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The US Mobile Market: Growth, Competition, and Future Development

This article explores the growth and competition in the US mobile market, focusing on key players like Verizon, AT&T, Sprint, and T-Mobile. It discusses the reform of wireless policies in the 1990s, compensation for wireless termination, and the performance of the US wireless market. The article also highlights future developments and new services, such as broadband, video, shopping, gaming, and integration between wireline and wireless.

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The US Mobile Market: Growth, Competition, and Future Development

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  1. Mobile Markets: The US Experience Dennis Weller Chief Economist Verizon Mobile Economics ARCEP 26 March 2007

  2. Verizon: Profile • Verizon Wireless • 59 million subscribers • Verizon Telecom • 45 million lines • 7 million broadband customers: • 700,000 FiOS Internet • 189,000 FiOS TV • Verizon Business • Operations in 150 countries • Serves 97% of Fortune 500 • World’s most connected IP network

  3. Verizon Wireline Footprint in US

  4. Capital Expenditures of US Companies *Excludes Verizon. Data for JPMorgan & Chase are not available. Companies in the Dow Jones Industrial Average: 3M, AIG, Alcoa, Altria, American Express, AT&T, Boeing, Caterpillar, Citigroup, Coca-Cola, DuPont, Exxon Mobil, GE, GM, Hewlett-Packard, Home Depot, Honeywell, IBM, Intel, Johnson & Johnson, JPMorgan & Chase, McDonald's, Merck, Microsoft, Pfizer, Procter & Gamble, United Technologies, Verizon, Wal-Mart, and Walt Disney. Companies in the Fortune 10: Exxon Mobil, Wal-Mart, GM, Chevron, Ford, ConocoPhillips, GE, Citigroup, AIG, and IBM. Sources: Reuters data; company reports.

  5. Market Structure of US Wireless • Verizon • AT&T • Sprint/Nextel • T-Mobile • Alltel • Other players • Cable consortium • Regional carriers

  6. 1990s Reform of US Wireless Policies • Increased spectrum, capacity, competition • “Light touch” regulation • Preemption of states • Flexibility in technology • Verizon, Sprint, Alltel are CDMA • AT&T, T-Mobile are GSM • Flexibility in use of spectrum • Development of secondary market • 3G service without 3G license

  7. Compensation for Wireless Termination in the US Market • A “calling party pays” system • Local traffic from a wireline carrier pays $0.0007 per minute for wireless termination. • Wireless carriers have commercial agreements to exchange traffic on a “bill and keep” basis • Long distance carriers do not pay to terminate traffic on wireless carriers

  8. Wireless Termination in Europe and the US Termination rate in US cents per minute

  9. Performance of US Wireless Market • Rapid growth in subscription • 19% annual growth over last decade • 233 million subscribers • More wireless than wireline • Lower prices • Flat-rated packages include nationwide calling • Increased usage • Average usage per wireless handset: • 832 minutes/month in US • 149 minutes/month in Europe • More total wireless minutes in US than wireline

  10. US Retail Market for Wireless • Most offers count minutes in and out • But some offers count only minutes out • Flat rate offers for “buckets” of minutes • Unlimited off-peak minutes • Unlimited on-net minutes • Nationwide coverage • Most roaming is free • “Family share” plans • Handsets are subsidized • Numbers are portable • Geographic numbers from same pool as wireline • MVNOs are common

  11. Future Development and New Services • Broadband • Video • Shopping • Gaming • Payment • Integration between wireline and wireless • New solutions for business • IP

  12. Growth of Wireless Broadband High Speed Net Adds by Type, Dec. 2005 – June 2006 • In 1H06, total high-speed lines grew 26%, from 51.2 million to 64.6 million lines • 59% of all adds were mobile wireless subscriptions. • From June 2005 to June 2006: • Mobile wireless’ share of total broadband lines rose from 1% to 17% of total broadband lines.

  13. Pricing of VCAST Service V CAST VPak $15 per Month Mobile Web 2.0 VZW Today Unlimited Browsing Unlimited Basic Video Clips News Sports Entertainment Weather Access to Premium Content Unlimited Data Transport Get It Now services Get Games** Get Tones** Get Wallpaper** Get Going** • Partners include Comedy Central, MTV, News Corp, • 20th Century Fox • NBC News tailored for mobile • Exclusive mini-episodes of popular TV shows • More than 300 clips updated daily

  14. Verizon iobi HomeIP Enabled Telephone Service

  15. VerizonOne Concept2-way Multimedia Communication

  16. Access Point - Client CALL LOGS CALL FORWARDING VOICE MAIL CONTACTS • iobi desktop client allows users to manage their communications from their PC • Most convenient access point from your office or home PC • Send SMS or e-mails with a mouse click • View your weather information SEND MESSGAGES

  17. L1 Gateway EPG MSC MSC Internet SSP SSP Service Control Outlook IM SMS Messaging VM Alert VM Retrieval iobi End User Portal Broadsoft Application Server Conferencing And Collaboration Web Sharing Addr book Calendar Content Directories PSTN/VoIP Call Control ISCP™ MGC SIP Proxy VM TG

  18. Traffic Flows Among 20,000 Autonomous Networks on the Internet

  19. Lost?

  20. STM-1 IP Transit Prices in London

  21. VOIP Peering • VOIP traffic exchange: • Some services (e.g. SKYPE) don’t use telephone numbers – route IP to IP • Today, services that use phone numbers (e.g. Vonage) usually route through PSTN, even if both customers are VOIP • “VOIP peering” will allow VOIP to be exchanged on an IP basis, even if phone number is used • Data base lookup provides concordance between telephone number and IP address of recipient • Several systems now under development • Depends on what service customer buys, or on agreements among providers

  22. Challenges for Future of IP Market • Threat of regulation • As next-generation platforms converge with Internet, collision between Internet traffic model and traditional regulation of voice traffic exchange • Adding new dimensions to Internet market model • Quality • SMS • VOIP • Content • Security and privacy

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