Subscribers Reluctant to Pay for Mobile Extras: Survey
By Allan Pulga
The bosses behind the world’s wireless service providers may have overestimated public interest in paying for wireless data services. People like the technology, but not its price tag.
According to a report released last week by accounting firm KPMG, more than half of global telecommunications executives expect increased revenue from wireless extras like music, video, or game downloads. However, more than a third of North American consumers said they would not pay a premium for them.
“They feel they’re paying enough already,” said Carl Geppert of KPMG’s Americas Communications and Media Practice, to Reuters. “We just kind of assumed all along that this is something consumers would want and demand and pay for.”A sizeable number of telecom executives (44 per cent) assumed the speculative demand for wireless extras would generate at least 15 per cent revenue growth by 2007. Whereas 40 per cent of mobile subscribers would not pay a premium over their current bill to receive these services.
And 20 per cent of subscribers would refuse to pay more than 10 per cent above their current bill.
Sean Collins, Global Chair of KPMG’s Communications practice and partner in the U.K. firm, suggests that wireless service providers need to rethink the business model for data services, to take the same approach as the Internet did years ago – make the service free but charge third party companies to advertise on the proliferated service.
“Mobile service providers will need to stop thinking of converged services purely as a revenue booster,” said Collins. “Instead they should consider them as a churn reduction tool, allowing them to present a much more stable, loyal subscriber base… attractive to advertisers and digital commerce partners.”
Collins said the current generation of consumers has been raised in the Internet era, where content is perceived as free. “This report advocates… providing a service offering so compelling that it attracts hundreds of thousands of eyeballs which – in turn – are attractive to third party advertisers.”
Still, US carriers maintain that the current subscription model hasn’t deterred increasing numbers of customers from signing up. Verizon Wireless, which charges $15 a month for its VCast service, plus additional premiums for some multimedia, made $731 million from data service in the 2005 fourth quarter. About 46 per cent (23 million users) of Verizon subscribers use data services.
Whether such growth is enough to keep carrier executives happy remains to be seen. If not, today’s business model for delivering wireless data services could move on from its infancy to, as Collins predicts, its adolescence.