Using LTE to Boost ARPU
By Zahid Ghadialy
Managing Director eXplanoTech Ltd.
Webmaster 3g4g.co.uk, 3g4g.blogspot.com
What is ARPU?
Average Revenue Per User (ARPU) is a measure used
primarily by consumer communications and
networking companies. It is the total revenue divided
by the number of subscribers
Mobile Traffic will keep growing
New Sources of Mobile Traffic
Source: 3G Americas
All operators have some kind of flat rate ‘all
you can eat’ packages.
Though most of them put an upper cap or
clauses like ‘fair usage’ policy
These packages have put strain on the
The packages are widely abused as well
A recent report mentioned that 3% of the
users generate 40% of the traffic
Some operators have started fighting back
Vodafone recently announced that it will
charge people for out-of-bundle data.
AT&T planning to go the Vodafone way as
‘Smart-Pipes’ and ‘Happy-Pipes’
Some people now use the term
‘Smart-Pipes’ to emphasise
Policy Control, QoS and so forth
Dean Bubley from Disruptive wireless recently mentioned the word
‘Happy-Pipes’ to emphasise:
There is a huge value in deploying and running a network well
The smartest networks are the ones which work collaboratively *with*
Internet and content companies, not antagonistically against them. This
specifically related to areas like policy management.
There is much under-exploited potential for revenue around wholesale
models. There are many potential business opportunities, both for "bulk"
wholesale and "slice and dice" methods of deriving extra fees for capacity
and value-added services.
More users does not mean more ARPU
Some operators offer huge rebates to get customers onboard
Rebates don’t work well in most cases
They assume, “more users means more ARPU”
Their simplistic assumption relies on customer loyalty
Customer loyalty does not exist in this day and age.
Capex/Opex savings via Network Sharing
Though these savings don’t translate to ARPU, they
can certainly reduce the pressure to increase ARPU
Example: Two MNOs jointly rolling out an LTE network. Operators jointly roll out a new build
of 2500 sites in a developed economy. This will typically achieve a 30% capex saving
accumulated over five years and would also reduce opex by 15% per year by year five.
Source: Analysis Mason, May 2010
LTE Needed for maintaining existing ARPU
This statement may be too simplistic
Faster and more Reliable Mobile Broadband
But this may not be enough
Lots of Amazing Applications
iPhone has more than
More than 4 billion Apps
have been downloaded
50,000+ apps available for
Android based phones
Over 100,000 apps
downloaded per month
Real Time Mobile Apps
Live blogging with facility to easily add pictures and
Giving rise to m-Reporters and real time citizen journalism
VoIP based Voice and Video calling and conferencing
Live Radio and TV Streaming
Real time games
Positioning, Monitoring and Tracking Apps
Find me or find my friend type applications
Find the nearest xyz
Guide me or guide someone
Track my xyz in real time
Social Networking Apps
Facebook, Twitter, Linkedin, Orkut, etc.
And you can use these apps to your own advantage ;)
If operators create a
complete health based
portal, can they charge
Will users be willing to
pay extra for:
Having a remote nurse
available all the time to
To have their health
To remind them about
taking medicines, etc.
We are still waiting for the killer app
Fixed Mobile Convergence
Do subscribers become more loyal to operators and
give operators the right to charge more?
This is big on device manufacturers agenda.
There are already plans for:
Live games (Football, Soccer, etc.) in 3D
No one is sure how much bandwidth will a ‘3D’
broadcast/streaming hog but few people may pay premium for
HD (High Definition)
HD Voice on mobiles
HD Video/Movies on mobile
Blu-Ray for mobiles?
Quality of Service and Quality of Experience
Are we willing to pay extra to:
Always get connectivity
Get high speed connectivity even if the network is congested
Operators can give higher priority to their
Faster songs download
Faster movies download
Are people willing to pay extra for:
Reliable connectivity at home
High speed data transfer while at home
Differences with respect to WiFi:
Mobile broadband consumes less power for the Mobile
The security is far better in Mobile Broadband
Special offers for Premium Subscribers
Orange in UK gives 2 for 1
for movies on wednesdays.
Can this concept be
enhanced for premium
O2 in UK has a similar
concept called the O2
Revenue v/s ARPU
ARPU will only be a useful measure if:
Revenue increases on a regular basis and
Number of users increase
Do we focus too much on ARPU?
Do passive ‘data only’ devices reduce ARPU?
Operators can charge limited fees for data only
devices like the e-book readers, mobile Sat-Nav’s, etc.
Should they be included in the calculation of ARPU?
Do we need a different measure for these devices?
The operators generally get much higher margin on
these with a much lower churn
Some points raised in discussion during
the ‘Breakfast Briefing’
Discussion Notes - 1
Operators have to focus on much more than just
voice and video
Do M2M devices take away the revenue from
Can content providers use the location information
for their own advantage
Sending advertisement which are relevant to location
What about Spam?
Are people comfortable disclosing their location?
Location can be used by employers/partners/stalkers; not
acceptable in either case.
Discussion Notes - 2
LTE can allow people to get rid of their landlines and
instead the LTE to WiFi conversion could be used.
Billing is a very important weapon in the hands of
the operator. They can use it to charge for services
and content thereby taking a cut.
Users are willing to trust the operator more than 3rd parties
for charging them
The credit card details, etc do not have to be disclosed to
Thanks to the following people who attended the
breakfast briefing and making it a lively discussion:
Gunnar Hakansson, Ericsson
Michael Morash, Bridgewater systems
Margaret Hu, Huawei
Umesh Date, Mindtree
Mehul Patel, Mindtree
Mohammad Bin Aris, Mobily
Thanks also to the various contributors at the LTE
group on Linkedin who contributed to this
discussion out there.