Report: US Carriers Face Test
Without some level of success with wireless data this year, U.S. service providers will have a tough time convincing investors to fund third generation (3G) networks, according to the latest edition of Wireless Oracle, which is available now.
The monthly paid subscription service has examined the potential for wireless data services in the U.S., looking at the technologies being deployed, the costs to the operators of data delivery, the key applications and the proposed pricing plans. Amongst the operators under scrutiny are AT&T Wireless Services Inc. (NYSE: AWE), Cingular Wireless, Verizon Wireless, Nextel Communications Inc. (Nasdaq: NXTL), Sprint PCS (NYSE: PCS), and VoiceStream Wireless Corp..
The report, titled "The Price Is Right: U.S. Wireless Data Strategies," finds that capacity issues are keeping prices at the high end of the scale at present -- if prices were lower the networks might not be able to handle the data demands of users. This is particularly the case for Verizon Wireless and its CDMA 1xRTT network.
What is important for all the carriers is to get some services into the market and raise awareness of those services, and they need to do this to increase the average revenue per user (ARPU), as the growth in total subscriber numbers slows. Key to this will be the development of low-bandwidth applications that do not make the networks creak but that will generate revenue and user familiarity and loyalty. In this respect, European operators got lucky with the unexpected success of SMS. Although it is risky to assume that such success can be duplicated, it offers U.S. operators the potential for a low-risk, low-cost service that could gain acceptance from a nation hooked on a more established messaging service -- email.
In the meantime, U.S. customers can expect more sophisticated wireless data offerings to come with a fairly high price. "Next-gen data will remain a premium service for at least another year," finds the report. "Wireless operators historically have cut prices to boost market share. But in the past year that strategy has fallen out of favor with Wall Street, which now demands not just more customers but ones who spend enough to turn a profit." The report looks at the potential premium services that could be offered and the revenue potential they afford the operators.
The report finds that pricing patterns will also be affected by the rates for wired broadband services, such as cable and DSL. If wireline access prices increase, it will be easier for the wireless players to justify or even increase their rates. The effectiveness of the carriers' billing systems is also considered, as complicated and inefficient back-office functions can keep operational expenditure high, leaving less room for competitive pricing.
And no report is complete without an analysis of the potential, and threat, posed by wireless LANs and the specialist operators in that sector. With capacity less of a concern for the WiFi service providers, even if only in hotspot areas, expect more mobile operators to either launch, acquire, or partner with WLAN operators "to offer unlimited-use plans in airports, hotels and other areas frequented by the lucrative business-user demographic."
In conclusion, the report finds that, as with basic voice service, next-generation wireless data services will be "attractive and affordable mainly to business users and early adopters -- it’s worth remembering that wireless took more than a decade to grab 50% of the U.S. market. Next-gen data will be an evolution, not a revolution."
— Ray Le Maistre, European Editor, Unstrung
http://www.unstrung.com The full report, "The Price Is Right: U.S. Wireless Data Strategies," costs $400. An annual subscription to the Wireless Oracle is ordinarily $1,250, but is currently available at the special introductory price of $899. For more information, including subscription information and research examples, go to Wireless Oracle.
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