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Operators are not marketing 3G correctly

Industry observers say 3G services are priced too low and are marketed to the wrong users; content owners are also not adapting to customer needs fast enough.

SINGAPORE--To get more users to try out their 3G services, most operators now price video call services close to their traditional voice rates. This fervor to pull in 3G customers have resulted in a lower average revenue per user (ARPU), a trend that should not be encouraged when better services are being provided for, say industry observers during the CommunicAsia conference held here this week.

James Fergusson, regional director of technology sector for research firm Taylor Nelson Sofres Singapore, said: "If you’ve got a good product, you don’t sell it at a low price.”

Fergusson believes that operators are making a mistake appealing to price-conscious customers such as students, the unemployed and low-income earners.

“To increase ARPU, we shouldn’t appeal to people in the lower-income customer base”, he said. Operators should instead be targeting big spenders such as white-collar professionals, he added. These include long distance daily commuters, users who want IT services that give them more convenience, and early IT adopters in the 20 to 50 age groups. Service providers, he noted, should not target teenagers.

Operators currently are not marketing effectively to user groups outside teenagers, he said. “Marketed correctly, 3G can increase operator ARPU,” Fergusson said, but noted that operators are instead marketing 3G as a commodity, resulting in falling ARPU. However, high prices can also deter users from picking up 3G services, as one carrier has learnt.

Japanese operator NTT DoCoMo, priced its video call services 30 percent higher than its voice call charges. “Some say it is expensive and it’s taking some time to take off,” said Masayuki hirata, senior executive vice president and managing director of global business division, NTT DoCoMo.

Company officials are now engaged in an internal debate to resolve the issue, he said. The operator has also started a trial to offer some pre-selected users 3G services at lower rates, to determine if pricing is indeed a major barrier.

New billing models
Jan Nilsson, president and COO of Far EasTone Telecommunications, noted that current pricing models for communications services "cannot support tomorrow's services".

Fergusson said that the utility or productivity aspects of a 3G service, which will make people willing to pay more, are not being marketed properly by operators. Such tools include location-based services and mobile e-mail capabilities, rather than video calls and downloading of music, he said.

Some applications, such as the music downloads are gimmicky while others provide more value to users, he noted, adding that user appeal will depend on the age group of the target audience.

Ferguson advised operators to offer applications that consumers want and need. He added that they should keep the number of service offerings small, and take care not to cannibalize on their existing voice business.

NTT DoCoMo's Hirata said: "Voice and e-mail are not sufficient as service offerings for 3G." He added that the next-generation network allows the operator to offer richer content, and customers have been using a growing amount of such content after the introduction of its iMode mobile Internet access service.

Neil Montefiore, CEO of MobileOne said: "Content is what draws customers." He explained that content owners must adapt to a customer's needs and create applications that fulfill to these needs. He added that content owners are traditionally slow to adapt.

M1 currently offers 3G video streaming services, but Montefiore said the Singapore-owned mobile operator will be launching more 3G content by the end of this year.

Hirata noted that new services are needed to increase the ARPU for 3G, which he said will not increase much because mobile penetration rates are much higher now than when 2G services were launched.

Gregory Teo is a freelance IT writer based in Singapore.