NTT Docomo Chases "Smart ARPU"

No matter how much the term of art is criticized, "dumb pipe" is never far from the surface in the mobile or fixed network business. NTT Docomo, in fact, now uses the term "smart ARPU (average revenue per user)" to describe some of its new value-added services.

The very term implies that there is "dumb ARPU," namely vanilla mobile broadband, offering best effort only access. Nor is there complete agreement on the issue of whether differentiated end user quality of service is a potential source of such smart ARPU.

In fact, said Minoru Etoh, NTT Docomo managing director, offering best effort only access is operationally much simpler than offering tiers of service based on quality metrics. Many others of course believe it will be important to offer differentiated service, where it is possible.

Still, the problem with all the new services mobile operators are experimenting with is that there is still not so much agreement about what will be wind up being a “big” revenue stream, and what might not. Nor is there complete agreement on where the biggest opportunities might lie.

That uncertainty was much in view at a session on the mobile business at the Pacific Telecommunications Council where Yijing Brentano, Sprint VP, expressed optimism about prospects for mobile advertising, as did David Schropfer, The Luciano Group partner.

On the other hand, Minoru Etoh, managing director with NTT Docomo, and a venture capitalist in the audience, disagreed. “I’ve seen hundreds of business plans based on advertising,” the VC said. But Schropfer argued that the type of advertising makes a difference. Traditional formats can change with mobile.

“You can change behavior if you offer a coupon to me while I am in the store,” Schropfer said.

There was less disagreement with the notion that machine-to-machine services would be a significant opportunity, but even there the magnitude of the opportunity is uncertain.

M2M will be important, but only as a business customer service, with mobile service providers selling to automobile manufacturers, said Etoh and Brentano. And Schropfer even classified much of mobile commerce as an M2M opportunity. “M2M is the crux of where mobile commerce is going,” said Schropfer.

But Etoh was not convinced about the timing, and was uncertain revenue or adoption would be significant, any time soon.

Etoh said Docomo now refers to new value added services including music and video on demand as “smart ARPU (average revenue per user),” which now accounts for about 10 percent of NTT Docomo revenue.

There was much more agreement that new revenue sources are essential, though. in large part because there already is only so much revenue service providers can earn from end users buying mobile broadband, said Etoh.

Etoh also warned that Wi-Fi offload might not provide as much benefit for capacity relief in dense urban areas as many now expect.

Despite the rage for mobile offload using Wi-Fi, Docomo has found that Wi-Fi offload doesn’t work in very dense areas, with smallish macrocells, because there is too much interference between the Wi-Fi sites.