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ARPU Is Dead

1:25 PM -- CHICAGO -- Average revenue per user (ARPU) was one of wireless operators’ favorite invented metrics, but it won’t be much longer: ARPU is meaningless and it’s being phased out.

That was the sentiment shared by executives of the four largest US carriers at yesterday’s Connected World conference in Chicago. In fact, it was one of the only things the four machine-to-machine (M2M) heads from AT&T Inc. (NYSE: T), Verizon Wireless , Sprint Corp. (NYSE: S), and T-Mobile US Inc. could agree on. (See Does 4G Have a Role in M2M?)

The carriers predicted a future in which every person has at least five devices equipped with a wireless connection, but that means that they might also have five monthly bills.

When asked by a concerned audience member, who aptly noted that he can’t even get his AT&T iPhone and iPad on the same bill, how they expect him to have five different bills, the panelists responded, “We would never do that to you,” and “It’ll be fine.” (I paraphrase.)

M2M business models are going to require a lot of thought and probably some experimentation. Hamish Caldwell, executive director of mobility product management at AT&T, called them a “moving target.”

In some cases, as with the Kindle, the price of connectivity is bundled into the price of content. In others, like most netbooks, a monthly subscription is required. Prepaid, pay-per-use, or pricing based on data use are also possibilities, as are new models yet unimagined. The operators said they’re open to doing any number of business models that a developer or partner might suggest.

What they won’t do is worry about how much it is bringing them in per subscriber, which is the name of the game on the voice side.

“ARPU as a measurement of a carrier's health in wireless over time -- not over night -- will go away,” said Wayne Ward, vice president of emerging solutions at Sprint. “I don’t think it matters.”

T-Mobile’s national director of M2M, John Horn, took that one step further, noting that Verizon has the lowest ARPU and highest revenue, proving that ARPU is meaningless. When you’re talking small bursts of data or bundled pricing packages, APRU has to go out the window, and revenue becomes the only important factor.

M2M is a unique opportunity for carriers in that it is only incremental revenue, and it doesn’t threaten their legacy businesses. If they want to make those increments substantial, however, they’ll have to hit that moving target of billing dead on.

RIP ARPU.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

sarahthomas1011 12/5/2012 | 4:31:59 PM
re: ARPU Is Dead

Verizon's MiFi is another example of a service that lets you share megabytes, connecting 5 Wi-Fi-enabled devices and paying on one bill.

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