Last year I wrote on the three reasons why US operators have suffered from data cost growth outstripping data revenue growth, and how a similar fate could befall operators in India when mobile internet usage finally takes off by the end of 2015. Helpfully, I set up the problem but didn’t give any solutions for Indian operators to consider! That was because it was too early to cover problem and solution all at once, but let’s now look at some steps being taken to address the imbalance between cost growth and revenue growth.
A bit of background: although we have well over a billion mobile broadband users around the world (see figures below), mobile ARPU continues to decline in all regions. Profitable revenue growth in the era of data is simply not guaranteed. Voice revenue is in steady decline as “minutes of use” growth has stagnated and per minute pricing continues to decline. Instant messaging is also substituting SMS revenue for operators, through switching from texting to services such as BBM and Whats App. Revenue growth from mobile data usage is not making up for this, and at the same time, as the chart below shows, data cost is in danger of spiralling out of control due to the huge rises we are seeing in traffic and the consequent need for more and more network capacity.
Here are a few industry trends that seek to address these challenges, both through pricing as well as through data cost management, many of which are applicable to India and some of which are already in use:
Next generation technologies will lower costs to serve growing data demand
(source: PwC analysis)
You may think this is too confusing and how on earth will the customer figure out to connect to which network, on which device, at what price and when? Answer: this will become more automated as devices’ capability to optimise across available networks and tariffs and latch onto connections accordingly evolves. Meantime, do not underestimate users’ ability to switch frequently between networks in a bid to squeeze out that all important extra bit of speed without having to spend more money on the service!
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The thoughts and opinions shared here are of the author.
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