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Will Success Ruin the U.S. Wireless Market?
It could begin to suffer from high saturation levels and revenues could drop while providers improve their service offerings.
Posted Mar 31, 2006
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The U.S. wireless market might be a victim of its own success, according to the latest study from IDC. In 2005 the industry skyrocketed, adding approximately 21.8 million new subscribers. As a result, subscriber growth and voice average-revenue-per-user (ARPU) are both expected to slow, with total revenue expected to decline from 2008 to 2009. "Total voice-service revenue declines late in the forecast period will jolt an industry accustomed to 25 years of voice revenue growth and further emphasize the importance of data services to the future of the industry," says Scott Ellison, program manager, for wireless and mobile at IDC. The wireless market had a stellar year in 2005, crossing the 200 million subscriber mark and 70 percent penetration threshold. Handset-based 3G applications also made their first appearance, with many vendors receiving a positive response. The wireless email push device market, the first wireless killer app, might be reaching consumer saturation levels, and the use and enhancement of these services for the wireless market has reached a plateau. The key will be the delivery of new improved data services to wireless handheld devices, such as improved ability to connect with back office systems, according to Ellison. "With the wireless subscriber market approaching saturation, driving further adoption and usage of data services will be critical to maintaining total ARPU and service growth in light of continuing voice ARPU erosion," Ellison says. Key market dynamics that will influence this market during the forecast period include the slowing of total subscriber growth and increased levels of wireless competition from mobile virtual network operators (MVNO). MVNOs will be new wireless providers that offer specific services tailored for handheld devices and PDAs. This will force the broader wireless service providers, such as Verizon and Cingular, to adopt and increase their own services to match the new competition, according to Ellison. This slight decline will in turn be matched by the further consolidation of service providers, Ellison says. "As new wireless services are developed and refined, the market will experience strong growth from the business sector as they realize its benefits."
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