How Much Further Could U.S. Mobile Market Consolidate?

Is the share of market now characteristic of the U.S. market sustainable? Most would say "no." Among the common observations is that two of the top four national providers have market share two to three times greater than two of the others.


Many observers would say a market with four national providers is about one too many for a sustainable and stable market.


Could one of the top four U.S. mobile service providers get 50-percent market share. In principle, "yes." But regulatory intervention cannot be discounted. Some observers think the U.S. mobile market already has become substantially non-competitive.


The Department of Justice, for example, recently opposed the acquisition of T-Mobile USA by AT&T, citing a standard methodology for determining the competitiveness of markets.

One of the ways to measure market concentration is the Heffindahl-Hirshman Index or HHI, often used as a measure of market concentration. The HHI is the square of the percentage market share of each firm summed over the largest 50 firms in a market. Here is the pre-merger market HHI which already suggests that the market is uncompetitive. HHI is the problem

For some of us who just want a quick rule of thumb that tells you when there is potential antitrust concern, 30 percent market share tends to work.That has been the figure cable TV executives in the United States have worried about, and which the Federal Communication Commission at one point set as the limit of subscriber market share for any U.S. cable operator. Both AT&T and Verizon Wireless already have market share that exceeds that figure.

 

The Justice Department will generally investigate any merger of firms in a market where the HHI exceeds 1,000 and will very likely challenge any merger if the HHI is greater than 1,800. With a HHI over 2,300 any deal will be heavily scrutinized and most likely rejected. Even a merger between T-Mobile USA and Sprint, with a resulting 28 percent market share, would probably not be allowed on the same antitrust grounds.

The competitive equilibrium point in the mobile industry seems to when the market shares of the top three providers are 46 percent, 29 percent and 18 percent, argues Chetan Sharma says. In any country, that "rule of three" seems to hold.

That roughly corresponds with a rule of thumb some of us learned about stable markets. The rule is that the top provider has twice the market share of the contestant in second place, while the number-two provider has about twice the market share of the number-three provider.

That suggests the U.S. mobile market still has room to change. At the moment, Verizon Wireless has perhaps 34 percent share, while AT&T has about 31 percent share. Classic theory would suggest the ultimate market share could approach a market with the top-three providers having a market share relationship something like 50:25:12.

That would have highly-significant implications for the four current providers that today represent 93 percent of all subscribers. One of the leading contestants reasonably could hope to grab half of the available market, while two of the contestants could face significant losses.


All that assumes regulatory action did not occur before that market structure was obtained, though.

Only 5% of iPads Used Outdoors; 90% of iPhone 4 Traffic is Generated Indoors as Well

The vast majority of mobile traffic from smart phones and tablets comes from indoor usage, a study from Actix has found found. Even most casual observers, reflecting on their own usage, might not be surprised by either finding.

By analyzing data from a live 3G network in a major city, Actix found that just five percent of Apple iPads are used outdoors. About 90 percent of iPhone 4 traffic and 80 percent of BlackBerry traffic likewise is produced indoors.

While iPads account for just one percent of data sessions, they use four times more data than an average 3G device. That would not surprise observers who know the usage patterns for mobile dongle-using devices such as PCs, compared to smart phones. An order of magnitude more usage is not unexpected for a dongle-connected PC, for example.

Why Mobile Commerce Will be Big

That mobile commerce is expected to grow so much is not too surprising, in context. Keep in mind that more people now have mobile subscriptions than electricity, safe drinking water, bank accounts, credit cards, TVs or PCs.

Looked at on a household basis, mobile spending now represents nearly half of household spending on communications and entertainment services.

 Since 2001, when fixed-line phone service was more than 65 percent of total subscription spending on communications and video services, fixed-line spending now has fallen to a bit over 25 percent. The percentage of video entertainment and broadband access spending also has been growing, Sharma says.

