According to a detailed article over on the Wall Street Journal, the advent of smartphones has seen telecom spending by families go up sharply at the expense of things like cars, clothing, events, and eating out. That wireless carriers have succeeded in getting a greater share of family spending sounds great for the sector, but there's a lot of conflicting trends going on here don't you think?
While telecom is apparently getting a bigger share of wallet, yet the transition of voice and SMS to IP is killing revenues and eating into profits. Data revenues are growing rapidly, but data traffic growth will supposedly kill the economics unless they can charge more. But if families are already spending this much on smartphone usage now, how much more can they really spend? And where is the extra money going, given that the top line story has been one of offsets and not growth?
Of course, the reason carriers are only partly happy with the changing spending habits of consumers toward telecommunications services is because so much of the extra is winding up in the hands of the likes of Apple - either directly or via those dreaded subsidies.
Meanwhile, wireless carriers are complaining that data growth will ruin their economics unless they can cap it and charge for it. They say they need that revenue to justify infrastructure buildouts to keep pace. With LTE now finally starting to go mainstream, there's going to be lots of potential traffic growth out there over the next few years.
But far are we from the point where the consumer is tapped out? How big a share of the consumers' wallet can they realistically get before something has to give? The smartphone revolution is both a wonder and a curse, depending on how you look at future strategy. It's enabling a wonderful future that someone's going to have to pay for eventually, and I don't think Apple and its trending-toward-one-trillion-dollar-marketcap are planning to share.
That's probably why the carriers are still looking for ways to tap content providers directly for a new revenue stream, e.g. with the 1-800 data model. We haven't heard much about that recently, but I'll bet it resurfaces this winter.
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