Will 3G Data Services Close the Value Gap

The next generation of data services has the potential to provide needed benefits for wireless carriers, including increasing customer stickiness, reducing churn, driving additional revenue from the existing subscriber base, and attracting new subscribers through more compelling offerings. Nevertheless, it is still a nascent market, and the carriers face many obstacles to success. Most of the “Big Six” nationwide carriers have made advances in assembling the necessary pieces of their next-generation wireless data strategies, upgrading networks, seeding the market with new handsets, and creating/partnering for better content. Nonetheless, the Yankee Group’s 2002 Mobile User Survey shows that end-user adoption and perceptions of value-added services remain lukewarm at best. The survey results highlight the carriers’ challenges in using advanced services as a means of improving their bottom lines.

The 2002 survey demonstrates that the wireless data/Internet services adoption rate has increased; however, the “value problem” associated with these services persists and remains the major obstacle to adoption. Exhibit 1 shows that the majority of wireless users cited value-related issues (e.g., “don’t want/don’t need,” “service too expensive,” and “doesn’t have information needed”) as reasons why they do not have wireless data/Internet services. Comparatively, technological issues (e.g., “too complicated,” “not available in area,” and “network speeds too slow”) continue to represent fewer barriers to adoption.

As carriers continue to extend coverage on next-generation networks and introduce richer data services, they must focus more than ever on crafting and marketing targeted packages. They must also educate these different customer segments on how to use these new services effectively. And, while the “value gap” associated with value-added services may have begun to close (since our 2000 survey), it is still significant and shows that carriers must not only evangelize wireless data/Internet services, but also provide applications that truly add value. In addressing this problem, the inevitable questions arise: Can the carriers bridge the value gap as it relates to value-added services, and are they on the right path with their next-generation offerings?

This Report examines user adoption of and opinion toward value-added services, with a focus on wireless data/Internet services. In addition, we explore carrier efforts to address the value problem. In the second part of our Mobile User Survey series, we will further examine end-user perceptions, behavior, preferences, and adoption trends by segment.