Annual state of_global_mobile_industry_2012_chetan_sharma_consulting

View more presentations from Chetan Sharma

Why Fiber to the Home Costs So Much

Up to 80 percent of the total broadband investment cost is related to civil infrastructure works, the European Commission says. Another way of putting matters is to say that as much of 80 percent of the cost of building fiber-to-customer networks is not affected in a positive way by Moore's Law.

The fact that computing power and storage keep getting more powerful and cheaper is helpful for application providers. But those improvements don't affect the cost of digging trenches, stringing cable and undertaking other forms of construction.

But that's only part of the problem. The other issue is that the financial return from any FTTH project is becoming more challenging in a competitive environment.

Is the investment case for fiber to the home networks getting more challenging? Yes, Rupert Wood, Analysys Mason principal analyst, has argued  A shift of revenue, attention and innovation to wireless networks is part of the reason. But the core business case for triple-play services also is becoming more challenging as well.

All of that suggests service providers will have to look outside the traditional end-user services area for sustainable growth. Many believe that will have to come in the form of services provided to business partners who can use network-provided information to support their own commerce and marketing efforts. Those partners might be application developers, content sites, ad networks, ad aggregators or other entities that can partner with service providers to add value to their existing business operations.

Current location, type of device, billing capabilities, payment systems, application programming interfaces and communication services, storage services, profile and presence information might be valuable in that regard.
 
Fiber to the home long has been touted by many as the "best," most "future proof" medium for fixed access networks, at least of the telco variety. But not by all. Investment analysts, virtually all cable and many telco excutives also have argued that "fiber to the home" costs too much.

Over the last decade or so, though, something new has happened. Innovation, access, usage and growth have shifted to wireless networks. None of that is helpful for the FTTH business case. That is not to say broadband access is anything but the foundation service of the future for a fixed-network service providers. Fixed networks in all likelihood always will provide orders of magnitude more usable bandwith than wireless networks.

The issue, though, is the cost of building new fiber networks, balanced against the expected financial returns.

“FTTH is often said to be ‘future-proof’, but the future appears to have veered off in a different direction,” says  Rupert Wood, Analysys Mason principal analyst. Regulatory uncertainty, the state of capital markets and executive decisions play a part in shaping the pace of fiber deployment. But saturation of end user demand now is becoming an issue as well.

The basic financial problems include competition from other contestants, which lowers the maximum penetration an operator can expect. FTTH has to be deployed, per location. But services will be sold to only some percentage of those locations. There is a stranded investment problem, in other words.

The other issue is that the triple-play services bundle is itself unstable. FTTH networks are not required to provide legacy voice services. In fact, the existing networks work fine for that purpose. One can argue that broadband is needed to provide the next generation of voice (VoIP or IP telephony), but demand for fixed-line voice has been dropping for a decade. So far, there is scant evidence that VoIP services offered in place of legacy voice have raised average revenue per user. Most observers would note the trend goes the other way: in the direction of lower prices.

And though entertainment video services offer a clear chance for telcos to gain market share at the expense of cable operators, there is at least some evidence that overall growth is stalling, limiting gains to market share wins.

Broadband access also is nearing saturation, though operators are offering higher-priced new tiers of service that could affect ARPU at some point. So the issue is that the business case for FTTH has to be carried by a declining service (voice), a possibly-mature service (video) and a nearly-mature service (broadband access).

And then there is wireless substitution. Fixed-line voice already is being cannibalized by mobile voice. Some observers now expect the same thing to start happening in broadband access, and many note new forms of video could displace some amount of entertainment video spending as well.

The fundamental contradiction is that continued investment in fixed-line networks, which is necessary over time, occurs in a context of essentially zero growth.

Atlantic-ACM, for example, now forecasts that U.S. wireline network revenue, overall, between now and 2015, will be flat at best. Compound annual growth rates, in fact, are forecast to be slightly negative, at about 0.3 percent. Where total industry revenue was about $345 billion in 2009. By 2015, revenue will be $337 billion, Atlantic-ACM predicts.

