How much higher can data revenues go?

A few years ago when wireless operators introduced their first mobile content services on their WAP decks, there was a lot of buzz about how data revenues might one day equal 20 percent of service revenues. Today that vision has become a reality.

During the recent first quarter earnings reports, AT&T reported wireless data revenues now make up 21 percent of total services revenues. And surprisingly it did not consist just of text messaging. While AT&T customers did send a total of 620 million multimedia messages and 44 billion text messages, the company said that wireless Internet was up 100 percent, email was up 60 percent and revenue from data access and media bundles were strong. 

Likewise, Verizon Wireless said that data revenue now represents 23 percent of its total service revenue and makes up $11.94 of total ARPU. Like AT&T many of its customers are sending text and video messages (58 billion text messages and 1.1 billion picture/video messages) but the company also says that consumers completed 34.6 million music and video downloads in the quarter.

Meanwhile the No. 3 carrier, Sprint Nextel, reported yesterday that while its ARPU is declining, postpaid data ARPU was $11.05 and accounted for 20 percent of total ARPU. Sprint executives said that the data ARPU came from data cards, text messaging and the PowerVision bundle. More than 200 million Sprint users access the network using a Sprint data card.

My point in rattling off all these statistics is that data usage is indeed up, even if it isn't being driven entirely by the mobile content services that many of us thought would thrive in this environment. Now that wireless data has reached the coveted 20 percent of service revenue mark, what's the next milestone? I believe that once we overcome some of the challenges of content search and discovery and user interface (clearly inroads are being made in this area), wireless data will continue to grow and could easily hit the 40 percent of total service revenue mark.

Already operators are starting to position their handset portfolios to take advantage of the growth in data traffic. Verizon now offers 25 different multimedia phones and Sprint is gearing up for the launch of its Samsung Instinct next month. All these movements are signs that wireless data is thriving. For mobile content players, this is good news. More multimedia handsets means subscribers will be more likely to download content and subscribe to a data plan. -Sue [1]