By John Breyault, Vice President of Public Policy, Telecommunications and Fraud
Consumers perusing the New York Times on May 14 who skipped over the Business section on their way to the crossword puzzle likely missed an important story for the future of communications in the U.S. In section B1 was this story, innocuously titled “Everyone Is Using Cellphones, But Not So Many Are Talking,” which noted that according the wireless industry, data and text now make up the majority of U.S. cellular traffic, overtaking voice.
Most of today’s cellphone-obsessed teenagers would probably react with a shrug and a “no duh.” For those of us that have watched the cellphone industry evolve from 1984’s Motorola DynaTAC 800X (the world’s first cellphone — a bargain at $3,995) to today’s sleek smartphones, however, the shift from voice to data represents a watershed moment for American consumers. Whereas for nearly two decades, the wireless industry’s primary source of revenue was mobile voice service, mobile data revenue is quickly replacing it. As consumers shift increasingly to using Voice Over IP (VoIP) technologies such as Skype for their mobile voice needs, this trend is only likely to accelerate.
So what does this mean from the all-important consumer pocketbook perspective? For one, consumers shopping for new cellular service should consider the price and quality of mobile data plans offered as or more carefully than they do the voice plans available. Second, consumers should be aware that the major American cellular companies are likely to begin shifting away the so-called “unlimited” or “all-you-can-eat” data plans (in reality usually capped at around 5 Gb of bandwidth per month) that are typically priced at around $30 per month per line. Instead, carriers are likely to offer data plans to new subscribers in buckets or “tiered” plans. This week AT&T announced that it would replace its $30 unlimited data plans with a $15 per month/200 Mb “Data Plus” plan and a $25 per month/2 Gb “Data Pro” plan for new subscribers. Verizon Wireless recently announced that it would be moving in a similar direction.
While these two tiers would cover 98 percent of At&T’s current data plan subscribers, consumer hunger for mobile bandwidth is projected to continue to grow exponentially. The user who is today content with a 200 Mb plan is likely to need to upgrade to the 2 Gb plan or as yet unannounced higher-bandwidth tiers in short order.
Given this trend, consumers shopping for a new cellular plan should carefully consider that number of voice minutes used in a typical month. The goal here is to avoid overbuying minutes. Many users may find that they save money by opting for a data and text plan with the lowest possible bucket of voice minutes. According to CTIA, the wireless industry association, the average U.S. mobile voice call dropped from 2.27 minutes in length in 2008 to 1.81 minutes in 2009. This is largely a result of more users replacing voice calls with texting. An example of this trend is the NCL intern who recently relayed a story of a friend whose voice mail message asks callers to simply send a text message instead of leaving a voice mail. We do not believe this to be an isolated incident.
Going forward, we expect that cellular voice service will become more like an “app” and less like a standalone service. How consumer and regulators in Washington react to the shift away from cellular voice towards mobile data will likely play a key role in shaping the wireless marketplace for years to come.