February 9, 2006

Why are we paying through the nose for mobile data?

Posted in Articles at 9:57 pm by siddey

I agree absolutely with Glenn Latham’s recent contribution to LBSzone.com (08/02/06). As do I on many occasions, Glenn asks why should we be paying ridiculously high data charges? It seems counter-intuitive that a business need to achieve market saturation is being addressed by exhorbitant pricing on new 2.5/3G network data services. It would be hard to argue that we’re still in the “early adopter” phase of mobile telephony, in which companies will typically charge a premium. Either device manufacturers are in cahoots with Telcos (supporting more bells & whistles that consume serious data) or the two segments are seriously out of whack. Either way, consumers are being led down the garden path.

I’m sure the synergies are obvious to the corporate accountants, however, without any Telco explaining the payback calculations for their mobile data networks why should we believe that such high costs are justified? I do understand the need to achieve suitable returns on investment, however, I’m finding it difficult to stay excited about the 2006 range of Wi-Fi and GPS enabled mobile phone handsets when I imagine the ARPU our Australian Telcos are targeting to milk out of me.

My simplistic mental arithmetic tells me that a greater volume of users would potentially yield similar financial results and would eventuate as a result of more attractive market pricing. My key argument is that by significantly increasing your audience, you also create further opportunities for value-added services such as LBS. Many LBS concepts will require a reasonable concentration of users in a particular area to achieve their potential. In the current market, particularly in little old Australia, that is still a long way off.

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2 Comments »

  1. Hi Todd,

    I recently came across your site while trying to find out more about the state of the LBS market in Australia. I help to run a new Palo Alto-based start up that is developing LBS-enhanced social networking software for mobile.
    We’re looking at markets all over the world, and I was hoping that Telstra, Optus, et. al. would have built a decent infrastructure for application developers like us.

    Unfortunately it appears not, though I’d love to email/call/skype you sometime to pick your brain about how you see the Australian LBS market evolving. If you’re interested please send me a note.

    Best,

    Mark Jacobstein

  2. Todd said,

    Hi Mark,

    It all depends upon your definition of “decent” and “infrastructure” as to whether Australia represents an attractive market for you. If you interpret this as having the development platform and physical infrastructure available to 3rd party developers to deliver applications that the Telcos can push out to their users, then absolutely! The Telcos certainly have their feelers out looking for compelling content at the moment.

    My criticisms are generally more focused on the fact that the Telco environments are closed and with Telstra being the largest provider of digital map data in Australia, developers are at the mercy of their pricing and contractual obligations. If you go it alone and opt for PSMA data, you’re competing with their existing corporate customer base with the end result being 20%-30% per unit royalties plus annual licensing fees.

    When you factor in the relatively small size of the Australian market, it does require a reasonable level of saturation in order to make a return on investment. Unlike elsewhere in the US and Europe, we’re yet to see the first GPS enabled handsets roll out here. A large number of consumers are still running older 2/2.5G black & white handsets.

    There are a handful of application developers in the Australian market that have teamed up with the likes of Tesltra, Optus and “3” to deliver LBS, however, fundamentally the opportunities are restricted by the cost to the end consumer, which is driven by the high per-unit royalties associated with the map data. The end result is that these applications are either directed towards enteprise users (real estate etc.) or are subsidised by the government itself (public transport travel planners etc.)

    Unlike the United States, we do not have freely available digital map data. We are dependent upon two main sources, both of which are government controlled and heavily oriented towards corporate users.

    From what I can tell, your offering could easily be deployed within Australia, however, I’m not so sure the value proposition is strong enough to make consumers pay the per month royalties being asked for similar consumer LBS.

    I would be happy to converse some more. Feel free to drop me an email anytime if you would like more specific information.

    Regards,

    Todd.


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