Wednesday, September 26, 2012
Tough Economy Affecting Cable, Mobile in Opposite Ways
Between 2007 and 2011, U.S. consumer spending generally shrank, as a response to the Great Recession and anemic recovery since 2008.
But though spending dropped overall, there was one area where spending actually rose: telecom services.
As you might guess, the growth was driven by mobile services, and most would attribute those gains to the attractions of smart phones such as the Apple iPhone.
U.S. consumer spending on phone services rose more than four percent in 2011, the fastest rate since 2005, according to Department of Labor statistics.
Families with more than one smart phone sometimes pay more for mobile service than they pay for cable TV and home Internet access.
The tough economic conditions are not helping cable companies, though.
“The real important economic stats for us in terms of potential wind at our back really relate to improvements in occupied housing, improvements in the unemployment stats, increases in disposable income and increases in consumer confidence,” according to Time Warner President and Chief Operating Officer Robert Marcus. “To tell you the truth, we really haven’t seen a whole lot of meaningful improvement in those stats across our footprint.”
Of course, as happy as mobile service provider executives might be about the revenue growth, the cost of subsidizing those smart phones creates operating margin issues. Still, the numbers speak for themselves: consumers are making cuts elsewhere to fund mobile services.
Other purchasing categories, including cars, clothing, entertainment and food consumed away from home have suffered, in comparison.
The big issue is how long that growth trend in mobile spending can continue.
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