Music and video key ingredients to carriers’ ARPU growth strategy

Canada’s wireless carriers seem to have found a couple of key applications that will help them drive their average revenue per user (ARPU) upwards at a faster rate: music and video. All three of the country’s national operators are offering music and TV services and appear to be banking a significant part of their ARPU future on these services. The national players are investing considerable amounts of money in upgrading their networks to offer faster downloads of bandwidth-hungry applications such as music and video. Rogers Communications Inc. recently announced a network enhancement using high speed download packet access (HSDPA) that company executives say will double voice capacity and increase wireless data services capability on its network. Bell Mobility and Telus Mobility are also upgrading their networks to EvDO, which is now available in major markets in Canada. While allowing for significant increases in voice capacity, the faster networks perhaps more importantly position the operators to offer more rich-media services to subscribers. Rogers Wireless, which was the first of the national companies to offer music and video downloads to cell phones, already boasts of wireless data revenue significantly higher than its rivals. The company counts nearly 10% of overall wireless revenue from data services. Rob Bruce, president of Rogers’ wireless division, noted during a recent RBC Capital Markets investors conference that upgrading to HSDPA is one key ingredient to improve wireless data revenue performance. "I think it’s one of the necessary steps," he said. "Our focus and our belief that there’s a very strong future in video and music continues to be an area where we’re going to invest….We see our investment in HSDPA as the underpinning of the infrastructure that’s going to allow us to take it to the next level." The Rogers Wireless president also believes HSDPA lays the foundation for reaching wireless data revenue levels experienced in Europe and Asia. "We just crested 52% penetration, so we have a lot of inherent headroom for growth of subscribers and the commensurate revenue that goes with it. But beyond that…wireless data has huge upside when we look at the component parts," he said. Mobile Internet downloads have yet to reach their full potential, and delivering TV signals to wireless devices still has more opportunity for growth, he added. While Rogers is leading the way in wireless data ARPU, Bell Mobility and Telus Mobility are set to begin gaining ground. Bell Mobility broke into the music download market late last year following an agreement with Groovemobile, and Bell Mobility’s parent company Bell Canada recently purchased a majority interest in Canadian music download company Puretracks. Telus Corp., which also offers music downloads through Puretracks, has only recently entered the mobile music download game, but the company has set the stage for a compelling alternative. Its service features music from the four top music labels: EMI Music, SonyBMG, Universal Music Group and Warner Music Group. It’s unclear at this point what Bell Mobility and Telus Mobility are reporting in terms of wireless data revenue as both companies have been reluctant to break out data revenue from the sale of ringtones, TV downloads, wallpaper and messaging during financial results conference calls. For more information on Bell Mobility’s and Telus Mobility’s views on music downloads, refer to the March 20 issue of Report on Wireless sister publication Canadian NEW MEDIA. An upcoming issue of Report on Wireless will have more details on the importance of music and video to wireless data revenue increases.

Music and video key ingredients to carriers’ ARPU growth strategy

News | March 22, 2006

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