That is not to argue against replacement of aging networks; in fact that is a necessary and normal part of any network deployment. The issue is the declining amount of revenue any such network can generate.

"Overall consumer spend on telecoms has long since ceased to grow in developed economies," says Wood.

And though FTTH promises dramatically-higher bandwidth, demand is a bit uncertain at the moment. "Even though many cable operators have been offering superfast fixed broadband connectivity for some time in Europe and North America, take-up of such services remains troublingly low."

Aside from some early adopters, Wood argues, new services that uniquely take advantage of FTTH are needed. Industry executives are aware of that need, and have been for quite some time.

The issue is that the scale and pace of innovation in wireless now outstrips what is happening on the fixed line network. That makes the revenue upside for FTTH a tougher challenge. In some markets, cheaper copper-based alternatives might continue to make more sense, Wood argues.

That is particularly true in Europe, says Wood, where consumer willingness to pay a premium for additional bandwidth is low and where broadband prices are already significantly lower than in North America.

"This level of commitment to FTTH looks unsustainable and fundamentally unreasonable, especially when VDSL networks will pass far more households," says Wood. "We therefore expect telcos that have opted for FTTH roll-out beyond proof-of-concept trials and greenfield sites to back away from further commitment and, in some cases, reduce the scale of their FTTH roll-out plans."

So the strategic issue now would seem to be whether continued FTTH momentum can be sustained. It would be an unexpected turn of events, if it turns out Wood is correct.

What "Showrooming" Could Mean for Service Provider Strategy

Telcos facing steadily declining voice revenues, the historic driver of the largest part of their business, now face challenges similar to what Best Buy faces with online competition. As consumers switch to use of mobile phones as the primary way they "use" voice, their need to buy landline voice keeps dropping.

Likewise, consumers looking for the latest in gadgets increasingly buy from Amazon.com, though using Best Buy as a place to check out those products. That "showrooming" problem is not going away.

Some analysts think Best Buy's long-term future might rely on turning its business model upside-down and embracing showrooming, and there are glimmers of insight for telecom service providers as well.

The radical notion is that, Instead of selling electronics gear, Best Buy could gradually become a supplier of  instruction, service, support, connections, returns and pickup. All those things are tricky or less satisfying operations online, some argue.

In a communications service provider context, the analogy might be a shift to greater reliance on providing "big data mining" and support for third-party partners who want access to huge service provider audiences.

As Best Buy shifts to third-party services for consumer electronics manufacturers, becoming physical support locations for those partners, and de-emphasizing product sales, so telcos and mobile service providers could grow their "big data" service businesses.

Best Buy could embrace being a showroom, welcoming price-checking shoppers into the store to play with the latest electronic gadgets, then helping them buy online, even from another seller. As crazy as that might sound, Best Buy executives say they make more profit from electronics product supplier payments than from the sales of gear.

In a similar way, communications service providers might someday find they make more money from services sold to business partners than to end users. That isn't to say it would be easy. But there are precedents.

Retailers can lease space to third parties. Think Apple Stores that already are inside Best Buy. Telcos know about wholesale. It's the same concept.

ROI is Good, Measuring it Often is Quite Hard

Return on investment is an important measure. In marketing, though, it is notoriously difficult. Among the reasons is that most larger brands use multiple channels and touch points, but tend to measure and attribute returns based on a single channel. 

Many, for example, attribute sales to the "last-click" by a buyer, while some might atribute an ultimate sale to the "first click." Others, with channel partners at work, will recognize a sale as coming from that channel, essentially ignoring all the work done by all the other channels, or the touch points that might have contributed to a sale.

First-click and last-click attribution models are easiest to measure, but their use can over- or under-credit an ad format’s influence on conversion activity. 

For instance, February 2012 data from Adobe measuring revenue per visitor to US websites, broken down by attribution model, showed that search generated 38 percent more revenue when measured via first-click attribution than last-click. 

Social’s first-click slant was even more dramatic: 88 percent. 

Additional Q1 2012 findings from digital marketing firm RKG showed similar differences.

