Where Did AT&T Prepaid Accounts Go?

AT&T's prepaid results were weaker om the second quarter. "Obviously we had a net loss of customers of about 400,000," AT&T CFO Richard Lindner says.

So what happened? Did those users stop using their mobiles? Other evidence suggests not. Few users in recent surveys claim to have terminated their mobile services entirely.

So the most-logical explanation is that other prepaid mobile providers picked up those 400,000 customers. And Lindner doesn't dispute that view. "Certainly we’re seeing impacts from other competitive offers in the market," he says.

Prepaid represents about four percent of AT&T wireless service revenues and less than that amount as a percentage of total earnings. So AT&T is not likely to push too hard in the prepaid direction for fear of cannibalizing its more-lucrative postpaid business.

But that will mean growing opportunties for providers of prepaid wireless.

"Obviously we recognize there’s certainly some opportunities for us there in that portion of the market and so you’ll see us continue to address that and make some tweaks and changes to our product offers," says Lindner.

"But one thing that I think we feel is important is we are not going to put offers in the market that we don’t feel will be profitable or earn a reasonable return," he adds. "And we won't do anything obviously that would impact or cannibalize our postpaid base."

AT&T, Verizon: Business Segment Suffers Worse than Consumer

Verizon Communications and AT&T arguably took bigger hits to their enterprise than consumer segments as a result of the recession, second quarter financial results suggest.

Revenue from Verizon’s global enterprise business dropped 6.7 percent while the wireless customer segment revenue grew 27.7 percent. Even consumer wired services revenue grew 13.7 percent in the second quarter.

AT&T also reported that the deepest economic impacts in the second quarter came in the business services segment.

AT&T CFO Richard Lindner likewise says total business revenues, including enterprise, wholesale, small and mid-sized customers, were down 5.6 percent year over year. Excluding equipment sales, business revenues were down 4.3 percent, Lindner says.

Wireless revenue was up 10.1 percent, on the other hand, while total wireline consumer customer revenues were $5.4 billion in the second quarter, compared with $5.7 billion in the year-earlier quarter and essentially flat, down only $11 million, versus the first quarter of 2009.

"We’ve seen pressures across business product lines but the largest impacts are volume related in traditional voice and legacy data products," says Lindner. "The sectors where we’ve seen the most impact, as you would expect, are in finance, transportation, and manufacturing."

Consumer broadband and video are helping both AT&T and Verizon, while it appears legacy business products are suffering. Newer services including Ethernet, VPNs, hosting, IP conferencing and applications services grew 15.2 percent year over year.

In an economy where consumer spending drives roughly 75 percent of activity, one might have suspected consumer revenue would be harder hit. Instead, it appears massive job losses have crimped business segment spending the most.

50% to 60% of New Prepaid Wireless Users Will Never Go Back to Post-Paid

Prepaid wireless clearly is growing. In the first quarter, for example, about 61 percent of the new net customers T-Mobile added were prepaid accounts. In the fourth quarter of 2008, T-Mobile added 57 percent prepaid accounts. In the first quarter of 2008 T-Mobile added 25 percent prepaid customers.

So the big question is what those customers might do once the recession is over and there is less need to watch spending on mobile and other communications and entertainment services.

Wireless analyst Chetan Sharma thinks it is possible that "it is quite likely that 50 percent to 60 percent of such consumers don’t go back to postpaid."

For major wireless providers, this will mean a decline in average revenue per user. For prepaid providers, the trend will mean continued opportunities to take market share from postpaid providers.

The other trend is that although prepaid traditionaly has been viewed as a niche segment for lower-income customers, that could be changing. Lots of customers who traditionally have used postpaid plans might find they can get along quite nicely using prepaid.

Over time, even smart phone customers will find they are able to buy prepaid service that allows them to use higher performance, later model devices with prepaid plans.

Mobile Streaming Video Grows 58% Last Quarter

Worldwide mobile data bandwidth usage has grown 30 percent during the second quarter of 2009, says Allot Communications. Asia leads the growth with 36 percent; Europe posted 28 percent growth and the Americas 25 percent.

Heavy data users do not distinguish between their fixed and their mobile networks and seem to expect the same service from the Internet, irrespective of their access method, the report says.

That is going to be a problem, for the same reason a small percentage of heavy users create performance issues for all other users, one might reasonably conclude. The other issue is that the fastest-growing traffic type is streaming video, which grew 58 percent during the quarter. Since streaming video requires 100 times the bandwidth of a voice call, you can imagine what the problem is.

The other issue is that mobile traffic is not evenly distributed: some locations get dramatically more demand than others. Peer-to-peer traffic, for example, accounts for 42 percent of bandwidth utilization in the busiest cells on the network, but only 21 percent in the average cell.

Since mobile licenses are awarded in ways that mean usable bandiwidth in any one location is limited, fancier engineering, higher network cost and more-sophisticated traffic engineering are required at some cell sites, though others might manage just fine.

Internet Rivals TV as Top Leisure Pursuit

The Internet now rivals TV as a favorite leisure activity, say researchers at Frank Magid Associates (click image for larger view). And computer or game consoles are not far behind.

Broadband Adoption is Not Just about Availability

Some observers think broadband adoption is primarily a matter of availability. It is important, but it is not the only important factor.

Even if every home and business in every OECD country were wired with a broadband connection, the United States "per capita" rank would actually fall to 20th, because of differences in the size of households in each of the countries.

In other words, "America would be 100 percent broadband saturated and yet our standing would plummet because the OECD ranks on a per capita basis rather than per household," says Federal Communications Commission Commissioner Robert McDowell.

In Spain, for example, 28 percent of people flatly say they "do not want" broadband. About 15 percent of homes do not own a computer.

About 13 percent of surveyed consumers say they do not find the Internet "useful."

S0me 12 percent say they do not have time to use the Internet and 10 percent say they do not know what the Internet is. Only four percent of non-users say it is "too expensive."

So the main reason non-users are not buying broadband access services is that they do not see the Internet's usefulness and value.

Questions about Zer01, Buzzirk

Nancy Gohring , a reporter fror IDG News Service, has raised some uncomfortable and so far unanswered questions about Zer01, the new prepaid mobile service launched by United Technologies Group and sold by channel partners including Buzzirk. The service promises unlimited voice and data for $70 a month, with no contract.

But Gohring says "what little information is available about the services is vague, technically inconsistent, and doesn't match up with public records."

And that's the least of the issues. Anybody thinking about becoming a distributor probably should read this as part of their due diligence. It's a heck of a piece of reporting and research.

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