With Wireless Data, Smaller Carriers Must Mind the Gap

The floundering economy hasn’t kept consumers from spending on mobile data, according to the latest quarterly report on the wireless industry from Chetan Sharma, one of our GigaOM Pro analysts. U.S. data service revenues grew 27 percent year-over-year in the third quarter, Sharma reported, with Verizon Wireless (s vz) and AT&T (s t) accounting for 80 percent of the rise, underscoring what I wrote last week about how the rich carriers are getting richer. Given the investment needed to build out new networks, and the incredible growth in data, both the smaller carriers and U.S. regulators should mind the growing gap between those that are raking in the wireless data dough and those that are not.
Verizon’s data revenue exceeded $4 billion during the quarter, and is now approaching longtime global leader NTT DoCoMo.  Overall, the top four U.S. carriers “are now a permanent fixture” among the top 10 worldwide carriers in terms of mobile service revenues. Other nuggets from Sharma’s report include:

  • 3G penetration in the U.S. stayed at “a healthy” 43 percent in the third quarter of 2009, with Verizon outpacing its competitors and T-Mobile slowly expanding its 3G coverage. The growth in 3G and smartphones helped offset some of the downward pressure on the data revenues and overall ARPU.
  • Flat-rate pricing continued to gain steam in the U.S. market with industry-wide flat-rate pricing plans that included data. Almost all of the major carriers are offering flat-fee access plans for most of the new smartphones being introduced in the market, and roughly 20 percent of the consumers have flat-rate data plans.
  • The subscriber gap between the two largest carriers (AT&T and Verizon) and the next-largest two (Sprint (s s) and T-Mobile) will continue to increase, Sharma predicts, rising from 28 percent.

U.S. mobile data traffic is likely to exceed 400 petabytes by the end of 2009, according to Sharma, up 193 percent from 2008. And that increased usage is forcing carriers to accelerate their 4G strategies and adopt a multipronged model to manage traffic more effectively. With the larger carriers seeing the greatest revenue gains from data, it stands to reason that as more investment is needed to “keep up with the Verizons” both AT&T and Verizon will continue their data lead. That’s bad news for T-Mobile and Sprint. Sprint’s investment in WiMAX was its attempt to get out in front of this demand for data, but so far it looks like its timing may have been off.