Report: Carriers Adopt 3 Strategies To Boost Data

By Joseph Palenchar On Jan 24 2011 - 6:01am

HAMPTON, N.H. – Cellular carriers are building up their data revenues by expanding their smartphone portfolios, introducing tiered data plans, and upgrading network speeds, research company Technology Business Research (TBR) concluded in a recent report.

“The wireless industry is undergoing rapid evolution toward a data-focused revenue model,” said analyst Kate Price. “The combination of a wide array of smartphones, high-performing networks and multiple rate-plan options has been the key to data revenue growth for the top performers.”

Connected devices such as e-readers and other machineto- machine (M2M) devices are also stimulating carriers’ data revenues, TBR said. “AT&T and Verizon Wireless are the industry leaders in connected devices, which accounted for 44 percent and 19 percent of net additions, respectively (in the third quarter of 2010),” Price said. AT&T was a frontrunner in the connected-devices category, supporting 7.8 million connections and carving out a niche with e-readers, she said.

Price also called M2M “a rapidly growing device segment,” with carriers pursuing vertical markets with a focus on healthcare and utilities. Although average revenues per device are low, she said, volume is high, and the devices provide high margins for operators.” AT&T and Sprint seem to be the most aggressive carriers targeting specific vertical markets to grow their revenues, Price noted.

Smartphone penetration is also a significant contributor to data-revenue growth, TBR said, because smartphones’ advanced features promote the use of applications, Internet access and video streaming. AT&T has relied on the iPhone to boost data revenues “despite its best efforts to expand the handset lineup with Android and Windows Phone 7 devices,” Price said, while Verizon Wireless has relied on a more diversified handset lineup based primarily on Android phones. The two carriers are likely to reverse roles, however, given Verizon’s decision to launch a CDMA iPhone by the end of January, she said. “Whereas Verizon has played a key role in the growth of Google’s Android platform, the next two years will see AT&T become a key Android proponent while Verizon sees its growth shift toward the iPhone,” she said.

The spread of tiered data plans to complement or replace higher-priced unlimited-data plans is also stimulating data use by expanding the potential base of smartphone users, TBR continued. Lower-priced data tiers “will enable operators to attract low-data users and move them up the value chain as they become familiar with and demand more data services,” Price said. Tiered data pricing, she added, “will serve as a segue to innovative pricing for connected devices.” Price foresees carriers providing buckets of data to which subscribers can attach numerous devices, further promoting adoption of connected devices.

Verizon Wireless followed AT&T into offering tiered data plans in October by offering a $15/ month data plan for 150MB of data on an experimental basis while maintaining its $30 unlimited-use plan. Price believes Verizon will make the $15 plan “more permanent following favorable subscriber adoption.” In June 2010, AT&T dropped its $30/month unlimited-data plan to launch two options: $15 for 200MB and $25 for 2GB.

To support robust data consumption, carriers have been upgrading their networks’ data rates, notably with Verizon’s 4G LTE launch and the adoption by T-Mobile and AT&T of HSPA+ technology. T-Mobile plans to accelerate its data speed further with the rollout of multicarrier HSPA+, and AT&T this month committed to a timetable to roll out LTE service, which it will launch in mid-2011, expand to markets with a population of 75 million by the end of 2011, and deploy nationwide by the end of 2013.

For its part, Verizon provides 4G LTE service to 110 million people, and the carrier will deploy the 4G technology throughout its entire footprint by 2013 to reach 285 million people.

Samsung’s 4G LTE phone for Verizon, as yet unnamed, features Android 2.2, 4.3-inch Super AMOLED Plus display for improved viewing in sunlight, HD video recording, 8-megapixel rear camera, 1.3-megapixel front-facing camera, and access to Samsung’s Media Hub movie- and TV-show-download service.