The bill for packet

Is the shift to packet data worth all of the transitional headaches carriers face? That’s the question James Morehead, Portal Software (www.portal.com) director of wireless market development, asked an audience of wireless execs yesterday at Billing World 2001.

Many in the industry expect wireless data to boost revenues, and thereby save the industry from falling ARPU, increasing competition, rising churn rates and swelling 3G spectrum investments.

“And yet, it doesn’t matter which carrier I talk to, there are existing business infrastructure limitations,” Morehead said, listing prepaid voice capacity issues and postpaid voice capacity and flexibility issues among the legacy limitations.

However, the news from abroad bodes well for North American carriers making the transition from circuit- to packet-switch data. Morehead said the much-heralded NTT DoCoMo’s (www.nttdocomo.com) packet-based services generate 10 times the revenues per kilobyte compared to circuit-switch data equivalent to that of Sprint, Orange and Bell Mobility.

“But this is not limited to Japan,” Morehead announced. “There are lots of other examples where packet data or packet-like services enable this higher margin effect.” The examples Morehead cited include Telenor (www.telenor.com) in Norway, which reaps a margin of approximately 95% on its short message service. Other SMS providers report impressive percentages as well.

Another example, Smart Communications in the Phillipines, generates more SMS traffic in one day than Telenor has in a week, Morehead said, adding that Telenor produces more than 20 million SMS messages in a week. According to Morehead, Smart Communications has run promotions just to inform its customers that they also can use wireless phones to make voice calls.

But can North American carriers turn data into profits? Yes, Morehead said, referencing the RIM Blackberry service, which charges about $40 a month for the equivalent of approximately 10-15 voice minutes a month.

However, the key to profits is developing billing and pricing models that customers understand and accept, Morehead said, and implementing the business infrastructure that will support those models. New choices include billing for data usage, billing for each transaction and sharing revenue with content providers. Each of these choices requires billing system changes.

Explaining that 2.5G carries less network complexities than 3G, Morehead recommended that carriers begin the transition to next-generation billing and pricing models now, rather than waiting and having to face the overwhelming combination of time-consuming network and billing transitions.