It seems like just about everyone has a cellphone these days, many of those being smartphones. With such seemingly wide-spread proliferation people have been whispering for years that the market for smartphone growth in the US will be tapped out soon. Recent numbers showing declining rates of network activations seem to hint at the same issue. According to a study by Chetan Sharma, new network connections hit an all time low earlier this year. From the Chetan Sharma study:
For the quarter, the market added a paltry 139K new connections, a decline of 95% from Q2 2012. It was the lowest net-adds quarter in the US mobile history (barring the early days of tepid growth).
According to a Gigaom article, the growing trend of emerging tech and the Internet of Things was expected to accelerate the rise of new connections again, but they haven’t created actual demand to meet the hype quite yet. Most of the “new” connections are actually pre-existing customers from somewhere else.
Creating new mobile subscribers has become increasingly difficult for carriers in recent years the mobile phone proliferate across society, but operators were hoping to keep the market humming along by connecting tablets, cameras, cars, farm equipment and every manner of object in the emerging internet of things. With the exception of tablets, that’s clearly not happening. …
Sharma estimates that 90 percent of all carrier subscriber gains are customers they’ve taken from another carrier, either from each other or from one of the smaller carriers. The remaining 10 percent are all that’s left for actual mobile industry growth. The industry is approaching a stalemate, where individual carriers are making small gains, but overall the number of pieces on the board remain unchanged.
But while things are slowing down, Sharma doesn’t think we’re quite near the end yet. There will always be room for at least some growth while smartphones still exist.
There has been some speculation in the market that the smartphone growth in the US market is over. In the US, roughly 240M subscribers have 335M mobile subscriptions. Out of those 240 subs, roughly 145M have smartphones (many of them have two or more). These days newborns get an iPhone on their arrival as a welcome gift, but if we take out the 0-5 age group, we are left with 293M potential subs. This means the potential market for smartphones at this point in time is 148M subs who don’t have a smartphone (obviously, there will always be folks who just don’t want any wireless phone – smartphone or otherwise but the size of that group is shrinking). Add to the upgrade cycle which averages between 18-20 months in the US, the market for smartphone growth remains pretty healthy.
The global market is even more fertile.
And other connected devices might eventually start effecting mobile connection numbers in one way or another. While consumers originally favored WiFi tablets, they’re starting to embrace tablets with data plans – especially if the can tie that new device to their existing data plan used for a smartphone. Gigaom noted this trend with cars as well, pointing out that people seem to prefer interacting with their smartcars via phones rather than a brand new OS and network connection. Here are some interesting notes about shared data plans from Sharma:
- Shared data plans launched by Verizon and AT&T saw positive results. The tablet and other device attachment rate has gone up by 60%.
- Shared data plans are working so well for AT&T that most of its postpaid growth is coming from tablets. In the last 4 quarters, postpaid tablets accounted for over 72% of the net-adds.
- Shared data plans moved tablet session based consumers to postpaid tablet plans with more predictable revenue stream. The $10 surcharge for every device is still an inhibitor for many consumers. Over time, we expect this fee to go away to bring in many more consumers experience data services across devices other than their smartphones.
The need for connections is there, it’s just a matter of figuring out what and how users want to consume.