Thursday, August 17, 2006

How to pad your data ARPU

A Palladium Club mega-uber value reader recently returned from a working vacation in Southern Europe writes in with the following tale of woe. Please forward to Ms. Reding.

"Mobile 3G connectivity has dropped to acceptable price levels… or so I thought. EUR30/month for 1 GB of traffic is acceptable for professional usage (as a last resort for email checks). Apparently the thickheaded telco marketeers finally got the point that there is something like price-elasticity, and that high utilization of your extremely high investment in licenses and infrastructure gets you more business and recurring use/customers than creaming off the top with exorbitant pricing and alienating your customers.

Until I got my recent invoice. I had to use the connectivity during my vacation in Spain, connecting through a mobile operator who advertises with the same type of price level: EUR15/mnth for 1 GB.

Well let's make a quick and dirty calculation. Both operators combined (home and Spain) want to get in total EUR45/mnth for 1 GB for connectivity. Add some transport costs for 1 GB (EUR 2 max) and extra billing/handshaking for lets assume EUR10/month. Total EUR57. A hefty profit margin added, let's assume a round number EUR100 for 1 GB.

No. The bill amounted to a mindboggling Euro 8000 per 1 GB traffic."

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