Pricing 3G Mobile Services
Dr Tim KellyHead, Strategies & Policy Unit
(SPU), International Telecommunication Union,
GPC6, Barcelona, 15 February 2001
Note: The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of the ITU or its membership. Dr Tim Kelly can be contacted by e-mail at [email protected].
Pricing 3G Mobile: Pricing 3G Mobile: AgendaAgenda
The 3G pricing arena Factors to consider Technology trends Mobile Internet dilemmas
Selected national scenarios Finland Japan Uganda
Lessons for pricing
Pricing 3G mobile services
[Simple in a vacuum]
Pricing 3G mobile services
[… hard in the real world]
Respondingto competition
Recuperatinglicense &
spectrum fees
Stimulatingcontent
development
Handlinginterconnect
issues
Handlingcontent service
partnerships
Migration of existing 2G user
base to 3G
Handlingroaming
agreements
Covering highnetwork roll-out
costs
Average price per pop. of Average price per pop. of European 3G licences (US$)European 3G licences (US$)
0
0
10
17
36
88
160
175
562
595
Sweden
Finland
Norway
Switzerland
Portugal
Austria
Netherlands
Italy
Germany
UK
Source: ITU, http://www.itu.int/ti/industryoverview/at_glance/UMTS2001.htm
1990 1995 2000 2005
Terminalsize
Multi-functionMulti-function
MiniaturizationMiniaturization
IMT-2000 (3rd Gen.)Multimedia
intermediate Gen.Voice/Data
Multi ModeMulti BandMulti ModeMulti Band
Single ModeSingle BandSingle ModeSingle Band
384kbps-2Mbps 384kbps-2Mbps 57-115kbps 57-115kbps7- 28.8kbps7- 28.8kbps
Cellular/PCS (2nd Gen.)Voice/Data
Cellular/PCS (2nd Gen.)Voice/Data
Analog CellularVoice (1st Gen.)
Analog CellularVoice (1st Gen.)
Technology trendsTechnology trends
Source: ITU IMT-2000 Task Force.
Mobile Internet dilemmasMobile Internet dilemmas In the Internet world:
Access is generally unmetered, flat-rate E-mail is perceived to be a “free” application Content providers gain revenue principally through
advertising or subscription In the mobile world:
Access is generally metered, per-minute Voice mail and messaging are charged by air-time Content providers share airtime revenues
In a mobile Internet world: Which business model takes precedence? Who does the billing? How are revenues shared between content provider,
service provider and portal?
Example 1: FinlandExample 1: Finland
0
10
20
30
40
50
60
70
80
91 92 93 94 95 96 97 98 99
Mobile
Fixed
Source: ITU, “Mobile/Fixed Interconnect: Finland case study”
Access in FinlandAccess in Finland
0
10
20
30
40
50
60
70
80
90
100
12.9
61.
972.
973.
974.
975.
976.
977.
978.
979.
9710
.97
11.9
712
.97
1.98
2.98
3.98
4.98
5.98
6.98
7.98
8.98
9.98
10.9
811
.98
12.9
81.
992.
993.
994.
995.
996.
997.
998.
999.
9910
.99
11.9
912
.99
1.00
2.00
3.00
% O
F H
OU
SE
HO
LD
S
fixed only both mobile only no telephone
Source: ITU, “Mobile/Fixed Interconnect: Finland case study”
Pricing 3G services in FinlandPricing 3G services in FinlandA good starting point
Early licensing process (March 1999), based on a Beauty Contest
A consensual (if incomprehensible) interconnect regime
Universal service achieved >98 per cent of families have telephone access 20 per cent of families now use only a mobilephone Only 15 per cent of families now have only a fixed-
line telephoneThe market opportunity
3G market opportunity may lie in fixed-line substitution, esp. for Internet access
Example 2: JapanExample 2: JapanNumber of Mobile Internet subscribers Number of Mobile Internet subscribers (millions)(millions)
0
5
10
15
20
25
30
June 2000 Dec 2000
J-SkyWeb
EZ Web
i-Mode
Source: www.tca.or.jp
NTT DoCoMo: 3G PioneersNTT DoCoMo: 3G Pioneers
3G service (FOMA: Freedom of Mobile multimedia Access), to be launched, May 2001
Current i-Mode pricing structure ¥300 (US$2.60) per month fee ¥0.30 (2.6 US cents) per packet downloaded Content subscription fees set by provider (ranging
from 0 to ¥300 per month) Average revenue around ¥2’500 (US$21.50 per
month)BUT: I-Mode = 9.6 kbit/s; FOMA = 384 kbit/sSO: how to price FOMA without undercutting
profitable I-Mode market?
Example 3: UgandaExample 3: Uganda3G in an African LDC3G in an African LDC
One of first African countries to permit competition (three mobile operators)
Mobile overtook fixed-line in mid-1999 BUT:
Low levels of literacy (64%) Even lower levels of IT literacy (PC ownership <1%)
AND: Fixed-line network in poor state of repair Wireless ISDN used for by businesses, hotels and embassies
SO: Market opportunity for 3G is for fixed locations: Simple to install Internet access for consumers High speed Internet access for businesses
Lessons for pricing policyLessons for pricing policy
Price 3G as a service not as a “technology”Price structure will be closer to Internet than to
today’s mobile networks3G will enter different markets in different ways:
In some countries, it will be a fixed-line replacement In other countries, it will be as a consumer device In other countries, it will be as high-speed Internet
access for businessesIn the developed world, 3G take-up will be
primarily driven by young, mobile consumers In the developing world, 3G take-up will be
primarily driven by fixed-location businesses