85% of Mobile Traffic But 39% of Revenue-What Gives?

A whopping 85 percent of the traffic traversing the four nationwide mobile operators networks is pure data, according to a new study by wireless analyst Chetan Sharma, showing that the U.S. mobile industry long ago abandoned its voice mantle to become a data-driven juggernaut. Or has it? Sharma as well found that data accounted for only 39 percent of all mobile data revenue that carriers collected in the fourth quarter. Operators may be running what are primarily data networks, however they are after all getting paid mainly for voice minutes.

The detailed report as well shows that overall revenue for operators is increasing, driven by data use, which will grow from a $67 billion market in 2011 to an $80 billion one at the end of this year. Nevertheless the average revenue that carriers collect per customer is declining: For every 52¢ of new data fees operators took in last quarter, they lost 96¢ in voice fees.

Taken at face value, these numbers paint a or rather foreboding picture: Mobile operators' future anyway you look at it lies in replacing voice minutes with data megabytes on the revenues sheets, however voice revenue is declining faster than data revenue is increasing. To boot, operators are using far more network capacity to deliver one dollar's worth of data than they are using to deliver one dollar's worth of voice.

The numbers as well don't paint a precise picture

But the numbers as well don't paint a precise picture. During 85 percent of traffic may be data, the networks that carry it are orders of magnitude more efficient than they were in the past. For the same infrastructure and spectrum investment, operators can deliver multiple megabits of capacity where they once could offer only dial-up modem speeds or a few dozen phone calls. Those network efficiencies mean operators can make money off data even if it takes over 100 percent of their traffic-as long as they keep upgrading their networks.

But the loss of voice revenue is the bigger problem. Voice accounts for so much of their revenue stream but so little of their network resources that carriers are clearly using it to pad their profits. If some over-the-top VoIP (Voice over Internet Protocol) service were to get widely adopted, it could wipe out a good percentage of clients' bills, forcing operators to build their business models primarily on data. That doesn't mean they couldn't make money on data; it just means they would make a lot less.

What would in effect do the operators in is if they were forced to charge clients only for the data they consume. Sharma reported that only the top 30 percent of smartphone users consume more than 1 GB per month. But the data plans that operators sell are designed to give average consumption a wide berth. The smallest smartphone data bucket Verizon sells contains 2 GB for $30 per month. Pursuant to this agreement AT&T's new pricing structure, clients can buy a 300 MB plan for $20, however the straightway tier is 3 GB for $30. That means the vast majority of U.S. smartphone clients are coming in way in accordance with their caps, buying a lot of data they will conceivably never use.