The point is that a "one-touchpoint experience" is atypical for internet users and not a good measure of digital effectiveness. Nor is that common for complex products sold to business customers, either. 

Questions About Prepaid Growth in U.S. Market

MetroPCS Communications and Leap Wireless International reported an abrupt slowdown in customer growth during what is traditionally their strongest quarter, raising concerns the sputtering U.S. economy is forcing more consumers to eschew prepaid wireless service or seek even cheaper options, the Wall Street Journal reports.

The trend also follows a more aggressive push by larger carriers, such as Sprint Nextel Corp.  and T-Mobile USA, to capture users at the lowest end of the market. It isn't yet entirely clear what combination of forces is at work. Perhaps T-Mobile USA and Sprint, or other prepaid providers, simply are taking more market share.

Tablet Ownership Will Grow 200% Next 2 Years

In the consumer market, tablet ownership will increase by 200 percent across the U.S. and Western European markets over the next two years, predicts Futuresource Consulting. The obvious question device suppliers will ask is "what does that mean for sales of other devices?"

Futuresource predicts that sales netbooks will be harmed, but some would argue that netbooks have been a declining product category for some years. Most consumers seem to see tablets as an addition to conventional PCs or Macs rather than a replacement. What might be less clear is the impact of tablet sales on notebooks, which many users now use as their "PC."

An installed base of nearly 52 million was achieved in 2011 across the two regions, with the market on track to exceed 153 million units in 2013. Ownership will be highest in the USA, with Western European markets showing significant opportunities for growth.

Bigger Screens Drive More Tablet Usage

The Kindle Fire, has almost doubled its share of the tablet market in the past two months from 29.4 percent share in December 2011 to 54.4 percent share in February 2012, according to comScore. 

 Samsung’s Galaxy Tab family followed with a market share of 15.4 percent in February, followed by the Motorola Xoom with 7.0 percent share. The Asus Transformer and Toshiba AT100 rounded out the top five with 6.3 percent and 5.7 percent market share, respectively.

U.S. Market Share of Android Tablets by Unique Devices Dec-2011, Jan-2012, Feb-2012 Total U.S. Source: comScore Device Essentials*
	% Share of Android Tablets
	Dec-11	Jan-12	Feb-12
Amazon Kindle Fire	29.4%	41.8%	54.4%
Samsung Galaxy Tab Family	23.8%	19.1%	15.4%
Motorola Xoom	11.8%	9.0%	7.0%
Asus Transformer	6.4%	6.2%	6.3%
Toshiba AT100	7.1%	7.0%	5.7%
Acer Picasso	6.0%	5.2%	4.3%
Acer Iconia	2.8%	2.6%	2.1%
Dell Streak	2.2%	1.7%	1.3%
Lenovo IdeaPad Tablet K1	0.7%	0.9%	1.2%
Sony Tablet S	0.9%	0.8%	0.7%
Other	8.9%	5.6%	1.6%

As you might expect, screen size is directly associated with higher content consumption. For example, 10″ tablets have a 39-percent higher consumption rate than seven-inch  tablets and a 58-percent higher rate than five-inch tablets.

Average Browser Page Views per Tablet Feb-2012 Total U.S. Source: comScore Device Essentials*
Tablet Screen Size	Browser Page Views per Tablet
10 inch	125
9 inch	116
7 inch	90
5 inch	79

New Evidence that Netflix is Cannibalizing Cable Network Viewing

Bernstein Research’s Todd Juenger says there is new evidence that Netflix customers are shifting their consumption of subscription channel programming, especially childrens' programming.

Bernstein found that among homes that regularly stream Netflix programming, viewing of linear kids’ channels, and not just Nickelodeon, took a hit.

“Turns out, Netflix streamers watch just as much traditional TV as non-streamers,” Juenger  says. “However, there is a significant share shift among streamers. Kids’ networks (not just Nickelodeon) and syndicated shows are getting severely whacked.”


