[qi:083] Devices like Amazon’s Kindle e-reader are pioneering a business model that will help carriers grow their subscriptions at the expense of annual average revenue per user, according to a report out today from Nielsen. The audience tracking company also follows wireless subscriptions and, in its analysis of first-quarter data, noted that alternative sources of revenue from wireless web-connected devices would drive growth but would also mean the demise of ARPU as a useful metric for measuring a wireless carrier’s success.
Carriers see a growth opportunity in devices like the Kindle and new business models such as convincing utilities to use their networks for delivering data. But that growth will have to be based on a greater number of cheap subscriptions. Instead of convincing a user to shell out $50 a month for a wireless plan, carriers will likely see more plans that sell for less, resulting in the estimated $2 ARPU the Kindle provides for Sprint. Nielsen’s Roger Entner, SVP and head of Research and Insights at the Telecom Practice, said, “We are at the terminal end of wireless penetration. There are two segments left for penetration: people who don’t have money and the ones that you cannot persuade to have a wireless phone.”
So, for growth, carriers have to turn to machines and build the cost of the wireless subscription into the price of the service or content. Verizon Wireless expects to increase its subscriptions by 500 percent by offering such data plans, and last year, John Roese, the former chief technology officer of Nortel Networks, offered several ways this may pan out. As the paradigm shifts and networks change, perhaps analysts worried about the health of a carrier should start focusing on the profitability per gigabyte of data transferred instead of ARPU. Once the carrier becomes a dumb pipe, that’s going to be the only metric that matters.