European mobile network operators are barking up the wrong tree with 2.5G data services, according to a consultancy firm, which suggests that the industry could be repeating the mistakes it made with WAP (wireless access protocol).
Operators such as MmO2, Vodafone, Orange and T-Mobile in the UK have begun selling data-based GPRS services -- also known as 2.5G -- which speed up download times and create an always-on data connection. But these companies are making a strategic mistake in charging customers the same per-megabyte rates across the board, according to Denmark-based research firm Strand Consult.
"The way GPRS is priced today is as if all phone calls cost the same, whether they were long distance, international, or local," said Strand chief executive John Strand. "Operators need to understand that pricing of GPRS is much more complicated than that."
European operators struggled with how to bill for GPRS even after the technology was ready, which contributed to a slow rollout. But now that the GPRS services are available, Strand says that pricing regimes are still not attractive to customers. The result is that few are signing up for the services, and even fewer are using them.
"GPRS is a bigger failure than WAP was," he said. He noted that the revenue brought in by GPRS among the four Denmark network operators in the past year amounted to only about 23,000 euros (roughly £14,0000), which would not be enough to pay for the lunches of the engineers that installed the GPRS equipment.
Billing is a key issue with telecommunications services, because the systems are complex and expensive to set up. In the US, for example, mobile phones have been less successful than in Europe partly because of the way billing works -- customers have to pay to receive mobile calls, and phone companies are unable to charge different rates for calls made to mobiles.
Similar difficulties will continue to beset European mobile operators with GPRS unless they change their ways, Strand believes. He advocates a billing system similar to that used in Korea, where users pay a lower rate for multimedia downloads and a higher rate for text-based downloads.
"When you're collecting email, it's not data-intensive, but it's very high value. If you're watching a movie, it's not of such high value, but it's very data intensive," he said. "You've got to say that these are different kinds of data traffic with different prices."
The Korean market also prices GPRS data in "packets" of half a kilobyte, which makes it easier for customers to understand how much they are paying for. Strand publishes a report called "The Korean Mobile market, a window to 3G" that explains how the highly successful Korean market works.
There may be some hope for European operators, Strand said. Technical solutions exist today that can handle differentiated GPRS billing, and some operators are already using a similar business model for "premium SMS".
Premium SMS services, which have become a success for European operators, let users transfer graphics, ring-tones or other extra content for a fee above the usual SMS charge.
"It doesn't make sense that the Premium SMS business model is in place but they are not doing the same thing for GPRS," Strand said.