October 18
With commercial GPRS networks now operating across Europe, the revenue potential of GPRS should be just around the corner. Northstream has analysed and identified the five main challenges and the needed steps to achieve GPRS profitability.
The GPRS operators are still facing tremendous challenges, but have already taken quick and important steps towards profitability:
1. Consumer value
The always-on connectivity and faster access to the Internet via GPRS is highly valued by current customers. Here GPRS provides a clear contrast to the dial-up and circuit switched based services. At the moment, however, only a limited number of users have discovered the value in the service - those connecting their computers through their mobile phones, and some die-hard WAP:ers. The increased bandwidth will of course broaden the potential of wireless services but it will be the tariff structures and the available content that will determine who brings the best value to the GPRS users.
In Japan at the early stages of 3G the videophone sales rate, although limited in availability, is indicating a consumer success in the build. Mobile video services could mean a substantial change in the way mobile users share their experiences and emotions, access information and entertainment, and communicate with other people. We may not see 'i-Europe' today or tomorrow, but the wireless industry must start preparing for it now.
2. Increased revenue per user
GPRS, properly tariffed and packaged, is most likely the only solution in the near term to offset declining ARPUs (Average Revenue Per User).
3. Terminals are on the way
The availability of suitable and attractive terminals is key to a satisfactory uptake of GPRS services. There are already a number of initiatives aimed at providing easy-to-use and well-functioning terminals, some of these with an increased operator involvement. The terminals should provide support for a more homogenous offering of advanced services and applications. It is worth noting that for the first time the handsets are not last in line. It is now the innovative GPRS services that we all are waiting for.
4. Rebuilding investor confidence
Offering tailored GPRS, "on the go" services and communication tools will provide the strongest incentive for the growth of GPRS networks. It is this kind of offer that will stimulate the kind of sustainable revenue stream that is essential to satisfy the expectations of the investor community.
5. Focus on standards and frameworks
Standards are an extremely important part to ensure global harmonized solutions. But it is essential to adopt a pragmatic approach when time to market may conflict with the "perfect" solution. A recent example is the standardization controversy surrounding solutions for GPRS signaling channels that were resolved at a recent meeting of 3GPP - an organization where global partners co-operate in the development of mobile communications with various technical specifications. This will probably speed up design, type approval, production and sales of GPRS devices and thus give a small but needed boost to the GPRS market take-up.
Equally significant, the success of i-mode in Japan has demonstrated the potential of mobile data services, and the European GSM association has taken steps to develop a similar framework called M-services. Several major operators and handset providers have given their official support for the initiative.
Where to go from here? To reach a wider market and to make an impact on the operators' revenues, the GPRS services must expand beyond what is currently on offer.
A. Services
Northstream is convinced that the adoption of GPRS will depend on the perceived value the services bring to end-users. The importance of services cannot be overstated and is one of the key lessons to be learned from the success story of NTT DoCoMo's i-mode.
B. Pricing strategies
Pricing needs to reflect the perceived value: The extent of GPRS adoption depends on how the service and terminals are priced. The operator has to create a pricing strategy for each customer segment and for each service. A good example is when a single price per megabyte across all services could be perceived as cheap by the small-data WAP:er, while the travelling PC e-mailer could choke on the first bill.
C. Customer targets
The importance of services is one of the key lessons of the tremendous success story of i-mode. By targeting the right segments with the right services it is possible to maximise service revenues. To foster the development of targeted services, the operator should promote open access for third party developers and encourage dynamics and experimentation. Services & Applications should be fast to deploy, and fast to dismantle. Not improving today's development and launch cycles could endanger the future of a profitable service offering. At the same time, it is crucial to appreciate that both creating the appropriate service architecture and service provision process are extremely challenging from a commercial and technical perspective.
D. Packaging
Attractive and suitable terminals are critical in providing support for advanced services and applications. The operators that have understood the barriers restricting GPRS adoption and are starting to actively support terminal vendors and service developers. The Christmas market will be the first test of the ability of operators to offer attractive service packages and terminals. Not many days left…
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