Is ARPU Bad News For You?

Daniel Robinson over at Vnunet has decried the practice of mobile handset makers to promote their product as delivering “fantastic growth in ARPU (average revenue per user)”.

On the face of it, this seems a puzzling way of selling handsets. When a manufacturer claims that its device delivers higher Arpu than rival products, it is basically boasting that its new phone costs you more to run than rival models. This is like a car manufacturer advertising its latest model with the slogan “burns more petrol per mile than any other car on the road!”

Robinson has got the wrong end of the stick. Or at least, he has extrapolated something specific to something general. His commentary is aimed at “IT managers selecting wireless clients for mobile staff”, and in this he is right: businesses don’t want to pay large mobile bills for staff that access a lot of premium content. However, this doesn’t apply in all situations; higher ARPU is better for consumers, not worse.

Revenue is ideally generated by offering the public a service that they are willing to pay for because it adds value to their lives. This is almost perfectly true with mobile phones – as the price for voice calls and messaging falls telcos have to look for other ways to generate revenue, that is offer the consumer something that adds value to their lives. No-one is forced to buy content for a mobile phone. People buy ringtones because they believe it adds something to their lives, so telcos that allow access to a large number of quality ringtones are doing their customers a service. People read the news on the mobile because it is convenient to do so, so telcos that offer easy access to news services are doing their customer a service. And so on – this entire site is about mobile content so I have plenty of examples. The point is that every time the telcos offer customers something they want, they increase ARPU. There may be complaints over the price of a service, but this will change in time – South Korea has high ARPU by making its content a lot cheaper so people buy more. ARPU can also be increased by simply making content easier to obtain – mobiles are about convenience, after all.

So, a better car analogy (at least for consumers) would be auto manufacturers who offered car dealers the ability to include additional features such as a GPS system, on-board map display, digital radio and other features, promoting their offering as “increasing the average sale price of a car!”

Related stories:
-3G will fuel mobile revenue increases – if people use it
-The Top Ten Wireless Services in the World

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