European operators need to get the pricing of general packet radio services (GPRS) services right if they want wireless data services to make up for falling voice revenues, a new report says.

The report, from U.K.-based Analysys Research Ltd., says that by the end of 2001, 50 of Western Europe's 76 mobile operators had launched services based around faster GPRS and approximately 3.3 million compatible handsets had been sold. Yet only about 1 million people were using GPRS-based data services.

The slow takeoff of GPRS means mobile services will generate only €97 billion (US$87.15B) this year, just 4% more than in 2001, Analysys adds.

The report blames this lagging growth on the lack of compelling new applications, coupled with the high price being charged for data packet downloads, echoing Unstrung's call for better pricing plans for the new services (see Commentary: Cut Those Crazy GPRS Prices!). Analysys argues that operators need to rethink the way they promote GPRS if they want to reach a mass market.

"Although the market for GPRS-based services is now beginning to accelerate, operators must learn from the WAP experience and ensure that the branding focuses on the customer experience and not the technology," says Katrina Bond, the report's co-author. "This will become increasingly important as operators roll out GPRS to the mass market in an attempt to halt the ongoing decline in overall revenue per subscriber."

Operators such as Vodafone PLC in the U.K. are currently targeting business users with their GPRS service and charging about £5 to £6 (US$7 to $8) per Mbyte of data downloaded (see Vodafone Launches (Expensive) GPRS Euro Roaming). At the moment, Analysys reckons that about 75% of GPRS subscribers are business users.

Getting more customers means offering prepaid GPRS services. However, European carriers are getting increasingly sniffy about offering simple prepaid card services. Why is this, you may ask, when the entire European wireless boom was built on prepaid? In fact, Analysys says prepayers currently account for 63% of all mobile subscribers across Western Europe and as much as 90% in countries such as Italy. But ever since the European carriers splashed out billions on third-generation licenses, prepaid has become a something of dirty word.

The problem is that it is difficult to keep track of prepaid customers and to determine what exactly they contribute to average revenue per user (ARPU) figures, which have become a benchmark of performance among European operators' shareholders. Some prepaid users might use their phones for just a couple of calls per month, meaning they probably cost more to administer than they contribute to their carrier's coffers.

Yet teenage users in Europe are mostly on prepaid plans, and they are among the heaviest wireless data users in the world, sending out millions of SMS text messages to their peers every month. No doubt, it's this kind of prepaid user Analysys has in mind when it stresses that operators must cater to that market with GPRS services.

In order succeed there, Analysys says, operators need to build on the success of two-way text messaging and develop messaging applications that make use of color screens and 'always-on' connectivity, as well as more games and "infotainment" content. This will also precipitate the development of more sophisticated billing systems on the back-end, so carriers and content providers can share revenues derived from the sharper content and applications.

If the carriers succeed in attracting more consumers, they could swell the ranks of the European GPRS subscriber base to 40 million users by the end of 2003, Analysys speculates. Carriers would then have a captive market when true third-generation universal mobile telecommunication systems (UMTS) data services roll out in 2004.The plain truth is that European carriers can't afford to fail now with GPRS services. They have hocked the family silver for licenses to develop third-gen services that will cost billions more to implement, yet their main source of income -- revenue from mobile voice services -- is steadily falling. They have to figure out what every sector of the market wants from GPRS mobile data services and what they are prepared to pay for them, and get those services rolling soon, or they are looking at a very bleak future indeed.

— Dan Jones, Senior Editor, Unstrung
http://www.unstrung.com