landline services.

 

The most recent figures available cover 2006. At that point, landlines still beat cell phones by $18 per household, $542 to $524, according this Associated Press story posted at the International Herald Tribune. Analysts quoted in the story say that it is a near certainty that cell phones have passed fixed in the interim. There simply are more ways to spend money with a cell phone in terms of text messaging, video and music. They also outnumber landline phones, 250 million to 170 million.

 

The fact that cellular has passed wireline in the early days of 3G is a case of the industry having its cake and eating it too: It is hot, and the best things -- in the form of revenue generated by open networks from Verizon and, perhaps, other carriers, the Android platform and the services made available via the 700 MHz auction -- are yet to come.

 

The enviable place that cellular finds itself in is evident in this transcription at InformationWeek of a conversation between a reporter and a consultant about the trends that lay ahead in 2008. The piece focuses on the move by Verizon to open its network, which will stimulate business. The expert expects the other carriers will follow and, if strong standards are in place, the openness will result in strong growth.

 

The signs are good for a cellular expansion. For instance, Verizon Wireless experienced strong growth during the past quarter despite the fact that the AT&T-exclusive iPhone launched during the period. The carrier added 1.8 million net retail customers, according to this Reuters story. Indeed, Verizon Wireless -- a joint venture between Verizon and Vodafone -- brought in half of Verizon Communications' revenue.


 

The theme is clear. Said Sanford Bernstein analyst Craig Moffett:

It's a story of tremendous strength in wireless and continued deterioration in wireline.

Verizon was not the only carrier that enjoyed good times. AT&T had wireless revenue of $10.9 billion, a 14.4 percent increase over the year-ago quarter. The headliner, of course, was the iPhone. But the increases predate that introduction: During the past year, Verizon's CFO says, wireless subscriptions increased by 7 million. Wireless subscriber gains were 46.8 percent higher during the quarter compared to the third quarter of 2006. The carrier finished the third quarter with 65.7 million subscribers, 2 million more than at the end of the second quarter.

 

Only 7 million of the carrier's wireless customers are on 3G networks. Transitioning more to the new platform will drive non-voice revenues. The action could heat up as early as next month, the story says, when a Napster library of 5 million tracks is introduced.

 

This isn't a U.S.-only phenomena. Indeed, like most cellular trends, the U.S. trails Europe and Asia. This story, based on research from Informa, says mobile phone subscriber rolls in November reached 3.3 billion, which is equivalent to half the world's population.

 

Mark Newman, the head of research for Informa, said in a statement that cellular -- which is only 26 years old -- has beaten even the most optimistic forecasts on a regular basis. Fifty-nine countries have mobile penetrations of more than 100 percent. This means that in these nations many people have more than one phone, since there always will be a good number without any.

 

The sheer numbers are interesting: On November 29, there were 6,634,294,193 people in the world, according to the U.S. Census Bureau. At that point, 2,571,563,279 were using Global System for Mobile communications (GSM) phones. The second most popular platform, Code Division Multiple Access (CDMA), was used by 421.4 million people at the end of September.

 

The precise numbers, of course, are not the most important thing. The main takeaway is that cellular phones are the predominant way for people to talk to each other and perform a growing number of work and leisure activities. Wireline phones won't retake the crown. Though wireless, led by 4G platforms such as WiMax, Ultra Mobile Broadband (UMB) and Long Term Evolution (LTE), will be a significant player, it will never be the champ.



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