Was 2014 an Aberration, or the New Normal?

Was 2014 an aberration in the U.S. mobile business, or a harbinger? The answer matters.

From 2010 to 2013, U.S. mobile data pricing (per unit sold) declined by only single digits year over year. In the first nine months of 2014, data pricing dropped by 77 percent, according to industry analyst Chetan Sharma.

The other key inputs to the business model shows escalating numbers as well. Average (mean) mobile data consumption increased to about 2 Gb a month. Sharma notes it took 20 years for consumption to reach 1 Gb per month usage levels.

The increase to 2 Gb took about a year.

In addition to plunging prices (less revenue per unit sold) and higher usage (more network cost), marketing costs have grown as competition has become more intense.

Overall U.S. operating expense rose 20 percent, year over year. Income was flat while earnings grew three percent.

Among the positives, total revenue grew 21 percent to almost $400 billion.

Among the negatives, voice revenue declined 15 percent, messaging by 16 percent and tablet subscriptions by four percent.

So was 2014 an aberration? In some ways, it has to be. Can mobile data pricing (per unit sold) continue to drop at breath-taking rates? Some might note the other key figure is the amount of incremental new buying that happens as per-unit rates drop.

Sharma argues that Internet access will not grow fast enough to offset voice revenue losses. Neither will device sales revenue or wholesale revenues grow fast enough, even in conjunction with mobile data revenue growth, grow enough to offset sharp declines in voice. That, in a nutshell, is the strategic challenge mobile operators face.  

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