The transition from voice-centric tariffs to ones built around the mobile Internet has been accompanied by a pricing shift in most developed markets. Where operators used to charge for a bundle of minutes and text messages, allowing subscribers to use data services more freely, they now do the opposite. In the UK, for instance, a smartphone user might pay £50 ($75) a month for a 1GB data allowance, plus unlimited usage of traditional phone services. Among other things, this has guarded against the cannibalization of traditional business caused by the take-up of Internet telephony and messaging applications.
This has clearly not been the case in Africa, where service providers now face some unique challenges as they plan for a data-services future. Because most African customers are on prepaid deals, any fall in usage hits average revenue per user (ARPU) unless prices per minute or text message are going up. Unfortunately, for operators, they are not, while the appeal of web services like Viber and WhatsApp is growing. (See Africa's Data Dilemma.)
So far, the adoption of Internet telephony services has not triggered an overall slump in minutes of use. In fact, minutes of use have continued to increase as prices have dropped. But users in a number of African markets have figured out that buying a data bundle and using Viber or WhatsApp is cheaper than making a normal phone call.
That usage of Internet telephony has not prompted a collapse in ARPU is down to several factors. For one thing, smartphones are still relatively expensive, putting them beyond the reach of the mass market. For another, high-quality data networks are still unavailable in many areas. Illiteracy and a lack of education about technology offerings are also barriers to the adoption of mobile data services.
But change is coming. Viber already claims to have about 55 million customers in Africa -- equaling about 8% of its global user base -- and it has not even engaged in any active marketing in the region. "Smartphones [priced] between $50 and $100 now available on the market, coupled with a growing middle class that can afford these competitive prices, will surely speed up the transition from feature phones to smartphones in the years to come," says Mark Hardy, Viber's chief marketing officer. "We then expect to benefit from this trend and further grow our user base in the African continent." (See Viber Open to Partnerships With African Telcos.)
As higher-speed networks start to penetrate new markets, and service awareness grows, operators will have to think carefully about their Internet services strategies and how they go about charging for data connectivity. Dutch operators that failed to adapt their own pricing when data services were taking off have had to compete more aggressively against web players, launching over-the-top services of their own. Developments in Africa could force operators there to chart a similar course. (See Dutch Telcos Take Lead on OTT Transformation.)
— Iain Morris, , Editor-in-Chief, Telco Transformation, and News Editor, Light Reading