Total paging subscribers will reach 68.9 million by year-end 2002, according to The Strategis Group report, “The State of the U.S. Paging Industry: 1998.”

Of that number, 60.5 million are expected to be one-way subscribers and 8.4 million advanced messaging and narrowband personal communications services customers. The latter figure was further broken down to 55 percent being guaranteed messaging alphanumeric users and the remainder split between full two-way and voice-messaging subscribers.

Looking backward, the report showed subscriber growth in the paging market grew to 48.1 million customers last year, increasing paging penetration by 2 percent to 18 percent. However, while subscriber growth rates are as strong as 15 percent, growth rates have fallen in the last three years, according to the report. Growth rates were as strong as 22 percent in the 1996 Strategis study. The Strategis Group determined the lower growth rates stem from the industry’s strategic focus transition last year from subscriber growth to financial strength.

Although growth rates slowed in general, The Strategis Group said it expects to see increased revenues from advanced applications, like voice messaging, guaranteed messaging and two-way text messaging, gaining in popularity. These NPCS services should raise paging revenues 5 percent or more this year, from the average monthly revenue per paging subscriber figure of $9.58 reported in 1997, which was 2 percent lower than the $9.79 reported in 1996.

“We see revenue per subscriber bottoming out in 1997 and most carriers looking toward increased ARPU in 1998,” said Steve Virostek, Strategis Group analyst and author of the report. “It’s a trend that almost has to occur.”

The growth in higher-revenue alphanumeric services outpaced the growth of all other pagers. By year-end 1997, alphanumeric pagers made up more than 15 percent of the total paging units in service, an increase of 42 percent over 1996. The Strategis Group expects such abilities as information services, e-mail forwarding, text input and various Internet capabilities to push up this percentage further this year.

As alphanumeric services bring in more than 85 percent in additional revenue per month compared with plain numeric service, generating new alphanumeric customers will add to carriers’ rising revenue growth while cutting down on their customer acquisition costs, the group said.

However, Virostek said traditional one-way alphanumeric paging will begin to decline after this year, as guaranteed messaging alphanumeric replaces it, further supporting the view that NPCS and advanced messaging services are expected to be the primary growth drivers of the paging industry.

“Growth rates in one-way will go to single-digit numbers in 1999,” he said.

The report detailed the competition carriers will face outside the paging industry as it continues its consolidation. In particular, Virostek said dedicated data network providers like BellSouth Wireless Data and Ardis could prove a competitive force in the advanced messaging arena once the form factor and price of the Research In Motion [email protected] pager goes down.

“If they can come up with a smaller pager with similar features, we think they could play a significant part in advanced paging,” he said. Currently, these dedicated data companies haven’t the distribution channels to present any real challenge, he added.

On the other hand, The Strategis Group does not expect much messaging threat from the several so-called little low-earth-orbit satellite networks now being built.

“Their advantage is coverage,” Virostek said. “But that is far outweighed by the cost of the units and the airtime.” He expects these carriers to focus first on telemetry applications and put messaging on hold.


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