Mobile data brought U.S. wireless carriers more revenue than voice calls did for the first time last quarter, a milestone for the industry as faster network speeds are prompting Americans to consume, and pay for, more data than ever.
Mobile data service revenue reached $90 billion last year and accounted for more than 50 per cent of revenues for wireless companies in the final quarter of 2013, according to research published by Chetan Sharma Consulting late Wednesday.
"It is a milestone in the evolution of the industry," Chetan Sharma, president of the Seattle firm, said in a phone interview.
This year, Sharma predicts that the United States will become the first country to bring in $100 billion in mobile data revenue, a steep rise from the $1 billion the sector drew in 2002.
Customers are increasingly using their smart phones and tablets the way they use desktop computers, driving the rise in data consumption as they stream videos and download dense applications, said Sharma.
Last month, Cisco Systems Inc issued a report saying that by 2018, U.S. consumers will upload more data on smartphones than they did on laptops in 2013.
Data packages will eventually devour voice services altogether as companies experiment with transforming voice calls into voice apps carried as data, Sharma said.
Later this year, Verizon and T-Mobile will launch Voice over LTE which will transform a voice call into a data call.
"Data is the driving force behind the wireless industry in the US. It is what has led to a lot of smartphone and network evolution," said Sharma.
The rise in data usage has also intensified competition among the country's major carriers for growing revenue from data-hungry customers.
In the past month, Verizon and T-Mobile have doubled the amount of data customers receive for the same price while AT&T has cut prices for their 2GB plan by $15 a month.
At T-Mobile, customers are now consuming 50 per cent more data than they were one year ago, said spokeswoman Brandy Bishop.
At a Deutsche Bank Media, Internet and Telecom Conference earlier this month, Fran Shammo, CFO of Verizon said that while competition is stiffer, revenues are growing.
"What we expect is that you will get more and bigger data bundles, but people are going to use more, so the revenue drive is going to continue," he said.
Mobile carriers are gearing up for a bitter face off for more spectrum in government auctions, as they fear the demand for data will soon exceed network capacity and connections speed will slow.
Verizon CFO Shammo said the quest for more spectrum is one of the highest priorities on the company's budget.
"We need more spectrum," said Shammo at the conference. "Since spectrum only comes to the market once in a while, you've got to be in a position to execute on that."