Global Insight Perspective | |
Significance | Although much of the data is now over a year old, the twelfth report provides a wide-ranging update and analysis of the mobile phone market in the United States. |
Implications | Penetration reached 80% and growth in mobile data services continues to be strong. |
Outlook | Although many smaller players are being snapped up, the ongoing auction process, current spectrum holdings by major groups, and mobile satellite services with ground components should initiate the emergence of new national players in the near future. |
The FCC has released the Twelfth Annual Report and Analysis on the Competitive Market Conditions With Respect to Commercial Mobile Radio Services (PDF) or mobile phone industry (at the end of 2006). New sources of data have been tapped to help to provide a finer analysis of the industry in a detailed document that comprehensively describes industry conditions. Although much of the data in the twelfth annual report is now over a year old, 192 pages cover detailed analysis of the market and a summary of recent developments including regulation, pricing trends, mergers and acquisitions, agreements, and product launches with some data compared internationally.
Outlook and Implications
Subscriber Growth: Overall, 2006 proved to be a strong year for the industry, adding some 28.8 million new subscribers, the largest number ever added in one year to reach 241.8 million, taking the penetration level to 80%. This was driven by growth in prepaid subscribers, which take an increasing proportion of customers. The four national carriers—AT&T, Verizon, Sprint Nextel and T-Mobile—counted for some 198 million or 82% of these subscribers at the end of 2006. In the latest data released by the companies at the end of 2007 they counted some 218 million subscribers, a 10% rate of growth marginally boosted by AT&T's acquisition of Dobson Communications with 1.7 million subscribers (see United States: 25 January 2007: Dobson Acquisition Helps AT&T Break 70 mil. Wireless Subscribers in Strong Q4). Acquisitions by T-Mobile of SunCom; Rural Cellular and SureWest by Verizon; and AT&T affiliate Edge Wireless (by AT&T) are all set to concentrate the market further in the near term (see United States: 31 July 2007: Verizon Keeps on Climbing in Q2, Bids for Rural Cellular, United States: 4 December 2007: AT&T Makes Another Acquisition with Edge Wireless, United States: 23 January 2008: Verizon to Acquire SureWest Wireless Assets for US$69 mil., and United States: 17 September 2007: Under the Spotlight—Wireless Consolidation in the U.S.).
Facilities-Based Competition: The report utilises analyses by the census block for the first time, allowing a finer analysis than had previously been possible, with 8 million census blocks compared with the 3,200 counties previously measured. At least one mobile phone network covers 76.0% of the United States by land mass (85% excluding federal lands), with two or more covering 61.0% by land mass and three or more covering 39.9%. Looking at coverage by population, 99.8% are covered by one carrier, 99.0% by two or more, and 95.5% by three or more. Breaking down coverage by technology type, CDMA networks cover 55.9% of the land mass and 98.1% of the population, GSM/TDMA networks covered 57.1% of the land and 98.3% of the population, and iDEN covered only some 4.0% of the land mass and 57.4% of the population—a possible explanation for the falling popularity of the Sprint Nextel network (see United States: 9 October 2007: Sprint Begins Search for New CEO as Post-Paid Losses Continue).
Although the recent acquisitions noted above may reduce facilities-based competition in the near term, the push into the 700 MHz spectrum band precipitated by the current auction and the acquisition of Aloha by AT&T are set to mark new deployments. These will have long-range capability, which should facilitate improvements to competitive coverage. Verizon owns spectrum covering a population of 279 million, and there are currently four companies that own spectrum covering 285 million—AT&T, Sprint, T-Mobile, and Qualcomm, which previously acquired 700 MHz spectrum to facilitate its MediaFlo mobile TV plans. The report also notes that SpectrumCo, backed by a consortium of cable operators, acquired spectrum in last year's AWS auction covering a population of 275 million. A new and well-backed player may also emerge if Google is successful in acquiring the 700 MHz block of spectrum that it fought to ensure took in open-access rules, although with the price breaking the level that triggered the application of open-access rules earlier this week, Google's commitment will be tested (see United States: 5 February 2008: AT&T Gains FCC Approval for Aloha Spectrum Deal).
Overall, there are more than 150 terrestrial mobile carriers and an additional five providers of mobile satellite services. These are Mobile Satellite Ventures, Inmarsat, Globalstar, Iridium, and data-service provider Orbcomm. ICO Global Communications and Terrestar are also developing systems using satellites with ancillary terrestrial components under the 2003 flexible-use licensing scheme. There were 1.1 million subscribers to mobile satellite services at the end of 2006, a rise of 27% year-on-year (y/y).
Mobile Substitution: The report notes that in the second half of 2006, 11.8% of adults in the United States lived in mobile-only households, up from 7.8% in the second half of 2005. This figure rises to around 25% for adults aged 18-24 and to nearly 30% for adults aged 25-29.
Mobile Data: The FCC notes that there an estimated 21.9 million mobile wireless broadband connections (above 200 kbps), which would place 3G penetration at around 9%. With 18 million of these added over 2006, this number is likely to have more than doubled over 2007 as high-speed handset became standard. Twelve per cent of revenues were derived from mobile data in the United States, compared with 18% for Europe as a whole and 29% in Japan.
SMS use remains the main data service, with traffic reported by the CTIA, the international wireless association, increasing by 90% y/y to 18.7 billion messages in December 2006. MMS traffic rose from 1.1 billion for the whole of 2006 to 2.7 billion for the whole of 2006.
The report notes the rapid increase in data usage noted by web services firm Bango in June 2007, which reported U.S. mobile web use as tripling y/y to 21%, which it attributed to the proliferation of flat-rate data (see United States: 6 June 2007: Bango Sees Rapid Growth in U.S. Mobile Internet Usage; MEF Finds 26% of Users Satisfied).