November 2nd, 2006
$15 mobile phones? It's all about "ARPU"
From Silicon.com, our sister site in the UK, Gemma Simpson reports:
Mobile phones costing less than $15 will be available in developing countries by 2008, Motorola Chairman David Brown has predicted. If handsets can be delivered that cheaply, it could lead to another 100 million people a year getting their first phones, he said….
….Brown pointed out a study by the London School of Economics that "found a 10 percent increase in mobile penetration creates a 0.6 percent increase in gross domestic product."
The quote makes it sound as though lower the prices of mobile handsets is a form of altruism. The truth is, it's all about ARPU or average revenue per unit. My wife uses a cell phone that we were essentially paid to take (the combination of discounts turned into a net positive cash flow for us). So $15? Here in the US, you can get paid to take a cell phone.
When you think about the average revenue per unit that the mobile carriers are getting by virtue of the their basic and premium services that you're subscribing to, it makes perfect sense to give cell phones (or mobile handsets) away. It puts more of the U in ARPU into the market and the average revenue simply follows.
Perhaps more interesting is the arms race that's getting underway right now to control most of the "R" in ARPU. Cingular's recent deal (NPR interviewed me about it) to wirelessly deliver music to its customers handsets is very much about the arms race now that the playing field (with Apple on one side and Microsoft with its Zune) on the other is taking shape. The convergence of entertainment, telecommunications, software, and data services is all happening at the mobile device and the various stakeholders in each of those ecosystems will stop at nothing make sure they get the "R" instead of someone like Apple or Microsoft.
The games are underway.
