Using LTE to Boost ARPU

Breakfast BriefingBy 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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