Traffic Tariffs

Data usage is exploding across smartphones, a phenomenon that has interesting implications for mobile broadband via laptops. Will the latter experience similar expansion as adoption increases—Verizon’s recent LTE network launch may expedite that process, adding to Sprint and Clearwire as key providers of such services—or will smartphones’ smaller size continue to drive their clear leadership in data usage? Either way, the costs of providing data services over any device remain high. In fact, the growth in wireless data traffic is outstripping the corresponding growth in rev, posing a dilemma for wireless operators, according to Sanford Bernstein analyst Craig Moffett. He’s speaking particularly of mobile phones although the thrust is or will become germane to laptops as well. Citing AT&T’s recent disclosures that data traffic on its network has grown by 3,000% over the past 3 years while wireless data rev has increased by 166% over the same period, Sanford Bernstein analyst Craig Moffett said “the right question to ask is not whether revenue will grow (of course it will), but instead, whether revenue will grow faster or slower than capital spending.” In referencing the perceived dilemma for wireless carriers, Moffett said AT&T’s wireless capex spending rose 55% over the past 9 months as overall wireless rev grew 10.5% and organic growth just 7.5%. Usage-based pricing models have emerged as a way to increase adoption yet limit consumption, but Moffett said customers neither like nor understand such models. AT&T disagrees, claimed customers aren’t bothered by the tiered phone data plans it has instituted, and Verizon only offers tiered plans for its LTE services. So the jury remains out on which pricing models will win out, as it also is with the tiered models that have been applied to home broadband usage by some operators. The growth in mobile data usage demands an answer.