Using LTE to Boost ARPU

Breakfast Briefing By Zahid Ghadialy

Managing Director eXplanoTech Ltd. And

Webmaster 3g4g.co.uk, 3g4g.blogspot.com

What is ARPU?

Average Revenue Per User (ARPU) is a measure used primarily by consumer communications and networking companies. It is the total revenue divided by the number of subscribers

Source: Wikipedia

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Mobile Traffic will keep growing

Source: 3GPP

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New Sources of Mobile Traffic

Source: 3G Americas

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Global ARPU Trends

Source: GSMA, Dec. 09

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‘Dumb Pipes’

All operators have some kind of flat rate ‘all you can eat’ packages.

Though most of them put an upper cap or clauses like ‘fair usage’ policy

These packages have put strain on the network

The packages are widely abused as well

A recent report mentioned that 3% of the users generate 40% of the traffic

Some operators have started fighting back

Vodafone recently announced that it will charge people for out-of-bundle data.

AT&T planning to go the Vodafone way as well

‘Smart-Pipes’ and ‘Happy-Pipes’

Some people now use the term ‘Smart-Pipes’ to emphasise Policy Control, QoS and so forth

Dean Bubley from Disruptive wireless recently mentioned the word ‘Happy-Pipes’ to emphasise: There is a huge value in deploying and running a network well

The smartest networks are the ones which work collaboratively *with* Internet and content companies, not antagonistically against them. This specifically related to areas like policy management.

There is much under-exploited potential for revenue around wholesale models. There are many potential business opportunities, both for "bulk" wholesale and "slice and dice" methods of deriving extra fees for capacity and value-added services.

More users does not mean more ARPU

Some operators offer huge rebates to get customers onboard

Rebates don’t work well in most cases

They assume, “more users means more ARPU”

Their simplistic assumption relies on customer loyalty

Customer loyalty does not exist in this day and age.

Capex/Opex savings via Network Sharing

Example: Two MNOs jointly rolling out an LTE network. Operators jointly roll out a new build of 2500 sites in a developed economy. This will typically achieve a 30% capex saving accumulated over five years and would also reduce opex by 15% per year by year five.

Source: Analysis Mason, May 2010

Though these savings don’t translate to ARPU, they can certainly reduce the pressure to increase ARPU

LTE Needed for maintaining existing ARPU

This statement may be too simplistic

So how can LTE help boost ARPU?

Faster and more Reliable Mobile Broadband

But this may not be enough

Lots of Amazing Applications

iPhone has more than 185,000+ apps

More than 4 billion Apps have been downloaded already

50,000+ apps available for Android based phones

Over 100,000 apps downloaded per month

Real Time Mobile Apps

Live blogging with facility to easily add pictures and videos Giving rise to m-Reporters and real time citizen journalism

VoIP based Voice and Video calling and conferencing apps

Live Radio and TV Streaming

Real time games

Positioning, Monitoring and Tracking Apps

Find me or find my friend type applications

Satnav

Find the nearest xyz

Guide me or guide someone

Track my xyz in real time

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And you can use these apps to your own advantage ;)

Social Networking Apps

Facebook, Twitter, Linkedin, Orkut, etc.

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M-Health Apps

If operators create a complete health based portal, can they charge extra?

Will users be willing to pay extra for:

Having a remote nurse available all the time to answer queries

To have their health checked remotely

To remind them about taking medicines, etc.

Killer App

We are still waiting for the killer app

Are Apps the only way to increase ARPU?

Fixed Mobile Convergence

Triple play

Quad Play

Quintuple Play

Do subscribers become more loyal to operators and give operators the right to charge more?

‘3D’ Mobile

This is big on device manufacturers agenda.

There are already plans for:

3D movies

Live games (Football, Soccer, etc.) in 3D

3D Videogames

No one is sure how much bandwidth will a ‘3D’ broadcast/streaming hog but few people may pay premium for this service.

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HD (High Definition)

HD Voice on mobiles

HD Video/Movies on mobile

Blu-Ray for mobiles?

Quality of Service and Quality of Experience

Are we willing to pay extra to: Always get connectivity

Get high speed connectivity even if the network is congested

Operators can give higher priority to their own/preferred portals Faster songs download

Faster movies download

Femtocells

Are people willing to pay extra for: Reliable connectivity at home

High speed data transfer while at home

Differences with respect to WiFi: Mobile broadband consumes less power for the Mobile

The security is far better in Mobile Broadband

Special offers for Premium Subscribers

O2 in UK has a similar concept called the O2 priority

Orange in UK gives 2 for 1 for movies on wednesdays.

Can this concept be enhanced for premium subscribers

Things to think about

Revenue v/s ARPU

ARPU will only be a useful measure if: Revenue increases on a regular basis and

Number of users increase

Do we focus too much on ARPU?

Do passive ‘data only’ devices reduce ARPU?

Operators can charge limited fees for data only devices like the e-book readers, mobile Sat-Nav’s, etc. Should they be included in the calculation of ARPU?

Do we need a different measure for these devices?

The operators generally get much higher margin on these with a much lower churn

Some points raised in discussion during the ‘Breakfast Briefing’

Discussion Notes - 1

Operators have to focus on much more than just voice and video

Do M2M devices take away the revenue from operator

Can content providers use the location information for their own advantage Sending advertisement which are relevant to location

information

What about Spam?

Are people comfortable disclosing their location?

Location can be used by employers/partners/stalkers; not acceptable in either case.

Discussion Notes - 2

LTE can allow people to get rid of their landlines and instead the LTE to WiFi conversion could be used.

Billing is a very important weapon in the hands of the operator. They can use it to charge for services and content thereby taking a cut. Users are willing to trust the operator more than 3rd parties

for charging them

The credit card details, etc do not have to be disclosed to others

Credits

Thanks to the following people who attended the breakfast briefing and making it a lively discussion: Gunnar Hakansson, Ericsson

Michael Morash, Bridgewater systems

Margaret Hu, Huawei

Umesh Date, Mindtree

Mehul Patel, Mindtree

Mohammad Bin Aris, Mobily

Thanks also to the various contributors at the LTE group on Linkedin who contributed to this discussion out there.

Presented by Zahid Ghadialy © eXplanoTech Ltd.

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