Whatever Happened to GPRS?Whatever Happened to GPRS?

Wireless data services are now definitely having a positive effect on European carriers' bottom lines, but almost all of that revenue is being generated by old-school SMS and WAP services (see Report: Sun Will Shine on Europe's Data Nets). It wasn't supposed to be like this. Why aren't customers using new-fangled GPRS networks to download email, pictures and documents?

The answer -- in a word -- is price. GPRS is still too expensive (see Commentary: Cut Those Crazy GPRS Prices!). What's more, it's hard to tell what your monthly bill will be without keeping an eagle eye on the amount of bytes that you have taken out of your data allowance -- and that's another big disincentive.

A recent report from Analysys Consulting 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 (see Reports Slams GPRS Prices). Yet only about 1 million people were using GPRS-based data services.

Why aren't more people switching on GPRS wireless data services. A brief scan of the table below, culled from the latest Wireless Oracle, provides the answer. The vast majority of services are expensive and confusingly priced.

Table 1: GPRS Price Plans (selected European operators)

If we had a penny for every time an analyst has told us that customers don't understand per-megabit pricing schemes, we'd probably have enough cash to download a Word document over Vodafone Group PLC's (NYSE: VOD) GPRS network (see Vodafone Launches (Expensive) GPRS Euro Roaming).

Yet, none of the major European carriers offer an all-you-can-eat pricing scheme, not even one as expensive as Verizon Wireless' $99 a month offering in the U.S. (see US Wireless Data Needs to Be Cheaper).

The unsurprising result of all this pricing tomfoolery is that European carriers have seen very little revenue generated from GPRS services, as the following table shows:

Table 2: Non Voice Revenues as a Percentage of Service Revenues, Vodafone (12 Months to March 31 2002)

This is certainly not the picture that the carriers originally painted when they started to talk about packet-switched mobile services back in the boom times of the "mobile Internet" (Historical Note: actually one wet afternoon in Stockholm, during June 1999).

Packet data services, the carriers said, would allow them to start raking in revenues. They pointed to examples like NTT DoCoMo Inc. (NYSE: DCM), which makes approximately 15 percent of its revenue from data services.

However, European carriers don't have nearly the stranglehold over the European market that DoCoMo had with i-mode (and is now losing with FOMA -- see No Heat Yet for FOMA). This fact, compounded with a lack of imaginative services and moribund pricing schemes, has hamstrung GPRS in Europe, analysts say.

"In part, high tariffs are no doubt related to the desire to 'price skim' the early adopters and to avoid bringing GPRS services to market that suffer from poor quality during the 'busy hour' in heavily loaded, revenue-generating voice networks – a problem compounded because the high voice traffic locations are also high data traffic locations," explains Gabriel Brown, research analyst with the Wireless Oracle.

However, as the Analysys report notes, if GPRS is to succeed, carriers have to be more inventive with their pricing, targeting a wider audience than just the business users. They need to develop more generous pricing plans and ramp up prepaid usage if the networks are to succeed.

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

Editor's Note: Light Reading is not affiliated with Oracle Corporation.