U.S. Mobile Market Share in Flux, or Only the Reporting?

Perhaps it is one more sign of growing disruption in the U.S. mobile service provider market, but there is some dispute about whether Verizon Wireless or AT&T now has the larger market share, based on subscriber accounts.

By virtually all accounts, Verizon Wireless has been the market leader. But there are at least some analysts who believe AT&T has moved ahead.

That was not the case in 2012. AT&T said it had 105.2 million wireless subscribers for the second quarter of 2012, at a time when Verizon Wireless reported some 111.3 million wireless customers.

But AT&T does not any longer report its wireless subscriber figures, emphasizing total accounts in service.

When a company doesn’t report a specific number, such as number of accounts in service, or number of subscribers, you have to assume there is a reason.

To be sure, a change in reporting probably is required, as more customers shift to shared or family plans, so an “account” is not equivalent to devices or users in service. Further changes will be required if and when service for sensors (machine to machine or Internet of Things) are added to “account” totals.

Then there is the matter of how to count wholesale accounts, not just retail accounts. A wholesale mobile virtual network operator (MVNO) generates revenue for the supplying carrier, though typically with lower average revenue per user or end user account.

All of that complicates efforts to calculate U.S.mobile service provider market share.

The recent spate of mobile service provider acquisitions, in particular on the part of AT&T (Leap Wireless) and T-Mobile US (MetroPCS), have rearranged U.S. service provider market share, to some extent, based on subscribers.

MetroPCS added about 9.5 million subscribers for T-Mobile US. The Leap Wireless acquisition by AT&T adds about five million subscribers.

What remains a bit cloudy is the actual market share held by Verizon Wireless and AT&T.

By some reckoning, until the acquisition by T-Mobile US of MetroPCS, and AT&T’s purchase of Leap Wireless, Verizon held the lead in share of customer accounts. In the second quarter of 2013, Verizon Wireless had about 100.1 million subscribers.

Some now think AT&T has surpassed Verizon Wireless in subscriber count. Others might not see the evidence for that claim. AT&T did not report an actual wireless subscriber figure In the second quarter of 2013.

Virtually all observers would have in 2012 agreed that Verizon Wireless had the largest number of U.S. mobile subscribers, with AT&T following. Sprint, by most estimates based on company reporting also had significantly more share than T-Mobile US.

But after the acquisitions, some think market share has shifted, with AT&T leading Verizon, and Sprint still ahead of T-Mobile US, but by a smaller margin.

What is odd is that analysts no longer seem to agree about U.S. mobile service provider market share.

Many compilations of market share from 2012 had Verizon leading with about 34 percent share, followed by AT&T with about 32 percent, then Sprint with about 17 percent and T-Mobile US with 10 percent share. After a spate of acquisitions, the shares are rearranged.

AT&T now, by some accounts, seems to have passed Verizon, and T-Mobile US has gained market share, according to some accounts.

2013 mobile service provider market share

source: Blue Field Strategies

16% to 26% of U.S. Mobile Customers Use OTT Messaging At Least Once a Month

These days, it is hard to distinguish between use of text, voice and video features of over the top "VoIP" apps, but in many countries a majority of smart phone customers use an over the top messaging app during a typical month. 

In the U.S. market, perhaps 26 percent of smart phone users surveyed by Yankee Group use an over the top VoIP app once a month. About eight percent report using an app daily, while 10 percent report they do so at least weekly. 

Japanese smart phone panelists are the predominant users of Voice over IP (VoIP) applications on mobile devices, among seven countries tracked by Arbitron Mobile. That usage includes any messaging features of over the top VoIP apps.

Almost 70 percent of the smart phone panelists in Japan accessed VoIP apps during the month of January 2013, spending six hours and 25 minutes with voice and messaging apps. 

The Arbitron Mobile on-device software meter reported that VoIP users in the Japan smart phone panel accessed their VoIP apps an average of 222 times in the month, three times more than panelists in Indonesia, who at 65.9 sessions per month are the second most active users of VoIP apps across the seven Arbitron Mobile-based smart phone panels.

About 41 percent of Indonesia panelists use VoIP apps on their mobile devices, spending an average of 2 hours and 15 minutes a month.

China panelists are the least active users of VoIP apps. Only 16.4 percent of the China smart phone panel (operated by iResearch) accessed any VoIP apps in the month of January.

