Telco Dilemma Series: 1. the cost of unlimited & ARPU

As I mentioned in the preface post, SMS Text news has a post “US Carriers become dumb pipes”.

The debate on dumb pipes is obviously wider than that single post and is really around what the carriers should provide, i.e. just the bandwidth and nothing more. The question for the carriers though is how do they grow and how do they please their shareholders by only selling dumb pipes.

Bandwidth is almost an infinite resource and is constantly falling in price. So the problem is if the carrier creates an unlimited price structure, the only way to win and retain customers is to fight the competition by reducing the price. There’s no other service involved with which to differentiate, it’s unlimited bandwidth at $99 from X or unlimited at $95 from Y.

Reports already suggest that the ARPU is falling and that the uptake in data is expected to fill the gap. So we know that Carriers are pinning their future on the update of data packages both capped and unlimited.

So how much will an unlimited plan cost in Europe?

Unlimited bundles of both voice and data will cost what a carrier expects to make from a customer with all it’s added value services in place. The ARPU needs to be the same with the locked in poor services as without them. So without unlimited voice and data, a carrier will push it’s own music service, ring tones etc and expect a revenue of $99 per month from it’s customers as an example. So, In the dumb pipe world, the carrier has to get the same or more revenue per user, so will price the unlimited service at $99 ARPU target figure. The reason for $99 is that it’s not going to be able to up sell you any value add service so needs to get the revenue by offering you the unlimited service at the same ARPU target price, as all the market appears to want is a dumb pipe.

So what does that equate to in Europe, your guess is as good as mine. $99 is about £50 in the UK, I’m guess it’ll be more than that, for between £60 & £75 I’d expect to see an unlimited voice and data package hit the shelves here in the UK. That’s $120 to $150, so considerably more expensive than the US.

Is the ARPU model bad?

Maybe the ARPU model is the root of the problem for carriers then, Stephen Wellman also thinks so;

ARPU as a model has been a big reason wireless carriers have not embraced change. It’s the primary reason carriers love to trap their customers with long contracts and ARPU is the reason carriers have tried to control all aspects of the mobile market, from devices to content to the mobile Web. While carriers in Europe and Asia have been more flexible than their American counterparts, the end result of this model has been a market that has failed to really innovate.

I’ll discuss innovation in another post because I think is there area where future revenues have to come from. Stephen goes on to highlight how successful the iPhone has been and calls for the carriers to leave the devices and services to the people that actually understand them.

Conclusion

So the problem is still there; how do Carriers please the share holders, by only focusing on delivering a ‘dumb’ network? Moving to an unlimited pricing scheme doesn’t fix the problem. So maybe the ARPU model is the root of the problem after all.

The Telco Dilemma Series.

I’ve been thinking about the implication of the $99 unlimited packages hitting the US shops and what the impacts of that would be if the model is adopted here in Europe. My musings then went on to cover the other challenges facing the mobile and fixed line carriers. So I’ve decided to split the post up and cover each of the questions in a little more detail.

So these are the ten questions I’ll be asking and trying to answer over the next few days.

1. How much will an unlimited plan cost in Europe?

2. The implications of unlimited bandwidth.

3. Is it unlimited or unlimited*

4. Is unlimited* bad or will the three strikes rule remove the *?

5. Should the value added services be dropped?

6. Has Nokia shown the way with Ovi?

7. Is the carrier model too predictable?

8. How do you compete in a market place when services are free?

9. Why is there loads of innovation in the mobile space, yet none of it from the Carriers?

10. Google has bought, Grand Central and Jaiku, who should the carriers be buying?

If you think you can answer any of the questions then please let me know.

Twitter Updates for 2008-02-27

  • we just had the building shake,. enough to wkar both of us up..don’t know what it was? #
  • yep we just had a tremor, hit the midlands we felt it here in cheshire..it’s hitting the BBC latest news ticker now too..right back to bed! #
  • chilling out in hotel room on t-mobile wifi..sleep soon, what with earthquakes (!) and small children didn’t get enough sleep last night. #

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People should report anyone who owns more than one mobile phone

Having just read this post on SMS Text News, It’s clear I’ll be under suspicion too.

The Metro newspaper in London is reporting that if you see anyone carrying more than one mobile phone, you might well be a terrorist.

People should report anyone suspicious who owns more than one mobile phone, a counter-terrorism campaign launched on Tuesday is urging.

I’m one of the quickly growing group of people that have more than one mobile phone in use at any one time.  Adam Curry picked up on this push to look for terrorists yesterday, but it’s going a little too far in my book.

Is Your Printer Spying On You?

Imagine that every time you printed a document, it automatically included a secret code that could be used to identify the printer – and potentially, the person who used it. Sounds like something from an episode of “Alias,” right?

Unfortunately, the scenario isn’t fictional. In a purported effort to identify counterfeiters, the US government has succeeded in persuading some color laser printer manufacturers to encode each page with identifying information. That means that without your knowledge or consent, an act you assume is private could become public. A communication tool you’re using in everyday life could become a tool for government surveillance. And what’s worse, there are no laws to prevent abuse.

I just picked this up and thought it thought provoking as I’m working on a printer deal at work. The printer company in question does print yellow dot’s btw,

I’m talking to the consultants next week so I’ll ask about it, let’s see what they say.