The era of the smartphone has been a boon for wireless providers, not just in terms of handset sales, but in terms of data consumption and pricing.
According to PwC's 2010 North American Wireless Industry Survey, smartphone customers bring in "significantly" higher average revenue per user than traditional wireless phones. According to the survey, 23% of postpaid customers were using smartphones, up 11% from the previous year. The average revenue per smartphone user is $86, compared with $55 for the typical wireless customer. In addition, smartphone sales as a percentage of revenue doubled from 19% in 2009 to 38% in 2010 for carriers with more than $5 billion, according to the survey, which covered all major U.S. and Canadian carriers.
Meanwhile, wireless carriers are capitalizing on increased potential revenue by making it easier for people to download data using apps for their smartphones. According to the survey, 91% of the companies have launched a portal to facilitate app downloads. Several carriers also launched location-based services and video calls/messaging as additional revenue sources in 2010.
"Consumers are clearly becoming more data-hungry, particularly in North America, and the explosion in data usage in recent years will continue for the foreseeable future, particularly when considering the increasing penetration of 3G and 4G enabled smartphones, tablet and notebook computers and other connected devices," Pierre-Alain Sur, U.S. wireless industry leader, PwC, tells Marketing Daily in an email. "As a result, many within the industry believe that all-you-can-eat data usage at current price points will continue to evolve towards tiered or metered pricing."
The increase in smartphones (as well as their easy-to-use apps) has increased the demand for bandwidth (video streaming requires 25 times the network capacity as a simple voice call), leading the wireless providers to continue infrastructure investment despite the recession. Of the carriers surveyed, three carriers have begun using faster 4G networks (compared with only one in 2009), while two more will implement 4G technology in 2011 and one more in 2012.
"The trend toward increased use of data-hungry services will place tremendous strain on the capacity of the wireless networks, and carriers are voicing concern about the lack of available spectrum to keep up with demand," according to Sur. "There will be continued focus on how to finance the upgrades necessary to keep up with the demand." "[Last year] was the year of data, with smartphones accounting for more than 30 percent of total wireless handset sales and delivering a higher average revenue per user for carriers than traditional devices," said Sur in a statement. "However, the rising data consumption brings significant new challenges for carriers. They will need to determine how best to monetize the additional data usage among price-sensitive customers and how to finance the network improvements necessary to keep pace with demand."