Flat Consumer Electronics Revenue Growth: CEA Predicts

During the 2001 through 2004 period, when the U.S. economy went through, and then came out of, the "Internet and telecom bubble," household telephone expenditures held constant at 2.3 percent of all household expenditures, a rate constant from 1996 through 2004. Only in one year--2002--was spending different, and in that year, household expenditures rose to 2.4 percent.

That might be the sort of year 2009 is for the consumer electronics industry. Or at leaset, that appears to be what the Consumer Electronics Association believes will happen in 2009.

The consumer electronics industry is projected to generate $171 billion in U.S. shipment revenues in 2009, according to the semi-annual industry forecast released by the Consumer Electronics Association. That would be a decline of about $1 billion from the estimated $172 billion CEA estimates the industry earned in 2008.

“The CE industry is resilient but not immune from the business cycle," says CEA CEO Gary Shapiro. The essentially flat forecast would be something of a break with past history. Over the past 10 years, annual revenues have not slipped, according to iSuppli, but growth rates have slowed, as this chart shows.

As early as 2006, for example, iSuppli projected growth rate declines from the seven to nine percent range down to the three percent range, compared to the nine percent annual increases seen between 2001 and 2005. The essentially flat CEA forecast, should it materialize, would be something of a data point outlier. But then, CEA might be expecting a recession that has different characteristics than past recessions.

Flat growth would seem likely, if past measures of consumer spending on communications, for example, during a recession, remain true to form. There is no evidence that broadband or mobile growth went into reverse during the last time of turbulence, for example. Internet access penetration of homes actually accelerated from 1997 through 2003. Where Internet growth was 18.6 percent in 1997, it stood at 50.5 percent in 2001 and at 54.6 percent in 2003.

Actual household spending on telecommunications rose steadily from 1981 through 2004, the Federal Communications Commission reports, with one exception. In 2002, spending flattened, rather than growing.

Broadband penetration was 4.4 percent in 2000, 9.1 percent in 2001 and 19.9 percent in 2003.

Wireless presents a similar picture. In 1999 six-month mobile revenues stood at $19.4 billion. Revenue then grew to $24.6 billion in 2000, to $30.9 billion in 2001, to $36.7 billion in 2002, $41.4 billion in 2003 and $48.3 billion in 2004.

Between December 1999 and December 2004, the average monthly wireless bill climbed steadily, from $41.24 in 1999 to $50.64 in December 2004.

There is, however, evidence for "flat" growth during a recession. In 2002, household expenditures on communications overall did flatten, but only for a single year, and then only slightly, on the order of $1 a month in reduced spending.

The issue is whether this recession is structurally different from past recessions, though. Nobody knows, yet.

50% Mobile Broadband Penetration by 2013?

The actual extent of mobile broadband usage in five years time is quite a jump ball. The conventional wisdom--undoubtedly correct--is that mobile broadband is growing, even if we might be a bit ahead of the game to call it "mainstream" at the moment.

If one assumes a smartphone sale is farily linearly a predictor of the sale of a data plan, increasingly of the broadband sort, then at the moment sales volume in the U.S. market is something on the order of 20 million units a year, but scaling smartly.

Of course, though we normally assume the sale of a smartphone comes with an activated data plan, that might not always be the case, as some of the market is of the "replacement" sort. Also, smartphones are not the only driver of mobile broadband. Of late, PC cards have been substantial contributors.

So the big change in market receptivity is the expansion of mobile broadband from the "mobile email" and "mobile PC" to "mobile Web" user cases.

In 2008, there might have been 38 million mobile email users in the United States, a reasonable proxy for the smartphone part of the mobile broadband ("data plans") market. That, at least, is the market size researchers at Mpathix suggest was the case.

Nielsen Mobile estimated in August 2008 that there were 13 million mobile data cards in use in the United States, to give you some idea of the installed base.

At the end of 2006, out of the 225 million cellular subscribers in the United States, 15 million used a 3G-based mobile broadband service via cell phone, PDA More about PDAs, laptop or other device, researchers at Parks Associates estimated. Parks Associates also estimated there were 3.5 to 4 million data card service subscribers in the United States in mid-2007.

That clearly is changing now with the advent of mobile Web devices such as the Apple iPhone, to be sure. Still, 38 million is a significant increase from the 12.1 million mobile email users in 2005, MPathix says. It is an even bigger increase from the six million mobile email users Research in Motion estimated were part of the U.S. user base at the beginning of 2006.

Parks Associates now estimates that nearly 60 million smartphone units will be sold in 2013. Parks Associates also estimates that in 2013, U.S. consumers will purchase over five million connected cameras, over one million 3G-enabled MIDs (portable media players), and over two million 3G-enabled netbooks (mini-PCs). There arguably is a less-linear relationship between purchases of those sorts of devices and activation of mobile broadband service, though.

So Parks Associates estimate that, by 2013, there will be over 140 million U.S. consumers paying for mobile broadband, including services provided to every device capable of such communication, argues Kurt Scherf, Parks Associates VP. As there are now 263 million mobile accounts in service, the 140 million represents more than half of the total number of wireless accounts. True, wireless subscriptions continue to grow, though at a slowing rate as we near 90 percent pentration. Still, that is a rather breathtaking scenario.

Keep in mind that U.S. fixed broadband penetration is somewhere north of 55 percent, in a market where 20 to 25 percent of homes do not own PCs, and in a market where perhaps 10 percent of Internet users remain on dial-up services, and perhaps 60 percent of those users say they do not want to upgrade to broadband.

