Who's ready for GPRS? GPRS can breathe new life into mobile operators' ailing ARPU levels, but only if the terminals are user-friendly, the services are attractive and the pricing is right - GPRS

Telecommunications International, Feb, 2002 by Wynne Davies

With voice revenue projected to shrink in the near future, GSM mobile operators are turning to GPRS to keep their business growing. The theory goes that the Faster data speeds and 'always on' capability enabled by GPRS will kick-start the mobile data and m-commerce markets, which, in turn, will more than off-set the decline in voice revenue.

Although there hasn't been an overwhelming take up of GPRS to date (lack of handsets has been a significant contributing factor), there is general optimism among the analyst community that GPRS will soon gain momentum. According to a recent report published by Analysys, a UK-based telecoms consultancy, there will be 110 million GPRS users across western Europe by 2006, representing 35 per cent of all cellular subscribers. These GPRS subscribers are projected to generate [euro]800 m in mobile data revenue for the region in 2002, rising to an annual value of [euro]23 bn by 2006 (Figure 1).

However, the report warns that the full potential of GPRS will only be realised if the right pricing structures are put in place.

Pricing experiments

Being a packet-oriented technology, GPRS signals a new era for mobile operators. Instead of billing for the length of call time -- as with 2G -- operators can charge for the amount of data transferred over the network.

At the moment, operators are experimenting with a broad range of pricing structures for GPRS network access. These include introductory unmetered packages from several operators in Italy and Sonera in Finland, as well as complicated combinations of volume and time-based pricing by some German operators. Another German operator, VIAG, charges per WAP page. Telia and Comviq, two Swedish operators, have gone as far as to offer GPRS access free for a limited trial period.

Vodafone UK offers two GPRS price packages for consumers, which they can attach to their normal monthly price plans. Vodafone is offering a flat-rate 'GPRS 1' option for the more frequent WAP user, which includes 1Mb worth of data transferral for [pounds sterling]7.49 ([euro]l2) per month. With an average WAP page measuring between one and two Kb, GPRS 1 will allow customers to access anything between 500 and a 1,000 WAP pages per month. Alternatively, customers can choose a GPRS price plan with no monthly fee, paying for WAP access pro-rota at two pence per Kb. There is no peak or off-peak with GPRS pricing plans.

Getting the pricing right from the beginning is important, because it will influence the appeal and success of these services, and set user expectations regarding pricing levels and structures for future 3G services. "Current pricing for GPRS services reflects the immaturity of this market," says Katrina Bond of Analysys. "Handset supply is limited, customer preferences and usage patterns are uncertain, and the focus to date has been on basic network access services, rather than the premium services that GPRS enables."

GPRS enables faster, more efficient data transfer than current cellular networks, and therefore broadens the scope for offering mobile access to e-mail and business applications, as well as enabling games, messaging and information services to be enhanced with graphics. The Analysys report concludes that while volume-based pricing might be most appropriate for basic GPRS network access, as the range of GPRS services expands, if operators and service providers are to maximise their revenue, they must relate price levels and structures to the perceived value of the services to users, and not just simply to the volume of data transmitted.

It is clear that data services enabled by GPRS are vital to the continued growth of mobile service revenue, but the introduction of GPRS presents mobile operators and other service providers with significant pricing challenges. Not only must they get the pricing level right, but in structuring their tariffs they must also consider the ease with which different types of tariff can be communicated, the capabilities of billing systems and the value of GPRS as perceived by different market segments. It is equally true that time-based charges are easier to communicate to the market than volume-based charges, but prices will inevitably decline as operators compete with each other, and will face further downward pressure from public wireless LANs and 3G services.

Value-based pricing can maximise revenues for the wide range of GPRS services that are being introduced, including file transfer, messaging, collaborative working applications, infotainment services and m-commerce. Value is not just related to the volume of data. For instance, current GPRS price levels are higher than GSM for file transfer, but offer savings for high volumes of web browsing.

Terminal issues

Even if all the GPRS pricing challenges are eventually resolved, many believe that for GPRS to take off in a big way then the design and functionality of terminal devices will need to be improved. The small form factor of today's mobile phones will have to change radically in order to present feature-rich web page information in a meaningful manner to the GPRS user.