Panel	VoIP User %	VoIP Time Spent (minutes per month)	Sessions/Month
Japan	68.2%	386.5	222.4
Indonesia	40.9%	134.9	65.9
United Kingdom	22.1%	79.2	35.1
United States	16.5%	77.6	35.6
Germany	27.0%	68.1	31.8
France	17.4%	65.2	34.3
China	16.4%	26.6	27.2

source: Arbitron

Japanese smart phone panelists, the heaviest users of mobile VoIP, spend the least amount of time—one hour, 36 minutes in the month—and have the fewest sessions—57.8 in the month—for carrier-based voice calls. 

Indonesian panelists, the second heaviest users of VoIP are the second lightest user of their carrier calling minutes.           

Panel	VoIP Time Spent (minutes per month)	Voice Call Time Spent (minutes per month)
Japan	386.5	96.3
Indonesia	134.9	109.0
United Kingdom	79.2	242.3
United States	77.6	460.6
Germany	68.1	167.8
France	65.2	298.4
China	26.6	225.6

source: Arbitron

Three VoIP apps occupy the leading position among Arbitron smart phone panelists around the world. Skype predominates in U.S. and Europe; LINE leads in Japan and Indonesia; and Youxin is the leader in a crowded field of VoIP apps in China.

Panel	VoIP Apps	App User %	App Time Spent (minutes per month)	Number of Sessions/Month
Japan	LINE	64.2%	392.3	225.7
Indonesia	LINE	27.6%	156.0	79.7
United Kingdom	Skype	14.4%	52.9	23.9
United States	Skype	11.5%	64.1	22.5
Germany	Skype	17.1%	53.1	23.1
France	Skype	12.8%	44.5	19.1
China	Youxin	4.7%	16.5	21.4

Arbitron

AT&T 1-Gbps Coming to Austin, Texas mid-2014

As promised, AT&T will activate at least some locations in Austin, Texas with a symmetrical gigabit access network by about mid-2014, perhaps not coincidentally when Google Fiber also is slated to begin sales.

The more-immediate import, for many potential customers, is the first part of the upgrade, to a symmetrical 300-Mbps connection, starting for some locations by December 2013.

AT&T, which says it is beginning construction of its gigabit network in Austin, Texas, might reach the gigabit standard at some locations by mid-2014.

AT&T says it is starting with “tens of thousands” of customer locations throughout Austin and the surrounding areas at the end of 2013 (300 Mbps), with additional local expansion planned in 2014, though no specific targets were immediately revealed.

Skeptics might say it is important that AT&T did not announce pricing, either, though others might counter that the launch is not expected until December 2013. A rational service provider might not want to reveal too much detail until service actually is available.

But AT&T also faces a problem Google Fiber does not, namely an installed base of customers whose perception of what a reasonable Internet access offer looks like will change, if AT&T starts selling gigabit connections for prices anywhere close to what Google Fiber offers.

The problem is the same as AT&T and other telcos faced when VoIP began to get traction in the market. Telcos had scores of millions of legacy voice accounts sold for healthy premiums compared to many of the upstart VoIP providers.

So the strategic challenges was simple: match VoIP prices and features, or essentially refuse to match those offers and face erosion of accounts. One might argue that is not smart, but the math works.

Instead of taking an across the board revenue hit on all existing lines, telcos mostly decided to lose market share over time, while maintaining prices on a dwindling customer base. To be sure, customers were deserting in any case for mobile alternatives.

AT&T will face the same issue with gigabit networks, as the new value-price relationships will be reset, by its own gigabit offer and Google Fiber and other offers that are hovering around a 1-Gbps for $70 to $80 retail pricing range.

That of course has implications for the value-price relationship for the 300-Mbps service and all other slower speed services, which essentially will be priced in relation to the 1-Gbps service.

Google Fiber, for example, already has done so. Customers can sign up for free 5 Mbps service, guaranteed for seven years.

But Internet access and voice markets have different strategic implications. As AT&T did decades ago in the stand-alone long distance market, a choice to harvest legacy revenues makes sense if a product is in the mature and declining part of its life cycle.

Internet access is in some ways "mature," but has a different strategic character, as it is the foundation for most, if not all, other services fixed network service providers will offer.

Though it will face criticism for not moving faster, AT&T and other major ISPs likely have concluded that although they have to respond to the gigabit challenge posed by Google Fiber, they will respond market by market, as they typically always do, mindful of the implications for their existing high speed access revenue streams.

AT&T likely also has concluded that rushing to gigabit speeds is a mistake, as most consumers are likely to be quite happy with 300-Mbps services that cost less.

Time Warner Cable's Chief Financial Officer Irene Esteves continues to get coverage every time she speaks in an investment or other conference about the state of consumer demand for 1-Gbps access, seemingly prompted in virtually every case by Google Fiber's Kansas City 1-Gbps network and service. Esteves repeatedly has said that Time Warner Cable does not see the demand for such speeds.

