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Mobile broadband forecast bright, but there's no joy in ARPU

Mobile broadband traffic projections are through the roof in the next five years, but the surge doesn't apply to wireless operator ARPU, or wireline provider ARPU, for that matter. Providers need to find value-added services that help them compete with over-the-top content players to maintain their relevancy and revenue.

Kate Gerwig, Site Editor
Kate Gerwig
The good news, according to global consulting firm Ovum, is that users accessing mobile broadband-enabled laptops and handsets will increase revenue by more than 450% in 2014 compared to 2008. Mobile broadband adoption, of course, means 3G and 4G mobile data technology adoption. Projected revenue? $137 billion globally.

But wait, there's a downside. Mobile broadband growth refers to increases in the number of users and the amount of data traffic. But the joy doesn't spread to average revenue per user (ARPU), Ovum says. Instead wireless ARPU is expected to drop significantly during mobile broadband's meteoric rise, with projected growth of only 44% of the rate of total users -- a dilemma also faced by wireline network carriers.

Recent Internet traffic growth projections confirm the similarities, as well as the plummeting revenue-per-bit issues that call for a new business model to build ARPU.

Ovum expects 258 million users to access mobile broadband services through laptops by 2014, which translates into 1022% growth from 2008. Wireless operators expect similar growth for mobile broadband via handsets, but the existing user base is already much bigger: 158 million in 2008 growing to an estimated 1.8 billion in 2014.

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The ARPU dilemma is enormous for carriers. ARPU will drop due to less revenue generated from emerging markets, increased competition for mobile broadband access and possible prepaid tariffs designed to drive up broadband adoption, Ovum says.

Whether in the air, on the ground, or along the ocean floor, providers have to come up with new ways to increase revenue in addition to transmitting bits. Even transferring 1000% more bits could make them sideline commodity players if they don't come up with revenue-generating business models that take advantage of their network assets.

Ovum's projections again put the spotlight on value-added services as operators continue to look for a business model that will keep them in business in the digital age.

Check out Mobile app stores deliver little direct revenue but are critical for ARPU for another view on the choices mobile operators face. Clearly, the answers aren't obvious, but operators have some inherent advantages to over-the-top (OTT) content players. They just have to recognize them and take action in time.

This was last published in March 2009

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