$1 Per App the Coming Telco Pricing Model?

By Gary Kim October 07, 2013

Most consumers seem to agree that the right price for buying one song is 99 cents. Shockingly, some now believe, especially when machine-to-machine services are widespread, that the accepted price for a single M2M application likewise will be the same: about $1, according to Vish Nandlall, Ericsson CTO for North America.

Whether that will mostly wind up being pay per use or pay on a recurring basis remains to be seen, and both models likely will resonate for different users and apps, and likely for the obvious reasons. People and businesses might resist paying a recurring fee for a service or feature they might need only once, a few times, or episodically.

On the other hand, people and businesses might willingly pay that amount for services and features they expect to use all the time.

To be sure, $1 per service also suggests the challenges of migrating revenues from “bulk” services such as monthly-billed video, voice access and Internet access to a more application-based and differentiated focus on discrete apps and services.

For starters, service providers will have to figure out how to effectively and simply market all sorts of services. For providers historically focused on “simplicity,” that will be a challenge.

Then there is the issue of replacing whole access accounts (monthly average revenue per user of $50) with an equivalent number of $1 apps and services. If you are thinking that is unlikely, you are probably correct.

Few consumers are likely to drop a fixed voice line and then start spending $50 a month on 50 new Internet-based or mobile-based apps.

That suggests the upside will occur on the business-to-business, machine-to-machine and Internet of Things front, where a service provider sells an app to an enterprise that in turn integrates the app into its own customer base. Sensor apps are likely to be at the forefront, in that regard.

On a cost per sale basis, that is about the only way a big new business based on $1 an app makes financial sense for a mobile or fixed network communications service provider.

On top of that, service providers are faced with the threat of declining retail prices for major legacy services, customer demand shifts and investment in next generation networks, at the same time they face the challenge of adapting to a $1 per app business environment.

Edited by Alisen Downey

Contributing Editor

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