GPRS: Cheaper WAP, But Cheap Enough?
By Joachim Bamrud, Mon Mar 05 00:00:00 GMT 2001
The first commercial GPRS services have been launched and with them the first price models. How do they stack up?
A comparison of the price models for General Packet Radio Service (GPRS) of six European operators showed significant price differences. They also show differences in terms of the actual models. While all, as expected, charge for usage per kilobyte, some also charged additional daily or monthly fees. They also differed when it came to giving price reductions for increased usage.
Mobile phone operators and producers have said GPRS, offering high-speed data transfer and an “always on” technology, is key to the success of WAP and will be a good indication of the potential for third generation technology, which will offer even higher data transfer speeds.
Using the prices from the operators, we compared usage of 1,350 kilobytes over a 30-day period. That roughly corresponds to reading ten shorter news items on WAP and sending ten e-mails per day. Some users may just use WAP and not send e-mail, and vice-versa, of course. To see the reduction of prices for even larger usage, we also compared the rates when using twice the usage amount, 2,700 kilobytes over a 30-day period.
We compared prices from Europolitan in Sweden, NetCom in Norway, Telefonica in Spain, Telenor in Norway and T-Mobil and Viag Interkom in Germany. These operators launched full-scale GPRS service between November and early February. British Telecommunications launched GPRS in June last year, but only for selected corporate clients and was thus not included in the survey.
In the first comparison, NetCom (Norway’s second-largest operator) came out on top as the least expensive, charging the equivalent of US$9.07. Telenor followed at US$11.19. Viag charges $12.61 until the second quarter. Thereafter the price will be $13.17.
T-Mobil took fourth place at US$21.42 for one of its two GPRS options, followed by Telefonica (US$22.36), Europolitan (ranging from US$28.41 to $44.14 until April 1, when prices will go up and range from US$30.44 to $46.17) and T-Mobil’s second GPRS option, which would cost around $50.66.
In this comparison, NetCom’s prices were more than five times cheaper than the most expensive offer from T-Mobil.
“These prices are too high for the mass market, “ says Lars Godell, European telecoms analyst at Forrester Research, after being presented with the results. “The price differences were larger than I expected,” he added.
The average price of the six operators’ current service is $23.36 in our comparison.
If we compare prices based on consumption of 2,700 kilobytes over a 30-day period, NetCom and Telenor still come out on top, charging $12.90 and $16.06, respectively. Viag charges $18.32 until the second quarter, when the price will be $16.91. Telefonica would charge $22.36 (the same as with half the consumption). Europolitan’s rates would range from $29.94 to $58.35 until April 1, when they will go up to $36.02 to $60.38, depending on which option is used. T-Mobil Pro will cost $33.47, while its Eco-option is still steep at $94.42.
This would result in an average price of $34.52.
Paying anything above $10 per month will not spur a mass market for GPRS services, says Godell. But he thinks these prices more than anything are aimed at measuring consumer demand for mobile Internet services.
“European operators will use GPRS as a test for the mobile Internet. We will see a lot of experiments the next twelve months,” Godell says.
John Strand, director of Strand Consulting, agrees. The Danish consultancy specializes in mobile Internet technology and has operators worldwide as clients.
“The first GPRS prices are based on “Conference Reality” – what operators attending conferences heard other operators planned to charge,” he says. “Right now they are all looking at each other and evaluating what to do.”
His advice to clients was to start with high prices and then reduce them when they have more information on traffic and traffic patterns.
“This is a very complex thing for operators. They did not have any information on what demand would be, how much WAP would be used with GPRS, how many people would be sending e-mail and how the other services would do,” he says.
Bob Schukai, 3G Ram Director at Motorola point out that the first GPRS handset – the Motorola Timeport 260 – was mainly directed at professional, high-end users and thus not a low-end, mass-market product. When less expensive models from Motorola and its rivals hit the market, GPRS will become more of a mass-market factor, he thinks.
Strand says subsidizing handsets will be the real expense for operators, more so than the actual network equipment. The prices of such handsets will be as key as the usage charge, he thinks.
