How will wireless weather the economic storm?

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As the U.S. economy turns from bad to worse, it's impossible to not wonder how much fallout will occur in the wireless industry because of this crisis. Of course, much of the impact will depend on how long the crisis lingers and how consumers (and enterprises) respond to the belt-tightening.

One quick assessment that everyone seems to agree upon is that consumers will likely cut their landlines before they will give up their wireless phones. That's good news for wireless carriers but there is a caveat. Many industry observers think it's also likely that we'll see consumers downgrade to lower-priced rate plans and forego the extra add-ons such as mobile TV, ringtones and even mobile Web packages. That's bad news for mobile content firms, particularly those that are relying on credit to stay afloat until the ad-supported content model kicks into gear or those that are surviving on a thin margin of profits they receive from their revenue share deals with operators.

We're already seeing some early signs that all-you-can-eat unlimited wireless carriers are doing well in this economy. MetroPCS released some strong third-quarter numbers. The company had gross additions of 935,000 subscribers in the quarter, up 39 percent from the third quarter of 2007. And its net adds were 249,000 up from 114,302 in second quarter 2008. It will be interesting to see if the traditional operators--Verizon Wireless, AT&T and Sprint--also experience strong growth with their all-you-eat plans when they release their third quarter results. I suspect we won't see as big of an impact since their flat-rate plans are at the high-end of the price spectrum.

Holiday cell phone sales will likely take a hit from the economy. Traditionally the holiday season is a huge boon to wireless carriers as consumers love to give the gift of wireless. While touchscreen phones such as the T-Mobile USA G1, Apple iPhone 3G from AT&T and Verizon's BlackBerry Storm will likely be high on many gift lists, some analysts believe that the lower-cost phones will likely see an uptick this season as consumers scale down their holiday spending.

The wireless industry may be better positioned to "weather the storm" than other industries, but I suspect we'll still see some consolidation and company closures in the months ahead.  To read more insights on how the economy will impact the industry, check out the Sound Off feature where we've compiled some insights from top industry experts. --Sue

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