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1. Data ARPU: what is it good for?
Posted by monica.paolini
In my Excel-filled days, data ARPUs are my daily companions. On one hand, you have
costs, on the other revenues – that is ARPUs. And since the area of both major growth
and concern, is data, data ARPU is a core metric.
Until you stop and ask yourself, what do data ARPUs mean? How do they help us
understand and predict how data services generate revenues and can be profitable? I
have had some doubts about the usefulness of data ARPUs for a while and prefer to
use total ARPUs. But I always thought that at the very least data ARPUs give us a
sense of the relevance of data for subscribers. It is big news when data ARPUs go over
the 50% line – as they started a few years ago in Japan and, more recently, in other
countries.
When you look a bit more closely at how data ARPUs are calculated – i.e., the marginal
revenues from adding data services to an existing plan – you realize that data ARPUs
are not only scarcely useful, they are actually misleading as they lead to an
underestimation of data revenues.
If you relate data ARPUs to the cost of providing mobile data services, you come to the
realization that operators are squandering their voice revenues to support loss-
generating data services (I have to admit that I used to think that that was indeed the
case; but that was many years ago when laptop plans could not be even close to
profitable).
This is not what is happening – on the contrary, this way to allocate revenues does not
assign data the relevance it has for subscribers. As an unintended consequence, it may
even make operators less aggressive in pursuing the mobile data services. I have
presented my argument in a piece in FierceWireless, so let me move a step beyond.
If you buy my argument that data ARPUs are no longer relevant in a world where all
traffic in a mobile networks is becoming data, then how do we allocate revenues? Total
ARPU is still a useful tool to understand differences among markets, operators, or
subscriber segments. But another direction that I have found more and more useful in
understanding the intricacies of profitability and monetization, is to cast revenues – and
revenues for specific services or technologies – in per-bit values, such as per-GB
revenues. Wouldn’t you find it useful if operators started to publish such metrics? And,
wouldn’t that fit nicely with the VNI, as you could then relate traffic to revenues?
For more discussions and topics around SP Mobility, please visit our Mobility Community:
http://cisco.com/go/mobilitycommunity