But both Strand and Schukai agree with Godell that prices on GPRS services will have to come down.
“Operators are trying to determine what is the right price structure,” Schukai says. “I’m sure you’ll see a price model that will be appealing.”
The GPRS prices are considerably higher than Godell estimates Western European mobile Internet subscribers will be using the next five years. According to his estimates, operators’ average revenue per user (ARPU) per year for mobile Internet data in Western Europe will be as little as 2.45 Euros (approximately US$2.25) this year before going to 12.57 Euros in 2003 and 33.26 Euros in 2005. (This figure excludes SMS-revenues). Total data minute revenues per subscriber per year should be 21.30 Euros this year, 46.47 Euros in 2003 and 58.32 Euros in 2005, according to Godell’s calculations.
GPRS price models
In terms of pricing models, NetCom charges a flat fee of NOK 75 (around US$8.45) for the first megabyte. Thereafter users are charged per kilobyte based on 1MB costing NOK 25 (around US$2.78). To get demand started, NetCom is offering free service during its introductory month of February.
Rival Telenor charges a flat fee of NOK 0.10 for each kilobyte up to 1 MB. Thereafter it costs NOK 0.025 per kilobyte. Telenor has said it will revise its prices in July, although it didn't rule out keeping today's prices.
"We will look at the whole picture [of GPRS consumption and revenues] until then. If the prices turn out to be right, we will continue using that," says Esben Tuman Johnsen, a spokesman for Telenor Mobil.
Viag charges DM 0.09 (around US$0.042) for each 10 kilobytes. Additionally there's a flat fee of DM 0.49 per day of usage. From the second quarter, prices change. Then the kilobyte price goes down to DM 0.06 per 10 kilobyte and the daily surcharge is replaced by a flat monthly fee of DM 19.95 (approximately US$9.37)
T-Mobil offers two different options: GPRS Pro and GPRS Eco. GPRS Pro costs DM 0.19 per 10 kilobytes. In addition there's a flat monthly fee of DM 19.95. GPRS Eco costs DM 0.69 per 10 kilobyte and an additional DM 0.49 per day of use.
Telefonica charges per kilobyte, but gives a gradual discount for each megabyte. For all usage up to the first megabyte, the Spanish operator charges 4 pesetas (approximately US$0.022) per kilobyte. If a user consumes between 1 and 2MB, he pays 3 pesetas per kilobyte. Further price reductions are offered for usage between 2 and 5 MB, 5MB to 10 MB and over 10MB.
Europolitan offers three different GPRS options: GPRS WAP, GPRS Surf and Europolitan Data. GPRS WAP costs SEK 140 (around US$14.20) per megabyte and an additional SEK 155 monthly charge. As of April 1, the monthly fee goes up to SEK 175.
GPRS Surf costs SEK 295 per month. Through March 31st usage per kilobyte will not be charged, but after that date it will cost SEK 20 per MB (on top of the flat monthly fee).
The third option, Europolitan Data, costs 140 per MB. There is no additional charge until April 1, when users also have to pay an additional flat SEK 20 per month.
WAP & messaging cheaper
Even with the relatively high prices for GPRS, there is no doubt that WAP will benefit. Not only will WAP become more user-friendly with GPRS’ always-on technology and faster data transfer speeds, but even the initial prices will make WAP-usage less expensive than without GPRS.
According to a survey in Sweden by Computer Sweden and Mobile Media Group, WAP is about 30 percent less expensive with GPRS than with GSM. Another survey, by the Dagens IT newspaper showed that it’s five to seven times cheaper.
Messaging will also be less expensive. In Norway, for example, Telenor charges NOK 1 for sending an SMS. Sending an e-mail with GPRS will cost a quarter of that, and the length can be more than twice the 160-character limit of SMS-messages.
Joachim Bamrud is an award-winning journalist with 17 years experience as a writer and editor in the United States, Europe and Latin America. Bamrud has worked for various print, broadcast and online media, including Latin Trade, Reuters and UPI. He can be reached at firstname.lastname@example.org.