With pricing approaching a penny a minute and margins measured by economic micrometers, financial viability is all about market share and year-to-year subscriber growth. According to a recent market study by Technology Business Research, Verizon leads in market share with 22.4 percent, followed by Cingular (16.5 percent), AT&T (14.8 percent), Sprint (10.8 percent), Nextel (6.9 percent) and VoiceStream (5.7 percent). However, when viewed against a more important benchmark-- year-to-year subscriber growth -- Sprint comes out on top at 37.9 percent, followed closely by VoiceStream (36.4 percent), Nextel (27.4 percent), AT&T (19.5 percent), Verizon (9.1 percent) and Cingular (6.3 percent).
Increases in subscriber bases and in monthly per-subscriber charges (Nextel's $68 average is highest; Verizon's is lowest at $46) are needed to service the massive debt-burden these companies face mainly as a result of spectrum auctions and infrastructure build-outs. Worse, while economies of scale and technology upgrades have boosted the bottom line, marketing costs have soared and price competition has created a new consumer norm for what constitutes acceptable pricing.
Voice Still Rules
Every time I see the kids at my son's baseball practice scramble to figure out whose cell phone is ringing, I'm reminded that we're fast approaching a level of cellular voice density that nobody could have predicted. This level of connectedness has had a profound impact on business and society, fueled by technical development and cutthroat competition.
But wireless data remains, at best, an afterthought. Yes, in key vertical markets and among a sliver of the population we can refer to as mobile professionals, broadband wireless data has the potential to transform. But for most of us, the value proposition of making a phone call from your car is compelling, whereas the value proposition of accessing a Web site from your PDA is nothing more than confusing.
Given that reality, who can blame the major cellular providers for waiting on the sidelines, meekly promoting their overpriced, underperforming data services? Few of us demand these services and fewer still are willing to pay realistic prices.
Gloom but Not Doom
Is the future of wireless data really this bleak? Will the market ever take off, and what will it take to make that happen?
Low-cost wireless LAN hot spots make the infrastructure development risk more manageable, and all the cellular carriers have wireless hot-spot services on their radar. But before those services can be profitable, we need to see more technological development and some business realignment as well. The market can't sustain six profitable players, so look for consolidation among the major participants, especially those with complementary technologies. And the industry needs to achieve a level of secure transparency for wireless data services so mobile users can move between providers and technologies without first having to earn degrees in engineering and finance. I'm confident both these developments will happen eventually -- just don't hold your breath.
--Dave Molta, dmolta@nwc.com
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