Comment of the Week

The comment of the week this week comes from Njar, in response to Russell’s post on the trouble operators are having shifting 3G, even though it’s passed 50 million subs. Njar points out the importance of third-party developers in creating interest in it:

I’d agree that it’s certainly a very interesting time for the mobile developer. That said the finance that comes will still typically be deferent to well publicised and hyped products/services. I cite the Bango floatation.

I’m constantly amazed at how people are surprised at the fact Three’s ARPU is disproportionately higher than the other carriers. Three made a transition from a content house, to a network operator and used pricing as the incentive to buy a customer base. What they didn’t do though is give this connectivity away with no strings attached. A barrier to entry still existed; Yes, you’d get cheap calls, but you would still have to take out a contract (pass credit checks etc), or take on their PAYG offering, which was never a fully fledged PAYG model since it required a minimum spend requirement anyway. Three’s percentage of post pay customers (vs. prepay) is also still markedly higher than any other carrier.

What Three now have to do is continue to innovate in terms of content/services, and continue to grow 3rd party service provision. The latter of which, despite an almost continual barrage of ‘closed-wall’ comments on the web, they are doing very encouragingly at. The walled garden approach has not recently been a ‘let’s preserve our exclusivity’ issue, and certainly Three is now opening up to a much wider array of 3rd party content, and even apps.

> The real problem with 3G is that the operators haven’t worked out why we should buy a 3G phone – what exactly are the benefits and how will my user experience be improved over GPRS? This is partly because no one has developed the applications that need 3G speeds to justify themselves.

I can almost see the words ‘killer app’ about to creep into this sentence somewhere. Three’s ARPU is higher than the other carriers in the UK. I’ve noted some logical thoughts as to why this is above, but additionally one has to take into account how much better Three’s portal is to a non 3G carriers offering; The 400K unique users per day they receive to their portal is testament to this. The point is that as 3G handsets become smaller/faster/better and the consumer starts to expect a more converged, engaged, and media rich capable device in their pocket, the trend will be a migration towards 3G handsets. This is going to happen anyway – in spite of any particularly groovy 3rd party apps.

Take for example MMS capable handsets; We all know that the MMS peer to peer volumes have not materialised, however if you try and buy a handset now that is not camera enabled, you will definitely have your work cut out. 3G video capable handsets WILL become the de facto highstreet purchase handset; in
spite of whatever funky or otherwise apps and services ‘we’ all come up with, the crux is that the carriers need to claw back license expenditure, and they will roll out 3G handsets on mass.

For me, the real interest comes from the fact that for just about the first time carriers actually need decent 3rd party apps, and developed solutions/services, far more than they have ever done before. The background thoughts to his comment are; If there was never another SMS 3rd party service sold, would it be that hard hitting to the majority of carriers – no it would not be, since their peer to peer traffic blasts any third party activity out of the water. True MMS applications are somewhat redundant as a 3rd party offering (I’ll write you an epic on this, but not now). LBS, well don’t get me started! This brings us to shiny 3G handsets, and 3G capabilities. Much like SMS, lots of 3rd party service potential exists, but unlike SMS, there is literally NO carrier peer to peer service application currently in use. Take video calling, has anyone ever actually seen anyone making a video call to someone else? Now think why Three are so keen to promote video services as much as possible (See the Three UK portal, and ‘The Lab’). As I’ve inferred above, 3rd party applications alone will not be sufficient for a carrier to push 3G off the back of, but it does present an opportunity to drive churn, and also presents an opportunity for an app/service developer to be in the right place at the right time to capitalise on this churn and get their products adopted.

Thanks Njar for your consistent contributions!

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