US mobile industry still robust despite doom and gloom

Posted by Tammy Parker Wednesday, March 25th, 2009

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Is the recession forcing US mobile customers to drop their cell-phone plans en masse, and are the remaining subscribers switching from contract plans to prepaid? That’s what some critics contend, but industry metrics reveal that the economy’s impact on US mobile-subscription trends has been far less dramatic.

I’ve been investigating the recession’s impact on the mobile industry in the Americas, so I was intrigued about the New Millennium Research Council’s March 19 phone conference announcing results of a survey showing that 19% of respondents who do not have a mobile phone reported that they “discontinued cell phone service in the last six months because of actual job loss, fear of job loss, the recession, or any other related financial concerns.” The NMRC, which commissioned Opinion Research to conduct the survey, said that 460 of the 2,005 respondents reported that they do not have a mobile phone.

The mainstream US media took NMRC’s survey results at face value, but I’ve found lots of problems with the group’s findings. A glaring omission from the press conference was the fact that the US mobile industry continued to expand through 2008. According to Informa Telecoms & Media research, 4Q08 sustained a longtime trend whereby the fourth quarter has the highest quarterly net-additions figure of the year, with nearly 4.16 million mobile subs gained in the US in the final three months 2008. Although that was about 2.3 million fewer than in 4Q07’s 6.46 million, subscription numbers nonetheless increased.

The NMRC repeatedly declined to answer questions about who or what was funding its research of the mobile industry. As one reporter noted, the NMRC appeared to take delight in its prediction that the economic crisis is leading to a general exodus of US mobile customers, a mass migration of contract users to prepaid plans and a rejection of the “bells and whistles” that operators have included in their data-service plans.

Industry statistics don’t bear out the NMRC’s contention that massive numbers of mobile postpaid customers are switching to prepaid. “Among those with prepaid cell phone service, 17% have switched to such service in the last six months because of issues such as job loss, fear of job loss or the economy,” said the group.

However, Informa’s research shows that the US prepaid-to-postpaid ratio has not changed significantly in recent months. Prepaid users accounted for a bit less than 11% of end-4Q08’s total 270.03 million US mobile subscriptions; that was about the same percentage of US mobile customers on prepaid plans in 4Q07.

And contrary to what the NMRC contends, mobile customers must want those data-related “bells and whistles.” Data as a percentage of revenue continues to increase each quarter. In 4Q08, AT&T reported a 51.2% year-on-year increase in mobile data revenues, and data represented 26.6% of AT&T’s 4Q08 mobile service revenues, up from 19.9% a year earlier. Verizon Wireless had similar results, reporting a 41.4% year-on-year increase in data revenues in 4Q08. Verizon said data represented 26.6% of 4Q08 mobile service revenues, up from 19.9% in 4Q07.

My biggest problem with NMRC’s research is that any consumer study that purports to show a decline in mobile phone usage but only includes people who surveyors can reach via fixed-line phones has utterly missed the growing segment of “cord-cutters”: people who do not have fixed-line phones and use only mobile handsets for their voice communications.

Listening to the press conference, I realized that the NMRC was saying nothing about people who are giving up their landlines to just rely upon their cell phones. In rather remarkable timing, my 30-something niece had just days before sent me an SMS from her cell phone, telling me to delete her home phone number from my records as she could no longer justify paying for a fixed-line phone because she uses her mobile for all of her calls.

So, during the phone conference, I pressed *1 on my phone (as a matter of full disclosure, I’ll note that I was on a fixed line) to get into the queue to ask NMRC and Opinion Research about their survey. We were told that each caller would be allowed to ask two questions. When my time came, I noted my niece’s SMS to me and asked if the research had addressed the growing trend of cord-cutting. From the answer I was given, I ascertained that surveyors only contacted respondents on their landline phones.

I started to ask my second question, which, if I had been allowed to ask it, would have been, “Didn’t your survey totally miss the huge numbers of youth and adults, mainly those ages 18-34, who do not have landline service? They are not getting rid of their mobile handsets, because those are the only phones they have, right?”

But before I could say another word, I heard a “beep” and my line was muted by someone hosting the call. I realized then that NMRC and Opinion Research were not truly interested in open discourse regarding how US consumers are using their mobile phones and how the economy is affecting that usage.

I dug up some research from Stephen Blumberg and Julian Luke of the National Center for Health Statistics. Their most recent survey, released in December, showed that the number of American homes with only mobile phones continues to grow. “More than one out of every six American homes (17.5%) had only wireless telephones during the first half of 2008, an increase of 1.7 percentage points since the second half of 2007,” their report stated. “In addition, more than one out of every eight American homes (13.3%) received all or almost all calls on wireless telephones despite having a landline telephone in the home.”

Further, their research shows that “approximately 31% of adults aged 18-24 years lived in households with only wireless telephones.”

If the NMRC and Opinion Research had contacted people who use only mobile phones for their personal calling, it would have totally changed their survey’s results. Other pollsters have been fretting about this very issue as it relates to their surveys, because they, and the customers who buy their research, realize that phone polls are often missing young adults who do not have fixed-line service.

I don’t know what the true agenda is of the NMRC and Opinion Research. Some reporters and analysts think their survey was conducted on behalf of Tracfone Wireless, the America Movil-owned reseller of prepaid mobile services in the US. I’m not so sure about that, given the NMRC’s apparent delight in the idea that people are dropping mobile services altogether. Regardless, there’s a bias here that has not been revealed. I hope that before the popular media report on another of NMRC’s surveys, they take the time to dig up some fact-based industry research for a reality check.