Data killed the telephony star
People making fewer phone calls is fast becoming a worldwide trend. And there's not much network operators can do about it. By Alistair Fairweather.
Mobile phones have never been more ubiquitous. By the end of 2012, nine in 10 people on the planet had one. So why are people in the developed world making fewer phone calls?
In 2007, the average US cellphone user spent 826 minutes a month yakking away on their phones. By 2011, that number had fallen to 681 minutes — a decline of 17%.
Their colleagues across the Atlantic are not faring much better. From Finland to the UK, voice calls are dwindling steadily after decades of uninterrupted growth.
This does not mean that people have suddenly become less talkative. Instead, most customers in the developed world are consuming more data as they use their smartphones to stay in touch via online services such as Facebook, Twitter and WhatsApp. Since phone networks still make nearly two-thirds of their revenue from voice calls, this is deeply worrying to them.
And this trend shows no signs of slowing. More than 64% of US consumers now own a smartphone (compared to just 17% in 2009), and 80% of those who bought a new phone in the last three months chose a smartphone. The same pattern is repeating itself around the globe: smartphones are becoming more popular, while using them to make phone calls is less common.
Faced with unprecedented falls in voice revenue, many mobile networks have simply stopped metering phone calls and have withdrawn plans that offer limited amounts of minutes per month. Instead, subscribers are forced to buy unlimited calling plans at flat rates.
While this strategy buffers the networks against customers trading down to cheaper plans with fewer minutes, it will not remain effective for long. Data usage will soon completely dominate their networks, forcing them to concede portions of their once legendary margins to online services such as Netflix, Skype and Google.
While unlimited phone calls and SMSes may seem like heaven to most South Africans, our local networks will be watching these trends with concern. After decades of astronomical growth, they do not want to suffer the same fate as their peers in the north: relegation to the ranks of the utilities.
These heavy lifters of the economy, such as water and electricity companies, have enormous scale but thin margins. They are the “dumb pipes” that enable others to build “smart nodes”. For companies used to being the coolest kids in the economy, this must seem like a walking death.
This dance has played itself out many times in the past. Fixed-line telephony was once the most exciting market in the world. Now it is shrivelling. Mobile networks may be able to avoid this fate by becoming smart nodes themselves — offering services and content that keep customers loyal and engaged — but history suggests they will not be able to do so.
The future may be gloomy for the mobile behemoths, but it has never been rosier for customers. Phone owners around the globe can expect another decade of falling prices and improving services. The elephants may be fighting now, but they will fertilise the grass when they fall. — (c) 2013 Mail & Guardian
- Alistair Fairweather is chief technology officer at the Mail & Guardian
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