Data services will make up 20% of the U.S. wireless industry’s total revenue by the end of the decade, said Len Lauer, chief operating officer of Sprint Nextel. Data services such as music downloads or text messaging make up about 7% to 8% of revenue currently, Lauer said during a roundtable discussion at the CTIA Wireless show here Friday. He added data services are growing by 50% to 60%.
Cingular Chief Executive Stan Sigman, meanwhile, said he sees data services making up 25% to 30% of total revenue within three years.
Data revenue is becoming more important to the wireless carriers as voice revenue calls fall amid tighter competition. The carriers are increasingly looking to new services, and are spending billions of dollars on next-generation networks to enable users to get many of these services.
“It’ll be our bread and butter for the foreseeable future,” said Orange Group Chief Executive Sanjiv Ahuja. He said data services make up the mid-to-high teens of total revenue.
“I’m very bullish on future growth,” Sigman said. “We wouldn’t be making the investments we’re making, at the level we’re making it, if we weren’t bullish on the industry.”
While the US has roughly a 70% penetration rate, markets in Europe are much more mature. For example, Ahuja said penetration in the U.K. is at 115%, indicating people are using more than one device. In mature markets, he said, subscriber “growth is done.” There are more opportunities in providing new services to these subscribers.
Key features driving data services include Short Message Service, or SMS, text messaging, which has seen explosive growth over the last few years. The executives agreed that opening up messaging among carriers has helped drive that growth. Despite the strong growth, only a fraction of the customer base actually uses it, giving it strong growth potential, Sigman said.
Roughly 50% of Orange’s customers use SMS messaging, Ahuja said. The next big thing is running an instant messenger-type application over SMS, turning it into more of a conversational service. He also said that bringing in location-based services would help drive adoption of the service.
As the carriers currently invest in third-generation, or 3G, networks, which transfer both voice and non-voice data, the executives spoke about what will come next. Lauer said that, in moving towards a 4G network, it would be smart for carriers to agree on one standard to better integrate wireless technology into consumer-electronic products such as laptops or camcorders.
Ahuja and Sigman said they were less focused on 4G, and placed their priorities on the current 3G buildout and generating value out of it. “I think we need to do 3G well first,” Ahuja said.