Unlimited Messaging--Does it help or hinder data ARPU?
During the first quarter, all the tier 1 operators have tweaked their data messaging price plans. Some of this trend may be part of the me-too competitive mentality of the Tier 1s, but it also may be part of a bigger picture.
Data now accounts for about 10 percent of most operators' revenues. And we know that messaging makes up the lion share of all data traffic on the network. While mobile entertainment companies like to position their content and services as a way for operators to jump-start data revenue, so far the contribution of video, music and other mobile entertainment content to the bottom line has been limited, at best.
But now operators are experimenting with different pricing options to drive more SMS traffic. Cingular earlier this month added unlimited in-network messaging for $5 per month to customers who subscribe to either a messaging bundle or data plan. Meanwhile, Verizon's data messaging plans start at $10 per month for 500 messaging and that includes unlimited in-network messaging. T-Mobile has an unlimited messaging plan to any number for $15 per month and Sprint has a similar plan for $10 per month.
At the same time operators have hiked up their per-message prices for people who don't subscribe to a bucket messaging plan. The industry standard at one time was 10 cents per message and now it's inching upwards to 15 cents per message and 25 cents for a video message.
But will these subtle price changes impact data ARPU? Current Analysis analyst William Ho says in a research note that unlimited mobile-to-mobile messaging packages complement the voice mobile-to-mobile calling plans and he believes it will stimulate messaging traffic and enable viral adoption of messaging services.
However he also notes that while some operators, particularly T-Mobile, have created a better value proposition for customers with their messaging bundles, few customers actually switch operators because of the messaging packages offered. While we know that customers churn if they perceive a better value in a voice package, it's interesting that they haven't yet started to churn for a better messaging bundle.
Unlimited messaging plans seem to be following the slippery slope of bundled voice plans--where lower prices increase usage and adoption, but eventually lead to the service becoming a commodity. In the long run, where does that leave operators? How will they differentiate their data services from the competition? Let me know what you think. -Sue