Commentary
1/10/2008
02:18 PM
Stephen Wellman
Stephen Wellman
Commentary

Will The Open Web Destroy The ARPU Model For Carriers?

A few months ago I questioned the value of the existing business model for wireless service providers. Now other bloggers are joining the call to end ARPU's (average revenue per user) reign over the wireless world.



A few months ago I questioned the value of the existing business model for wireless service providers. Now other bloggers are joining the call to end ARPU's (average revenue per user) reign over the wireless world.Ajit Jaokar at Open Gardens posted one of the best critiques of the ARPU model I have ever read. Let's take a look at the arguments:

I have been thinking of this for some time ... The concept of ARPU may be outdated because ...

a) ARPU does not translate to the open mobile Web, i.e., the new world of mobile data (see below) b) It does not translate when one person has more than one Subscriber Identity Module (SIM) c) ARPU ignores the other models, such as advertising, where revenue is tied to a service or a product and not a user d) ARPU makes the telecom industry think local, whereas the Web is global. e) ARPU mistakenly makes the telecom industry think that it owns the customer

Ajit's best point centers on the customer relationship. Carriers have long treasured their exclusive billing relationships with their subscribers. But in an open mobile Web, these exclusive relationships will be opened.

AT&T already has opened its billing relationships for iPhone users to Apple. Apple has a direct relationship with all iPhone subscribers for selling content, thanks to iTunes. IPhone users do not have to rely on AT&T for any of their mobile content on their smartphones.

As carriers open their networks, their subscribers will develop more direct relationships with their mobile content providers on the consumer side and with their vendors and IT departments on the business side. In this world, the whole ARPU concept makes no sense.

While I think this is great news for the industry and for consumers, I wonder if subscribers are ready for the changes open access will bring. Many subscribers will choose to remain locked into contracts in exchange for subsidies, but many more will not.

The carriers already know this. And, as I have said before, I don't think that they're going to be as open as we want them to be. They will drag their feet more than a few times on their way to open access.

Can the carriers figure out a new business model? What do you think?

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