4G: where's the money?
As telecoms continue 4G equipment rollouts, one question looms: Will wireless data revenues keep pace with services offered?
Many analysts say no, unless telecoms find a killer, money-making 4G service.
"I've always noted that what it really takes [to drive 4G revenue] is an application that needs to consume that bandwidth," said Mike Jude, a program manager of consumer communications services at Stratecast. "Currently, I think most LTE and 3.5 [later generation, faster 3G] to 4G deployment plans depend on this notion of mobile Web access or mobile data access as being the driver. But really, if you're looking at the total population of total users of wireless, not that many of them use that much data."
And not many are currently willing to pay much more just for higher bandwidth.
Instead, Jude and others believe, some basic models such as the all-you-can-eat flat-rate need to be fundamentally rethought or at least subsidized with high-margin services.
"Everybody's looking for services that they can provide [for] high-margin that would depend on that kind of bandwidth requirement," Jude said. "If it's a service that people want and it requires that kind of bandwidth, presumably they'd pay for that."
If wireless providers launch 4G services without a clear idea of exactly what those ARPU-driving services are, wireless providers may face the same crisis the wireline providers are facing: plumetting revenue-per-bit even as infrastructure upgrade costs skyrocket and entrenched consumers protest any change to the revenue model status quo.
H. Paris Burstyn, a senior analyst with Ovum, said wireless carriers need to embrace the death of the minute and move past it in terms of billing.
"Carriers are ... fixated by minutes of use, and that's a terrible way to think about digital service because it's not about minutes of use, it's about megabits, and a growing quantity of data," Burstyn said. "The key is to figure out how to move the payment metric from minutes to megabits, and then tiers of service beyond that, which spills into net neutrality, and dealing with power users."
Jude said that there is some time to adjust, particularly with 4G. So far, however, a rational business plan has yet to emerge that will match the costs of 4G capital and operational expenses with revenue, Jude said.
Whatever the answer, it won't be found overnight.
"It's a very complex problem, and monetizing it is the big issue," Burstyn said. "Moving the consumer and the billing paradigm to something that's linked to the amount of data you use is going to be a very complicated and evolutionary step-by-step kind of thing."
- Michael Morisy / SearchTelecom