Back To Basics
Eddie Hold, President ;
Consumer Electronics Commercial Technology Connected Intelligence
A few years ago a friend of mine was mugged in London. Two men waved knives at him and demanded his wallet, his smartphone... and then his other phone. This final demand threw him a little, as he only carried one phone, and it took a while (and a quick frisk) to convince the muggers that they would have to share a single smartphone. I’m sure they walked away muttering about their poor fortune as, apparently, the odds are quite high that someone wandering the streets of London will be toting a couple of devices. Indeed, the current penetration rate for mobile phones in the UK is roughly 120 percent of the population, so once you start stripping out the very young, or old, as well as those in more rural areas, the odds of a two phone score in the center of a city increase quite significantly.
If you think that’s impressive, consider the Netherlands, where smartphone penetration is roughly 140 percent of the population, according to various sources. Think about that for a minute: that means the average person carries nearly one and a half smartphones, which is why I shouldn’t have been surprised to discover that the group of Dutch people I was with last week all carried two smartphones. While the U.S. carriers focused on connecting us to secondary devices, primarily cellular-connected tablets – a strategy that worked well for a brief period of time at best – European carriers kept their main focus on the phone. That’s not to say that the tablet was not an important focus in Europe, but they continued to focus on the seemingly ridiculous idea that 100 percent penetration was just the beginning.
This is a lesson that the U.S. carriers need to reconsider. With overall penetration hovering around 100 percent (including feature-phone users) the U.S. battle ground has focused primarily on winning the churn battle, taking more from your competitor than you lose to others each quarter, as well as looking for new devices to connect. But historically, none of these other devices have had long term success.
Consider the history…
Netbooks were really the first “must-have” cellular add-on that had the carriers salivating. These underpowered quasi-laptops appealed to consumers because of the price: $50, as long as there was a two-year cellular contract. Of course, this means that the actual price of the device was ridiculously expensive over the two year period, $10+ per month for the connection, and while the devices sold quite well for a while, the lack of processing power meant that they were quickly abandoned post-purchase, leading to an ultimate boom and bust of subscribers.
Luckily the connected tablet came along just in time to maintain subscriber numbers and the carriers took a very similar approach, offering cheap tablets tied to a two year contract. And again, the consumers bought them in droves. In 2017, there were around 29 million active tablet connections for the top four carriers*. But as with Netbooks, we have entered a “bust” cycle where connections are being dropped far faster than activated.
Beyond the fairly compelling argument that many of these tablets were just not up to the task, as they were low-end devices, there is a greater truth for the carriers: many of the devices that they want to connect via cellular don't really need an always-on connection. Given the combination of Wi-Fi availability and an omnipresent smartphone that can be used for the occasional hotspot, many devices do not need their own cellular link.
Which brings us back to the European approach that has stood the test of time - the reason many Dutch consumers end up with two smartphones is because they like to differentiate between work and personal life, so many employees are presented with a business phone. While in many cases they can use these phones for personal use, they often choose not to. So perhaps the next big growth target for U.S. carriers requires us all to find a better work/life balance, or bigger pockets so we can more easily carry two smartphones.
*Source: NPD Connected Intelligence, Broadband Market Share & Forecast Report
Related Blog Posts
Mike Diamond, Director, Industry Analysis, Commercial Technology for The NPD Group, looks at how AI will impact B2B software and hardware needs.
To simplify the complex web of live TV options, NPD Connected Intelligence’s John Buffone has distilled the future into four personas. Identify who you most resemble and perhaps learn a new way to access your favorite shows.
The heavy promotional push on the Samsung S9 variants by carriers, coupled with the price of the iPhone X, will create the ideal landscape for Samsung to strengthen its foothold in the U.S. market, says Brad Akyuz of NPD’s Connected Intelligence.
This year’s Mobile World Congress is wrapping up and soon everyone will be heading to the airport.
- What Toys“R”Us Closing Means for the Toy Industry
- Global Toy Industry Opportunities Amid Toys“R”Us Closure
- Gen Zs Are Discerning Grocery Shoppers With An Eye For Organic And Real Foods
- Vegan boost to prestige beauty market
- What’s happening in the automotive aftermarket?