The 50-percent mobile broadband penetration would represent a more-extensive degree of penetration by far, as it represents penetration of people, not of dwellings.

A Bold Forecast for U.S. Mobile Broadband

“By 2013, there will be over 140 million U.S. consumers paying for mobile broadband, which will extend video, communication, networking, and support services to all sorts of devices,” said Kurt Scherf, vice president, principal analyst, Parks Associates.

That's a bold forecast. But not outlandish if "mobile Web" gets traction as "mobile email" and "mobile PC" segments did.

Global revenues from mobile data services are set to exceed $200 billion this year for the first time, according to Informa Telecoms & Media. Total mobile data revenues were approximately $157 billion in 2007.

Mobile operators now generate approximately one fifth of their revenue from data services.Informa Telecoms & Media estimates that non-SMS data contributed $17.48 billion of revenue in the first quarter of 2008, accounting for 35.6 percent of total data revenues.

Tech Support on Installing a Husband

Dear Tech Support, 

Last year I upgraded from Boyfriend 5.0 to Husband 1.0 and noticed a distinct slow down in overall system performance, particularly in the flower and jewelry applications, which operated flawlessly under Boyfriend 5.0. In addition, Husband 1.0 uninstalled many other valuable programs, such as: Romance 9.5 and Personal Attention 6.5, and then installed undesirable programs such as NBA 5.0, NFL 3.0 and Golf Clubs 4.1.

Also Conversation 8.0 no longer runs, and Housecleaning 2.6 simply crashes the system. Please note that I have tried running Nagging 5.3 to fix these problems, but to no avail. 

What can I do? 

Signed, Desperate. 

DEAR DESPERATE:

First, keep in mind, Boyfriend 5.0 is an Entertainment Package, while Husband 1.0 is an operating system. Please enter command: ithoughtyoulovedme.html and try to download Tears 6.2 and do not forget to install the Guilt 3.0 update. If that application works as designed, Husband 1.0 should then automatically run the applications Jewelry 2.0 and Flowers 3.5. 

However, remember, overuse of the above application can cause Husband 1.0  to default to Grumpy Silence 2..5 , Happy Hour 7.0 or Beer 6.1. Please note that Beer 6.1 is a very bad program that will download the Farting and Snoring Loudly Beta. Whatever you do, DO NOT under any circumstances install Mother-In-Law 1.0 (it runs a virus in the background that will eventually seize control of all your system resources.) 

In addition, please do not attempt to reinstall the Boyfriend 5.0 –program. These are unsupported applications and will crash Husband 1.0.

In summary, Husband 1.0 is a great program, but it does have limited memory and cannot learn new applications quickly. You might consider buying additional software to improve memory and performance. We recommend Cooking 3.0 and Hot Lingerie 7.7. 

Good Luck! Tech Support

Broadband: This Doesn't Look Like a Problem

There continues to be concern expressed about the "lack" of broadband adoption in the U.S. market in some quarters. This illustration of the current and expected state of affairs for a number of nations by Analysys Mason does not suggest there actually is a problem. 

The United States appears to be in the mainstream of penetration rates. 

The Next Big Thing in Wireless Packaging

In the U.S. mobile business, there have been at least two major marketing concepts with huge impact on consumer adoption: "Digital One Rate," which erased the distinction between "local" and "domestic long distance," and "family plans," which principally are responsible for extending mobile penetration to most members of a family. 

The next big innovation? At some point, "data one rate combined with a family plan." The reason? Mobile broadband growth will be retarded until the data access equivalent of a family plan can be bought. Sprint already has taken a step in this direction by offering an "Everything Data" plan supporting two lines with Web and e-mail connectivity plus 1,500 minutes of shared voice services for $130. 

In fact, it is likely one can carry the concept just a bit further and create "data one rate family plans" that simply allow some consumers to buy a single broadband plan that supports all family members, whether in mobile or fixed mode, for a single rate. Executives at AT&T have been talking conceptually about unifying wired and wireless broadband as well, but the company hasn't actually launched anything like that. 

In principle, the idea is a simple extension of family plans, buckets of minutes or text messaging plans already in widespread use. 

There simply is going to be high consumer resistance to buying separate broadband connections for every connected mobile device. 

Clearwire has been talking about casual use plans, which likewise is a step in the right direction AT&T might also be looking at some transaction-based billing scheme that would support multiple Internet-connected devices. There won't be a marketing "big bang" on the order of Digital One Rate or family plans until carriers decide to get just that serious about mass adoption of broadband services. 

More Enterprises Disconnect Locations

The number of enterprises disconnecting network locations reached its highest level in six years during 2008, according to new research by Vertical Systems Group. In a survey of U.S.-based enterprise network managers, 14 percent reported that they had eliminated one or more network locations without adding or moving others. This figure compares to only nine percent from a survey conducted a year ago.

For the most recent survey, 41percent of respondents reported both additions and eliminations, while 16percent added locations without any eliminations. About 29 percent reported no change.

"The pace of network site additions stalled in the second half of 2008, and a significant number of networks are shrinking as compared to a year ago," said Rick Malone, principal at Vertical Systems Group. "Economic uncertainty and business slowdowns are forcing unplanned network reconfigurations, particularly within hard-hit industries like retail and financial.

Location eliminations peaked during the fourth quarter, and we expect this trend to continue throughout the first half of 2009," says Malone.