Ok, so we know nobody has ever accused
Americans of being stingy. The occasional sale comes along and they
indulge. The coupon book arrives in the mail or Groupon
is accessed and voila! instant savings gratification. But by and large,
the American mindset is on achieving the highest value item for the
lowest cost. However, low cost and high value are subjective terms, and
this is where US carriers profit greatly.
The average monthly phone bill as of
2011 was floating around $100, and that’s not including phone upgrades
or overage penalty fees. If you did your math correctly, that’s a
whopping $1.2K per year just on phone services. As usual, we can blame
the likes of Apple Inc.
for this drastic change in priorities: spending in 2007 amounted to
just $1K annually. Then the iPhone came out, data was available at 3G
speeds and nobody ever looked back. The forbidden fruit had been
digested into the heart and soul of Americans.
Joking aside, monthly phone bills are
getting larger as other amenities and even necessities such as food and
clothing are getting stuck by the wayside. Spending on food away from
home fell by $48, apparel spending declined by $141, and entertainment
spending dropped by $126. That may not sound like much to the average
consumer, but to the average American surviving a recession, it’s a lot.
For companies like Verizon Wireless and AT&T Inc.
it was enough to bring in $22 billion in 2007. The analysts at UBS AG
expect these numbers to rise sharply to $159B by 2017.
The question is, when will Americans think enough is enough? That’s a question yet to be answered by the public, as more people are switching to unlimited data plans
and doing more with their devices than ever before. Despite
its availability, the average family household still spends in excess of
$4000 a year just on services like mobile Web browsing and mobile
email. This spells a big win for carriers, who saw consumer expenditures
in their market rise by a steady 4% last year.
9 out of 10 US adults have a smartphone
and this translates to spending across the board, albeit unevenly, at
$59 for middle class consumers and $64 by upper middle class and upper
class consumers. Carriers don’t seem too worried about a downward trend
or a slow stall as costs continue to rise in telephone spending. After
all, who else will fund the LTE revolution?
As Verizon Chief Financial Officer Fran Shammo said at an investor conference last week, “Speed entices more usage. The more data they consume, the more they will have to buy.”
SOURCES
Wall Street Journal
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