It’s safe to say U.S. wireless subscribers have caught up with much of the rest of the world in terms of data consumption. But it appears American carriers still have their work cut out for them when it comes to cashing in.
The United States long has been considered a kind of backwater when it comes to mobile data usage. American carriers for years have looked enviably at markets such as Western Europe, where text messaging has become a key source of revenues, and Japan and Korea, where phones are used as mini-entertainment centers.
Recent research from M:Metrics indicate many of those gaps may be decreasing-or already have closed entirely. Figures from February, for instance, show that U.S. subscribers are more than twice as likely as their German counterparts to use their phones to search for news and information. American users are far more likely than U.K. consumers to communicate via mobile instant messaging or personal e-mail services. And the United States outpaces both markets when it comes to purchasing personalized content such as ringtones and wireless images.
Meanwhile, text messaging continues to gain ground steadily in America, with more than one-third of subscribers communicating with their thumbs.
“Asia leads (the world) in multimedia, and Europe leads in text messaging,” said Seamus McAteer, a senior analyst with M:Metrics. “The U.S. is second in both; it sort of borrows from both models.”
Indeed, users in Japan and Korea continue to outpace the rest of the world when it comes to wireless data, and for a number of reasons. Many analysts point to the number of users in the Far East who watch mobile video or play games during their commutes on trains or subways. Others cite the low household penetration of personal computers, noting that for many users a phone is the only way to access the Internet outside the office. Still others credit NTT DoCoMo Inc., which has earned acclaim for a generous revenue-share program that encourages developers to bring wireless applications to market.
Non-voice services accounted for a whopping 30 percent of revenue during the fourth quarter for Vodafone Japan, which Vodafone Group plc recently sold to Softbank Corp. None of Vodafone’s other subsidiaries drew more than 21 percent of their revenue in non-voice services during the period.
The average Vodafone Group provider generated 19.4 percent of its revenues from data and non-voice messaging services-about twice as much as most U.S. operators.
“North America, and the U.S. in particular, has taken significant strides in development and growth of mobile data over the past few years,” noted Atte Miettinen, chief commercial officer for End2End VAS ApS, a Danish provider of content management and messaging services. “However, it would be wrong to state that North American or U.S. operators have caught up with Europe in mobile data as a whole as there’s a significant difference in data [average revenue per user] compared to Europe both in terms of absolute numbers as well as a percentage of ARPU.”
For instance, Miettinen noted, data accounted for only 9.6 percent of Cingular Wireless L.L.C.’s fourth-quarter ARPU in 2005, generating an average of $4.70 per user-about 20-percent less than Vodafone Germany’s data ARPU of $5.80. But even that gap seems to be closing, as Cingular increased its data ARPU more than 10 percent, to $5.22, in the first quarter of 2006.
Ironically, slow uptake of text messaging among American users seems to be leading to other, more lucrative services. While European carriers have been slow to embrace outside instant-messaging services-fearing they could cannibalize SMS revenues-U.S. operators have gained substantial ground by partnering with AOL L.L.C., Microsoft Corp.’s MSN, Yahoo Inc. and other providers. Personal e-mail services are beginning to take root, too, and Americans continue to set the pace in wireless enterprise e-mail.
Meanwhile, mobile photo-messaging services lag substantially behind European offerings, thanks largely to initial interoperability problems between Tier 1 carriers. While interoperability is no longer a major concern, uptake has been hindered due to disappointing user experiences in the early days of multimedia messaging services.
Interestingly, vast differences in data usage habits exist even between Western European subscribers. U.K. consumers are 2.5 times more likely to access the wireless Web for news and information than their German counterparts, for instance, according to M:Metrics’ data. Mobile audio and video offerings seem to be more attractive to U.K. users as well-a contrast that likely stems from London’s status as one of the world’s elite media capitals, McAteer said.
“You have better handsets in the U.K. on average, you have a more dynamic media marketplace, you have more multichannel programming, and you have a very dynamic newspaper marketplace in the U.K.,” McAteer commented. “London is the center for marketing and media in Europe.”
Such factors could bode well for the United States, which is largely seen as the multimedia content center of the world. Analysts expect mobile data usage among both Americans and Western Europeans to continue to surge as next-generation applications such as mobile TV and music services come to market during the next several years.
“We expect the U.S. to drive the early development of the market both due to cultural and demographic drivers such as traditional TV usage” as well as new, dedicated multimedia wireless networks from Crown Castle International Corp. and Qualcomm Inc., End2End’s Miettinen noted. However, he said, “Europe is once again in the driving seat for the development of the mobile music market and especially the full-track music download propositions.”
Longtime mobile analyst Roger Entner warned that looking too closely at each market can be a futile endeavor. Unique circumstances in each market-sometimes even within each operator-have created offerings and scenarios that aren’t necessarily applicable anywhere else.
“Koreans like to gamble, they like to play games; you combine that with mobility and off you go,” said Entner, Ovum’s vice president of Wireless Telecoms. “And the Chinese like to gamble. But if you bring mobile gambling to the U.S., good luck. The (Southern) Baptist Convention will go bonkers.”
Those divisions can be even more pronounced in Europe, Entner noted, despite the close proximity of different markets. Unlike America, where a fairly young nation spans a vast continent, European countries have developed stark differences over centuries of living with-and fighting against-each other.
“(America) is a largely homogenous country,” he said. “The differences in Europe are far larger. They’ve all killed each other much more recently.”