Some will be tempted to argue this is a typical effort by a quasi-monopolist to dismiss a competitor's better and disruptive offering, and rather incorrect, since people in Kansas City do seem to be buying Google Fiber.

A few might say the statement is an effort to stave off, as long as possible, or perhaps indefinitely, the need to invest major new sums in access technology.

Others will note that since Time Warner Cable faces Google directly in Kansas City, the question is rather an obvious question for investors to ask. There is some truth to all such interpretations.

On the other hand, to understand the comment that "we just don't see the need of delivering that to consumers." one has to unpack the statement and put it into context.

Esteves is not necessarily dismissive of Google Fiber.  "We're in the business of delivering what consumers want, and to stay a little ahead of what we think they will want," she said, and seems always to say when asked about the state of demand for 1-Gbps access.

A fair way to rephrase might be "At the moment, at the prices we would have to charge, we believe few customers would want to buy 1-Gbps access." The statement is highly conditional.

At very low prices, many consumers would buy 1-Gbps. At significant prices, far fewer will do so. At high prices, a small percentage will purchase.

A corollary might be that "right now, at significant prices compared to our other offerings, few consumers we sell to would willingly pay the incremental prices to get the fastest speeds."

The "consumers don't want it" is a highly conditional statement. Time Warner Cable and all other executives know full well there is some set of circumstances that could drive very high take rates.

Time Warner Cable's business objective is to supply any future forecast level of demand, under competitive market conditions, at a profit, without investing prematurely or wildly in ways that harm its financial prospects.

Some might say Time Warner Cable is craven, stupid or just wrong about end user demand for 1 Gbps access. That's unfair and incorrect. Time Warner is making a highly conditional statement about demand under a finite set of circumstances. The answer will be different under a different set of specific circumstances.

U.S. Mobile Service Provider Market Share Shifts after AT&T, T-Mobile US Acquisitions

The recent spate of mobile service provider acquisitions, in particular on the part of AT&T and T-Mobile US, have rearranged U.S. service provider market share, as measured by subscriber accounts.

Until the acquisition by T-Mobile US of MetroPCS, and AT&T’s purchase of Leap Wireless, Verizon held the lead in share of customer accounts.

Virtually all observers would have in 2012 agreed that Verizon Wireless had the largest number of U.S. mobile subscribers, with AT&T following. Sprint, by most estimates based on company reporting also had significantly more share than T-Mobile US.

But after the acquisitions, market share has shifted, with AT&T leading Verizon, and Sprint still ahead of T-Mobile US, but by a smaller margin.

Many compilations of market share from 2012 had Verizon leading with about 34 percent share, followed by AT&T with about 32 percent, then Sprint with about 17 percent and T-Mobile US with 10 percent share. After a spate of acquisitions, the shares are rearranged.

AT&T now seems to have passed Verizon, and T-Mobile US has gained market share.

2013 mobile service provider market share

A New Era of Computing and Communications: A Decade in the Making

Sometimes big changes occur so gradually we aren’t aware the changes are significant. Back in 2008, for example, IDC predicted the information technology industry was at the very

beginning of what IDC called a "hyper-disruption” of the business, something that happens "once every 20 years to 25 years."

Simply, IDC predicted, rightly, a shift to computing built on mobile devices and apps,

cloud services, mobile broadband networks, big data analytics, and social technologies. That would supersede the current era, which many of us would have a hard time naming, though it is clear we had eras lead by mainframe, minicomputer and then PC devices.

More recently, the Internet has been a bigger factor, and mobile has clearly emerged as an important device form factor.

Collectively, IDC refers to this next era of computing as the "third platform." By about 2020,

when the information technology industry generates $5 trillion in spending, over $1.3 trillion

more than it does today, 40 percent of the industry's revenue and 98 percent of its

growth will be driven by third platform technologies that today represent just 22 percent of

spending.

It would be fair enough to note that such changes in computing eras had direct consequences for suppliers and buyers, notably the inability of any leader in one era to similarly dominate the next era, changes in sales channels (direct to indirect), end user devices, indoor networking and access networks and protocols.

Mobile and cloud are perhaps the easiest ways to characterize the direction of the shift. By extension, such periods of disruption also are going to disrupt revenue models and magnitudes for current suppliers.

A rational observer might agree that “consumerization” of information technology (people using consumer devices and apps) is characteristic of such a platform, as cloud services can be acquired and used by consumers (and also in their work roles) without distribution layers between end user and supplier.

Those distribution layers are important because they include significant businesses--telcos, cable companies, satellite providers, mobile service providers, ISPs, channel partners, distributors, value-added resellers and device suppliers.