Mobile data set to explode – this Friday, AT&T hopes not literally

Mobile Internet usage is quickly growing to be at least twice as large as the desktop Internet in terms of subscriber numbers, according to Morgan Stanley. The financial services firm is forecasting such huge mobile Internet growth that it today released a 422-page report, 692-page presentation and a 92-page 'summary' of the market dynamics.

Among the highlights: Mobile IP traffic will grow 66 times by 2013, a 130% compound annual growth rate. The report also found that smartphones will out-ship the global netbook and notebook market by 2010 and the overall global PC market by 2013. Morgan Stanley said it expects Apple to continue to change how consumers use their devices, driving them toward data and away from voice. The iPhone and iPod Touch still only represent a small chunk of global smartphone use — about 17%, but they are already responsible for 65% of all mobile Internet use.

"As five key trends converge (3G, social networking, video, VoIP and awesome mobile devices), the explosive Apple iPhone/iTouch ramps show why usage of mobile devices on IP-based networks should surprise to the upside for years to come," the report said. "As 3G adoption hits inflection points in many markets, consumers are flocking to a broad range of IP-based usage models over powerful mobile Internet-enabled devices."

As a result of this influx of IP usage, mobile data services made up more than 20% of global service revenues for wireless operators in 2009, according to a new white paper distributed today by independent wireless consultant Chetan Sharma. The US leads the world in data revenues by a good margin, drawing the majority of revenue from mobile messaging — although that is starting to change as non-SMS services and applications continue to make inroads.

This rise in mobile data is a mixed blessing for carriers, a point that both Sharma and Morgan Stanley made in their reports. For carriers, it means more stress on their already overtaxed networks as well as the need to compete on the strength of their networks plus the availability of WiFi. Morgan Stanley said tiered data-pricing based on speed and quantity will be key in replacing voice revenue lost to Vo IP services.

This is a sentiment that  AT&T CEO Ralph de la Vega echoed last week when he told attendees at a USB analyst conference that AT&T is working on educating its customers about their data consumption patterns in preparation for possible future pricing models. The speech, which many interpreted as de la Vega blaming consumers for AT&T's network problems, came after months of strains that iPhone data usage has inflicted on AT&T's network. The traffic overload has also invited backlash from competitors and consumers, which could reach an all-time high on Friday.

Newsweek journalist and "fake Steve Jobs" Dan Lyons suggested that all iPhone users consume as much bandwidth as possible on Friday in response to AT&T's de la Vega purportedly trying to stifle customers' right to unlimited data usage on the device.  AT&T responded to the planned protest, dubbed "Operation Chokehold," today calling it an attention-getting stunt.

"We understand that fakesteve.net is primarily a satirical forum, but there is nothing amusing about advocating that customers attempt to deliberately degrade service on a network that provides critical communications services for more than 80 million customers," AT&T wrote in a statement today. "We know that the vast majority of customers will see this action for what it is: an irresponsible and pointless scheme to draw attention to a blog."

Satire or not, AT&T does have 3% of its smartphone users generating 40% of its data traffic on its high-speed access network, so its network resource depletion is a real issue. In addition to investing in their infrastructure and looking for alternative strategies in WiFi and femtocells, Sharma said that carriers need to keep up the flow of new and improved handsets to maintain the interest. It will be a careful balance between making sure they can support the data influx, while also encouraging it to grow ARPUs.

"While the opportunities to exploit mobile media remain strong, the ecosystem needs to worry about meeting the expectations of the consumers," Sharma wrote in the report. "They have to invest in infrastructure, developer ecosystem, integrate popular applications and services, and continuous flow of new and improved handsets to keep up with the growing interest. It is clear that as the digital media consumption grows; mobile will be at the front and center of this evolution."