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[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 […]

[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.

  1. miten sampat Tuesday, May 26, 2009

    while i agree that it will dilute ARPU as a metric, the growth of embedded devices with access to wireless broadband networks is a good thing for Carriers.

    considering the fact that an embedded device by itself may not use up as much bandwidth as compared to a full blown phone, netbook, or other mobile broadband device.

    the packaging of the wireless experience on the Kindle2 is great, a nice template for more device to emulate how networking vanishes.

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  2. Jargony acronyms like ARPU == bad

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  3. [...] The ARPU metric (average revenue per user) may become less meaningful as telcos start to cut big bulk subscription deals. With companies like Amazon building subscriptions into the prices of products like their Kindle e-reader, Telcos will make less on every user, but they’ll make it up in volume. [...]

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  4. It’s amazing to see this thing unfold. In 2001 I was working in Germany, while GPRS was introduced. My customer, DT, was certain that these kind of devices will save them. The pipe never looked darker :)

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  5. [...] users earn Sprint $2/month, HP’s eReader Posted on May 27, 2009 by switch11 * GigaOm says that the Average Revenue Per Month Sprint makes from Kindle owners is around [...]

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  6. This is good for ARPU.

    It’s not that the $2 per month is replacing a much higher ARPU – this is additional. So it’s another $2 per month for someone who happens to be a voice and/or data subscriber. For someone who is not a subscriber, it’s $2 per month that would have gone to another service provider. And this is just the beginning – there will be more devices with more business models that provide extra revenue.

    What’s more is that not only is the cost of delivering relatively little data (in the Kindle example) very low, but there are no subscriber acquisition costs (which are very high for the competitive voice/basic services) associated with the additional revenue.

    You just cannot compare the Kindle’s ARPU with the ARPU of huge buckets of voice minutes and text messages and data plans for smartphones.

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  7. [...] Lurie said. “The goal of finding this incremental revenue is to make money. There is a lot of baggage around average revenue per user (ARPU), but these incremental revenues may bring in $1 per subscriber per month at 50 points of [...]

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  8. [...] Amazon Kindles Good For Telcos, Bad for ARPU [...]

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  9. [...] said earlier this year that it hopes to increase wireless subscriptions by 500 percent in the coming years, and nPhase will undoubtedly play a crucial role in trying to meet that goal. [...]

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  10. [...] carriers when it comes to providing communications for machine-to-machine networks. (Related Post: Amazon Kindles Good for Telcos, Bad for ARPU.) Subscribe to GigaOM Pro for $79 a year, get this [...]

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