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Voice plans significantly more profitable for carriers than data: Validas

Voice plans

Voice plans are still mobile carriers' bread and butter

Voice plans generate more than three times as much revenue for carriers as data plans, according to a Validas report.

Validas examined more than 20,000 current consumer wireless bills for the study, and found that voice revenue outstrips data revenue by a ratio of 3.6 to 1. This is partly attributable to the fact that nearly three of every four wireless users in the United States subscribe to voice plans and only one-quarter have data subscriptions, according to Validas.

“Voice remains ahead for at least two reasons,” said Ed Finegold, executive vice president of analytics for Validas, Missour City, TX. “First, you just have a lot more voice penetration in the market than data penetration.

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“Voice has been around longer, more users are accustomed to it, and – let’s face it – they’re still mostly called mobile phones,” he said. “Data-capable phones and broadband devices are still the minority in the device population, even though they are growing rapidly in number.

“Second, voice plans are more expensive: on average, just under $40 for voice versus a little more than $31 for data.”

Validas provides consumers, businesses and government agencies with an online wireless-bill management service. It leverages that service to provide wireless bill analysis reports.

As mobile phones become ubiquitous, consumers are becoming increasingly dependent on their handsets (see story), resulting in the heightened importance of billing models.

Still, in that regard it is data plans, not voice plans, that have garnered the lion’s share of attention, even outside business quarters.

For example, AT&T’s decision to restructure its pricing model for data plans, implementing a tiered system for data use, has generated a significant amount of conversation in the mobile industry (see story).

However, Validas argues that voice remains the more important revenue stream for carriers.

Data trails voice, but gaining speed
The report claims that even though mobile users are using their phones more for Web browsing and downloads, they are using more voice minutes as well. This is, in part, because usrs over- or undershoot the actual number of minutes they need, accumulating overage fees or failing to use all the allotted time.

Those charges, as well as pay-per-use revenue, were excluded from the study.

If they are included in the analysis, voice revenue’s lead over data revenue jumps to a ratio of more than 4:1.

And, even if data charges are compared to only voice plan fees, excluding discounts, credits and refunds from voice plan charges, the ratio is still 3.3:1 in favor of voice, per Validas.

“No matter how you add it up, voice is still the dominant revenue generator,” Mr. Finegold said.

Still, while voice plans are both more widespread and more expensive, data is catching up in both areas.

“Absolutely, data is gaining, and has gained, significant ground on voice,” Mr. Finegold said. “Roll the clock back five years and data revenue was hardly a blip on the radar, especially in the consumer market.

“Smartphones are having an impact, but we also see data usage growing among non-smartphones, or feature phones, as well,” he said.

However, while some analysts are saying that voice is no longer relevant as the data-intensive features of mobile phones become more popular, Validas claims otherwise.

The company says that data revenue could close the gap to a ratio of 2:1 within the next five years, but does not believe it is likely it will surpass voice revenue.

“If the carriers become more aggressive with data-only devices – think of an iPod touch-like device with a 4G data-only plan that uses a Skype-like app for voice – then the tables can turn,” Mr. Finegold said.
“But I have a hard time seeing data moving past voice as a result of a sudden drop in voice costs.

“You have a couple of hundred million users in the U.S. with voice plans,” he said. “Even with significant competition in the market and a weak economy, voice services just aren’t getting any cheaper.

“Finally, even with all the hype around 4G and LTE, I’m not a believer yet.”

The issue is not with the technology, but with the way carriers operate, per Mr. Finegold.

“[The issue is] how carriers compensate their execs, their salespeople and their employees,” he said. “It takes longer for those voice-centric incentives and operations to change than it does for technology to turn over.”

Advice for marketers
Validas’ emphasis on the importance of voice plans has implications for marketers.

“I don’t want to dismiss data or text because they’re important communications channels for high-value customers,” Mr Finegold said. “By and large, data users use more mobile services across the board and spend more for them overall than any other segment.

“But I heard a wise person say that the best ‘killer app’ in mobile is the contacts list,” he said. “It’s so powerful that many of us can’t remember our good friends’ phone numbers anymore.

“The marketer who thinks up an easy way for mobile users to add their brand and contact info to the contact list on any mobile phone has a chance to win big.”

Final Take
Peter Finocchiaro, editorial assistant at Mobile Marketer, New York

Editorial Assistant Peter Finocchiaro covers video, music, search and ad networks. Reach him at peter@napean.com.

 
Related content: Telecommunications, Validas, Ed Finegold, voice plans, data plans, wireless bills, carriers, mobile marketing, mobile

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