Conversely, Netflix’s claim that it’s a source of “catch-up” viewing for serialized cable dramas like AMC’s& Mad Men seems to carry some weight, with Bernstein finding that AMC’s ratings grew 86 percent in Q1 for streamers but only 71 percent for non-streamers.

ABC, CBS, Fox and NBC each performed better slightly among households that stream, as well. Some might speculate that non-linear viewing of all sorts is starting to have an effect. By that logic, time shifting and online consumption are cutting into "linear viewing" of traditional TV.

Tablets, PCs, Smart Phones Get Used in Different Ways When People Shop

Almost two out of three shoppers use at least one device to research and transact while shopping and 28 percent use two devices at a time, according to a study sponsored by Local Corp.

The study also suggests the different ways people use tablets, PCs and smart phones in the shopping process.

47 percent of consumers confirm they use their smartphone to search for local information, including information about the local store they want to visit.

 Prior to visiting a store, they use smartphones to conduct further research including looking for competitors’ pricing, checking for sales, previewing products and reading reviews.

Some 46 percent of shoppers look up prices on a store’s mobile site where they intend to shop and 42 percent check inventory prior to shopping in the store.

"Machine-to-Machine" Connections Grew 37% in 2011

The global number of mobile network connections used for wireless machine-to-machine (M2M) communication increased by 37 percent in 2011 to reach 108.0 million, according to Berg Insight.

Asia-Pacific was the strongest regional market, recording a year-on-year growth rate of 64 percent and reached 34.5 million connections at the year-end.

Europe and North America grew by around 27 percent each to 32.3 million and 29.3 million connections respectively.

In the next five years, the global number of wireless M2M connections will grow at a compound annual growth rate (CAGR) of 27.2 percent to reach 359.3 million in 2016.

According to a recent report from analyst firm Current Analysis, it's unclear if revenues from M2M are accelerating as quickly as operators had hoped. That isn't surprising.

New technology products often are not proven to be market successes as rapidly as backers had hoped. In fact, it often can take as long as 10 years for adoption to reach an inflection point. M2M is not there yet, but the slower adoption is not an unexpected development.

Nor would it be surprising if expectations outstrip sales to an extent that proponents begin to "sour" on M2M as a major revenue driver for mobile service providers. Most important new technologies have hype that cannot be fulfilled in the short term, leading to deflated expectations. Only later do many important innovations actually begin to gain adoption and importance. 

Apple iPhone, iPad are "Gateways" to Apple Ecosystem

Though in the past the apple iPod was a "gateway" device introducing users to the Apple ecosystem, that role now is played by the iPhone and iPad. About 25 percent of iPad owners say the device is their first Apple product.

According to the NPD Group, 33 percent of U.S. homes, (37 million households) own Apple products. While a majority (69 percent) of these consumers own iPods, ownership of iPads is growing.

“iPad sales are growing much faster than any other Apple product has this soon after launch,” said Ben Arnold, director of industry analysis at NPD. ”In fact, one-in-five Apple owner households has one, nearly equivalent to the number that own an Apple computer."

Historically, the iPod has been the introductory Apple device for consumers, with 82 percent of owners saying it was their first Apple product.

Long Term Evolution Subscribers Doubled in First Quarter, 2012

At the end of the fourth quarter of 2011, the worldwide Long Term Evolution subscriber base nearly doubled quarter over quarter to reach 12 million subscribers worldwide, according to Maravedis-Rethink. The quarter over quarter subscriber increase for LTE and WiMAX was 92 percent and 14 percent, respectively, over that reported at the end of the third quarter of 2011, according to Miravedis-Rethink.

At the end of 2011, 54 operators worldwide had launched LTE commercially, 19 during the quarter alone. An additional 224 major mobile operators had committed to launching the technology in the future, 193 of those with FDD-LTE and 31 with TD-LTE. Miravedis-Rethink anticipates that 469 million LTE subscribers will be active by 2016 of which 25 percent, or 118 million, will be TD-LTE users and the rest (75 percent, or 350 million) will be FDD-LTE.

