Strategy Analytics, a research firm based in Delafield, Wis., gave perhaps the most conservative forecast of the paging industry to date during a teleconference coinciding with the release of its report, titled “U.S. Paging Market Status and Forecast.”
Ann Lynch, a researcher at Strategy Analytics, said that while the paging installed base grew 17 percent last year, and will continue to grow in the coming years, the industry can expect its number to level off and shrink after 2004. “Paging is at the peak of its life cycle, riding the crest of a wave right now,” Lynch said. Annual growth has fallen since its peak in 1995 and will continue to fall through 2003.
The report projected a total installed base of 54.5 million by 2003. Of that number, 45 percent will be numeric users, 38 percent alphanumeric or guaranteed delivery alphanumeric users, 8 percent interactive or canned-response two-way users and 7 percent voice, the group predicted.
“The pressures facing the paging industry today are enormous,” she said. The industry faces Wall Street’s insistence that it get financial control and produce positive cash flow as well as increasing competition from mobile data and digital voice providers who also are offering text messaging solutions.
“All of this meant we had a pretty turbulent year,” Lynch said, referring to the roller coaster of ride stock prices.
Strategy Analytics said what little compound annual growth rate the industry does achieve will come from NPCS services. Last year, SkyTel solved many of its network problems, which resulted in a relaunch that claimed 200,000 customers by year end and attracted major resale agreements with PageNet, Metrocall, PageMart, AirTouch and MobileMedia.
VoiceNow may have been a disappointment, but “as with any new service, I think it’s important to maintain a healthy skepticism,” Lynch said. There is skepticism about the optimistic projections carriers make as well as the pessimistic doom tails told if those projections are not met. PageNet had the burden of needing to establish a large economy of scale to justify the costs of the network. Voice paging is still viable as proven by the success on Conxus’ rollout of essentially the same service. Conxus, without the burden of a large economy of scale, could roll out more slowly.
Other carriers will build out their NPCS licenses as well. As they do, they will aim their products increasingly at the consumer market, Strategy Analytics said.
“It has long been the holy grail of the paging service provider to capture the breadth and scope of the consumer market,” Lynch said. As consumers are more likely to know the name of their service provider than business users, because consumers pay the bill themselves, carriers can more effectively aim their marketing efforts at them, she said.
Further into the future, the pressures on the paging industry will intensify as the bastions of the paging industry-nationwide coverage and in-building penetration-come under threat from PCS and other digital voice services, she said.
Hence, the group is fairly conservative in its estimates of two-way data services, predicting only 8 percent of the total base will use such services. Just as alphanumeric services took time to catch on, so will two-way canned and interactive messaging, Lynch said. “Newer network launches take time to implement,” she said.
While fixed applications-such as SkyTel’s agreement with electric utility giant Enron Corp.-will add to paging providers’ customer portfolio in the time it takes to generate user interest, they will constitute only 20 percent of the total 8 percent of the installed base as of 2003, the firm predicted.
“We are not totally convinced that paging will capture the lion’s share of that (fixed application) market,” said David Kerr, director of wireless programs at Strategy Analytics. Paging will have to compete in that market with mobile data providers, digital voice providers and mobile satellite providers. “I don’t think we’ll have multiple devices in the home controlled by paging technology anytime soon,” he said.
But the industry will have some cards left to play, Lynch added, as pagers always will be small and unobtrusive with the greatest message reliability at the lowest and predictable flat-rate cost.
Also, consolidation will play a major factor, as the industry huddles together for survival. “We have a situation now where the industry is dominated by a smaller group of increasingly larger operators,” Lynch said, predicting that group could become as small as three or four major players.
“In an increasingly competitive wireless environment, paging is considered the grandfather,” she said. “It’s still holding its own.”
