Mobile Internet too expensive

Wireless providers are eager to begin making money on mobile data services. But so far high prices are keeping the market from developing, says an analyst
Written by Matthew Broersma, Contributor on

European wireless operators are shooting themselves in the foot with short-sighted efforts to begin making money from next-generation services, according to an influential analysts' firm.

On average, European telcos charge around £20 per megabyte of data downloaded onto data-enabled phones, typically on top of a fixed monthly fee of more than £7. But that is far too expensive and could be a major stumbling block in getting data services off the ground, according to senior analyst Farid Yunus of Yankee Group, an international firm of analysts.

Under that rate, a user would pay £40 a month if he received only 100 emails of 20kb each. "European operators just don't get it yet," said Yunus.

Billing is a major issue surrounding emerging next-generation wireless services, as companies try to figure out what services users want and how much they are willing to pay. Data services are crucial to network operators' plans -- over the next four years, Yankee Group predicts that revenues from voice calls will remain roughly steady, and even fall slightly, while profit growth comes from data and m-commerce.

Last year operators including Vodafone, BT, Orange and One2One paid billions for licenses to 3G spectrum, the technology that will succeed the present GSM network. Because of that debt load, telcos are eager to begin reaping mobile data revenues.

The most popular data service so far is text messaging, which continues to grow at a phenomenal rate, Yunus said. In a recent survey, 10 percent of users said they send more than 20 text messages a week. "Messaging will remain the killer app for data services," said Yunus.

As the bugs are ironed out of new technologies such as GPRS (general packet radio service), handsets will have a constant connection to the network and more sophisticated data services will be possible. Other key advances, according to Yankee Group, will be colour screens and the enabling of multimedia technologies such as Java.

The holy grail of European service providers is the popular i-mode service from Japan's NTT DoCoMo, which uses an existing always-on technology to offer information, games and transactions.

While i-mode is partly boosted by very low Japanese Internet penetration, its low cost is also a key factor, according to Yunus. A basic monthly subscription is about $2.40 (£1.60) and data costs only roughly $18.75 per megabyte.

But the figures are encouraging for Europeans, Yunus said. "$18.75 is lower than what European companies charge, but they don't need to come down that far," he said.

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