YouTube Driving Traffic, Globally

YouTube is driving global Internet traffic, a new study by Sandvine indicates. YouTube is the largest source of mobile video traffic in every region examined, accounting for as much as 25 percent of network data and no less than 12 percent, Sandvine says. 


In North America, video and audio streaming make up more than half of mobile data traffic, led by YouTube, Pandora and Netflix. 


In fact, audio and video streaming will exceed 60 percent of North America’s mobile data by late 2014, according to Sandvine. 

2/3of U.S. Mobile Consumers Won’t Pay more than $50/Month for Mobile Data

Some 66 percent of U.S. consumers planning to purchase a smart phone say they are unwilling to pay more than $50 per month for mobile data plans, Parks Associates research finds. The findings are not a surprise. Few consumers often say they are quite willing to pay more for a communications service.


But it once was unusual for most consumers to say they'd pay $30 a month for subscription TV services, as well, given the availability of "no incremental cost" broadcast TV. 


What happened is that a new product, and new product demand was created. That is what mobile service providers are going to have to do, as well. 


"Operators need to create new value propositions for their data services," said Harry Wang, Director, Mobile Research, Parks Associates. Operators need to shift consumers’ perception away from raw data to the experience created by their data services.”

Mobile Banking Customers Love Convenience, Banks Will Struggle with Business Case

An overwhelming majority (94 percent) of U.S. consumers say that banking on their mobile device is easy and more than three quarters (77 percent) feel it is convenient, but only 42 percent cite that it is reliable, according to a new study released today by Infosys. 


The Infosys survey also found that slow speed is a barrier to adoption for 31 percent of respondents. Some 30 percent are deterred by a lack of confidence in the protection of their data. About 26 percent say the experience of mobile banking is inconvenient.

Nearly half (45 percent) of consumers who do not use online banking believe that mobile banking is "experimental" or "dangerous," and more than a third (38 percent) say it is "scary." In fact, non-users are three times as likely to say "scary," and almost four times as likely to say "dangerous" than mobile banking users.

While 60 percent of consumers who do not use mobile banking cite a lack of confidence in the protection of their personal or financial data as a top concern, nearly the same amount (55 percent) share private information when updating their Facebook status on smart phones.

That might not be surprising. People have higher thresholds for security when dealing with their money, than their status update information, pictures and opinions.

Nearly 80 percent of all consumers like the mobile banking benefit of 24-hour access to their account, but only 48 percent are happy with the speed of service and only 46 percent with ease of log in.

The business issue for bankers is that mobile is a new channel to support, but without any obvious incremental revenue to gain.

Apple Earnings: Market Share Matters

There are a couple of classic reasons why market share is deemed to be a good thing. Gross revenue is one advantage. But profit margins are the other advantage leading market share is supposed to confer. Apple seems to be a case in point. 


Telcos struggle to make 20-percent margins. Perhaps software or "Internet" companies could reasonably expect, with market leadership, to have 40-percent profit margins. It is harder, in consumer electronics, in some product lines, to make single-digit margins. Apple is nearing 40-percent margins. Almost unheard of for a consumer electronics manufacturer.

Will Telcos "Think the Unthinkable?"

Are tier-one service provider strategic options that once were "unthinkable" now becoming less improbable? If some possible revenue trends materialize, what might have seemed "impossible" in the past might start looking more palatable.

By 2020, for example, European telcos could see their sales fall by up to 20 percent, while; earnings (EBITDA) could even drop by 40 percent, according to an analysis by Roland Berger Strategy Consultants.

Change of that sort might lead to relatively shocking changes for many service providers, including separation of retail and wholesale units or a switch to “wholesale-only” operations.

To respond, telcos must reduce operating costs, adopt new, sales and service models and tap growth markets, Roland Berger says.

