Forget net adds and ARPU – the future of wireless is 'revenue per account'

Mike Dano

I've been assembling a list of the top U.S. wireless carriers for FierceWireless every three months since the first quarter of 2009. Thanks to figures provided by Strategy Analytics, I've been able to provide trends in standard wireless business metrics like churn, ARPU and net subscriber additions.

But the days of comparing Verizon Wireless' (NYSE:VZ) quarterly net adds to those from AT&T Mobility (NYSE:T) are rapidly drawing to a close. These types of metrics are quickly being replaced by things like "revenue per account" or "revenue per bit."

For example, in its Clear-branded WiMAX service, Clearwire (NASDAQ:CLWR) offers a weekly service option and a two-hour service option. If a customer signs up for either of these two options, they are not counted in Clearwire's quarterly subscriber figures. Why would they be? People who purchase two hours of WiMAX service aren't subscribers, they're just people using the network. Nonetheless, they are generating revenues.

(To be clear, Clearwire said the vast majority of its users select its monthly service option, and therefore the carrier's quarterly subscriber count is a relatively accurate reflection of its business. But for how long?)

An even more pressing example comes from Verizon, the nation's largest carrier and a carrier that in the first quarter of this year stopped providing the number of "total connections" to its network. During Verizon's quarterly conference call, CFO Fran Shammo said Verizon is not disclosing total connections because "M2M is more complicated." He said the main thing for investors to focus on is that the company's revenue is increasing and it is adding more customers.

Click here for a list of the top U.S. wireless carriers in the first quarter of 2012.

Interestingly, Shammo provided more insight into Verizon's future direction during an investor conference last week. He said the carrier's move toward shared data plans will force it to measure its business differently. "But then as we come out with the data share plan, quite honestly, when we do that, we are going to have to change the metric in the industry," he said, according to a transcript of the event. "And we are going to have to go to an account, if you will, a revenue per account. It really won't be a revenue per customer anymore because if you think about the number of devices that will be added to these accounts, it really won't be important anymore what the revenue per customer is; it is going to be revenue per account."

Analyst Chetan Sharma's latest first-quarter figures offer a look at additional metrics on wireless carriers that may become more important in the future. For example, Sharma noted that Verizon has been the clear leader in terms of postpaid net adds during the past four quarters. But the postpaid market grew only 1 percent year over year. Meantime, the connected devices segment grew 23 percent year over year, prepaid grew 15 percent during that period and wholesale grew 10 percent.

It's clear that the future of the wireless business isn't going to be about which carrier can sign up the most subscribers during a particular quarter (or that will become not necessarily the most important statistic). It's going to be about which carrier can squeeze out the most money from a bit traveling over its network, and which carrier can connect the largest number services, like smart grids or ereaders, to its network. It's also going to be about which carrier can add value to a smartphone platform like Android or iOS rather than which can lock the platform down most tightly or load it with the most bloatware.

Of course, that future isn't quite here yet--which is why FierceWireless is still providing this list of the top U.S. wireless carriers, thanks to figures provided by Strategy Analytics. We'll be evolving this list in the coming months and years as the industry itself evolves. Stay tuned. +Mike Dano