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New Reality for Mobile Service Providers in North America

Sometimes the only way to increase market share is to go downward. Within the North American mobile communication market, where the monthly service price has remained relatively high when compared to more competitive markets, lowering subscriber costs was an inevitable outcome.

Wireless revenue increased by just 1.1 percent year-to-year among benchmarked U.S. mobile network operators in 3Q16, according to the latest market study by Technology Business Research (TBR).

Let's give credit where it's due. This situation is primarily the result of T-Mobile growing revenue 17.8 percent year-to-year on the strength of its 'Un-carrier' go-to-market strategies.

Mobile Phone Service Market Development

"While T-Mobile and Sprint remain able to increase wireless revenue by generating higher postpaid phone additions through competitive pricing, Verizon and AT&T are relying on value-added services to offset declining revenue from slowing phone subscriber growth," said Chris Antlitz, senior analyst at TBR.

Rather than undercutting competitors to boost subscriber additions, Verizon and AT&T were forced to focus on improving profitability by retaining the subscribers that were immune to their higher prices. They also shifted focus to support their higher-margin Internet of Things (IoT), mobile video and media businesses.

Combined wireless revenue among Tier 1 Canadian carriers rose 3.4 percent year-to-year. In fact, all Tier 1 Canadian operators increased service revenue in 3Q16 due to subscriber additions stemming from the launch of competitive pricing promotions and the freedom for more customers to switch carriers.

Moreover, all Tier 1 Canadian mobile service providers improved wireless churn in 3Q16, because of their successful customer service initiatives and improved network quality.

Combined wireless capex among Tier 1 U.S. operators decreased 10.6 percent year-to-year to $7.6 billion, attributed to carriers completing the bulk of initial LTE network construction, and Sprint’s significant pullback in spending during the quarter.

Most U.S. mobile network operators are now focusing short-term capex on improving the density of LTE networks by acquiring additional spectrum, and deploying small cells to support rising network traffic.

Outlook for New Infrastructure Investment

In the long term, network investments will be targeted to rolling out 5G as the technology becomes standardized around 2020. In the meantime, Verizon and AT&T plan to launch pre-standards 5G fixed-wireless services in 2017 that will augment their existing wireline broadband services.

Network operators are capitalizing on the demand for mobile video to boost subscriber additions. The T-Mobile One and Sprint Unlimited Freedom unlimited data plans launched in August and are alleviating
subscriber concerns over incurring overage fees from mobile video viewing.

That said, Verizon is refraining from offering unlimited LTE data to maintain high profitability, but is providing zero-rated streaming to some mobile video services, such as its go90 platform. Similarly, AT&T began offering its customers zero-rated access to DirecTV mobile streaming services in September.

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