The study suggests European telcos will have to invest up to EUR 600 billion, mostly for optical fiber and Long Term Evolution fourth generation mobile networks, says Alexander Dahlke, Partner at Roland Berger Strategy Consultants. Two or three main strategies are conceivable.

Google Mobile Playbook

Predictably, the Google Mobile Playbook, which provides advice for businesses about how to go about creating and using mobile webistes, is optimized for viewing on a tablet. Too clever by about half. Some applications naturally are optimized for mobile use, others for content creation, others for consumption mostly in a relaxed setting. 


The key bits of advice:

• Define your value proposition by determining what your consumer wants to do with your business in mobile. Benchmark against others in your industry for ideas.
• Build a mobile website. Once you have a mobile website, check the
  stats and optimize based on consumer usage.
• Build an app for a subset of your audience after your mobile site
  strategy is in place. Don’t forget to promote your app.
• Assign a Mobile Champion in your company and empower them with a cross-functional task force.
• Set up a meeting with your agencies about what’s working and what’s not
  for your brand on mobile and tablets.
• Search for your brand in mobile, as a consumer would. Take 5 minutes
  and do this today. What’s working? What’s not?
• Separate mobile-specific search campaigns from desktop search campaigns so you can test, measure and develop messaging specific for mobile.
• Run rich media HTML5 ads to extend your branding message to reach the mobile audience.
• Assign everyone in your marketing org the action item of reviewing their programs through a mobile lens.
• Check out your tablet consumer’s experience with your brand. Take 5 minutes today and search for your brand on a tablet as a consumer would. What’s working? What’s not? Maximize the tablet environment with rich media creative.

Half of all March 2012 Bandwidth Consumed was Video

Half of all Internet bandwidth usage now is video.  You probably would have guessed that. 

Apple iPhone Might Explain AT&T, Verizon, Sprint Net Additions, Losses

You might say the Apple iPhone was the story in the first quarter of 2012, in terms of how AT&T, Verizon and Sprint fared in terms of net new additions, either positive or negative.

Sprint activated more than 1.5 million iPhones in the first quarter of 2012, about 44 percent of those representing new customers. Since Sprint added about 263,000 net additions, the role of the Apple iPhone is obvious.

In its first quarter of 2012, AT&T  added 187,000 new two-year contract customers, 180,000 of those involved tablets such as the iPad, suggesting an anemic 7,000 net phone additions to a contract user base of nearly 70  million.  AT&T reported 4.3 million iPhone activations, a 43 percent drop from the fourth quarter.

Still, the iPhone still accounted for about 78 percent  of the smart phones that AT&T sold for the quarter.

Verizon activated 3.2 million iPhones during the first quarter, down from 4.3 million iPhones in the previous quarter, which was part of Apple's record-setting launch quarter for the iPhone 4S.

Overall, Verizon reported sales of 6.3 million smartphones during the first quarter, meaning that the iPhone continues to represent just over half of the carrier's smart phone business.

Why Shared or "Family" Data Plans Make Sense

Shared data plans are coming. The leading service providers in the U.S. market have been talking about it for years.  And there are good reasons for doing so.


It wouldn't be the first time the industry has moved to family plans. It did so with voice and text messaging, for example. If you understand why service providers did that, you will understand why they will move to similar policies for mobile data.


The family plan was developed to solve one specific problem. Most adults already were buying mobile phone service, which left only one potential user segment that had not yet adopted, and could drive unit growth. That segment was children of the adult users.


Family plans made it possible for parents to equip their children with mobile devices at prices the adults could justify. And that was the primary way mobile service providers could drive adoption of additional units, when the adult user market was approaching saturation. There also were churn benefits. 


With most service providers already moving to mandatory mobile data plans for smart phones, one way to provide clear incentives for faster adoption is to reduce the incremental cost of adding additional smart phones to accounts where there are significant feature phones in use. 


With average revenue per user going down, the best way to increase revenue is to get more devices on the network, including smart phones and tablets equipped with mobile broadband capability. 


Family data plans will mean that the incremental cost of adding each additional device will be lower than at present.