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Wireless data services shape up at Verizon

Mobile IM, other wireless applications are generating strong revenue for the company, as more consumers latch on to data services.

Verizon Wireless announced that its cellular data services now generate revenue rivaling what some phone companies gain by selling DSL, as more U.S. consumers use their cell phones like PCs.

According to financial data released Tuesday, Verizon Wireless subscribers generated $255 million in revenue during the last three months by sending or downloading record numbers of short text messages, photo messages and game or business applications.

By comparison, Verizon Communications' DSL revenue accounted for $300 million, according to the company's second-quarter financial results.

U.S. service providers believe that text messages, ring tones and more expensive features, like wireless broadband and video streaming, will combat the steep drops in revenue from voice calls, now a commodity because of fierce competition. But for years, it was a tough sell, mainly because wireless networks were too slow, and handsets were too unsophisticated to accommodate anything more than simple services like short-text messaging.

But during the past two years, wireless carriers have sped up their networks at least fourfold, and color-screen cell phones have become the norm rather than the exception. That's helped increase the popularity of data services, according to analysts and service providers.

"Wireless data is now a billion-dollar industry," Doreen Toben, chief financial officer at Verizon Communications, told financial analysts.

Verizon Wireless is not the only carrier claiming that the wireless data mind-set is starting to change among U.S. cell phone customers. Cingular Wireless, the nation's second-largest cell phone service provider, recently said its wireless data revenue during the last three months more than doubled compared with a year ago.