AT&T, Verizon Cashing in Outside of Phones

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The biggest U.S. mobile operators are setting up more new data connections to devices such as the iPad and machine-to-machine networks than to traditional phones, an industry consultant said Tuesday.

The bulk of new additions to the mobile services of both AT&T and Verizon Wireless represent "connected devices," which includes non-phone consumer products such as tablets, e-readers and netbooks, as well as M2M (machine-to-machine) units such as meter readers, according to Chetan Sharma, founder and president of Chetan Sharma Consulting. The company released a second-quarter report on mobile data on Tuesday.

Those additions by AT&T and Verizon helped to drive continued rapid growth in the second quarter as U.S. mobile data revenue increased 6 percent from the previous quarter and 22 percent from a year earlier. Total data revenue surpassed US$13.2 billion for the quarter.

Carriers are looking beyond traditional postpaid phone contracts for the revenue to pay for their expanding 3G (third-generation) and emerging 4G networks, and consumers and enterprises are buying into that idea, according to Sharma's statistics. For the first time, mobile penetration for the entire U.S. population exceeded 100 percent in the second quarter, if both connected devices and M2M connections are included, Sharma said. For the country's mobile operators as a whole, data services brought in 31 percent of revenue in the second quarter.

Apple announced last month that it had sold 3.27 million iPads, which can use AT&T's 3G network if they are equipped with 3G. Meanwhile, Verizon has been aggressively adding new non-phone connections, ending the second quarter with 7.7 million such links, including both M2M systems and devices such as netbooks. Together, AT&T and Verizon accounted for 75 percent of the gains in mobile data revenue in the quarter, Sharma said.

The amount of mobile data used also continues to soar, according to Sharma. The average mobile data user in the U.S. consumed 230MB per month in the quarter, up 50 percent in just six months, he said.

The U.S. mobile business will also reach another milestone this year, when "off-deck" application stores such as Apple's iTunes App Store surpass the revenue of carrier "decks" built into phones, Sharma predicted. Application purchases on "feature phones," which are less powerful than smartphones, still come primarily from the carrier deck, he said. Smartphones make up 31 percent of the U.S. subscriber base.

Verizon Wireless remained the world's largest mobile operator by data revenue, taking in slightly more than Japan's NTT DoCoMo, which had ruled on this measure until this year.

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