The price for data

Michele Mackenzie
26 Apr 2006
00:00
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KPMG's latest survey on mobile phone users' willingness to pay for mobile content services found that most users are reluctant to pay a premium for wireless content. The company surveyed 3,600 users and found that 40% were unwilling to pay a premium on their current bill in order to receive multimedia services. This attitude was particularly prevalent in Asia, where wireless content uptake has a one- to two-year lead on Europe and the US.

It was bound to happen sooner or later. Over the last few years, numerous end-user surveys have asserted that people are willing to pay a premium for all sorts of wireless content services, with the latest beneficiary of our largesse being mobile TV. Now it seems the tide has turned. But does this survey result really indicate a fundamental change in the prospects for the wireless content market‾

It is not surprising that the survey reveals that 40% are unwilling to pay a premium. People will only pay a premium for mobility if there is a clear value associated with it. The value of mobile access for many content services is not always so clear.

But there is value. We believe that there is demand for new wireless content services and that users will be willing to pay something for it. Ovum's latest forecasts for Asia Pacific predict that total revenues for wireless services will grow 7.5% annually and reach $236.8 billion by end 2010.

Voice revenues will grow 27.7% over that period (driven by growth markets such as India, Indonesia and Vietnam) compared to Western Europe, which is forecast to decline by 4%. Data revenues will top this to grow by 85% to reach $61 billion (compared to 78% growth in Western Europe) and account for 26% of total revenues. Admittedly, the majority of this still comes from messaging, but there is also good growth from other content services.

Of course, it will be challenging for wireless operators to build a substantial content-based business. Not all will be successful in selling wireless content. Some will be able to adopt a business model based on a large share of content revenues. Others will focus on making their money from the network traffic generated by content consumption.

Advanced multimedia services such as full-track downloads and video services moves the wireless operator out of the ringtone comfort zone, where there are no direct substitutes, and into competing head-to-head with online content service providers as well as traditional retailers. On price, as they are already finding with full-track downloads, users will be reluctant to pay a mobile premium over online music-download charges. Instead, wireless operators will need to add value by providing the mobile element of converged fixed/mobile content offerings. Already, with 3G in its infancy in most Asian markets, we are seeing the full spectrum of business models deployed.

And we agree that wireless operators need to look toward new business models to boost their revenues going forward. They are too heavily dependent on end-user revenues. They need to pay closer attention to some of their counterparts in the Internet and media industries, whose business has always been financed mainly by advertising.

Michele Mackenzie is a senior analyst with Ovum in Lodon

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