Broadband ARPUs keep shrinking despite revenue growth – why?

ARPUs revenue
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ITEM: The latest research from Omdia shows that telecoms revenue will keep growing over the next five years … but ARPUs won’t.

New figures from Omdia forecast that total worldwide telecoms revenue from mobile and fixed broadband services will grow 14% between 2022 and 2027 to reach €1.2 trillion ($11.6 trillion).

However, over the same period, monthly ARPU combined across both mobile and fixed broadband will drop 4.2% from €7.48 this year to €7.16 in 2027. (Notably, ARPUs were €7.65 in 2021, so the decline is already on progress.)

ARPUs revenue

5G won’t boost ARPUs

On the mobile side, the ARPU drop will mainly be the product of 5G not delivering enough value. To be sure, plenty of people will switch to 5G – Omdia projects 5G to account for 5.9 billion subscriptions in 2027, equivalent to a population penetration of almost 71%.

But two years into the era of 5G service launches, it’s now now evident that customers simply aren’t willing to pay more for 5G, says Omdia. Consequently, 5G subscriber growth won’t be enough to offset ARPU declines.

“Unlimited data and video streaming services bundled exclusively on 5G contracts have had some success, but this only gives the industry the illusion of a 5G ARPU uplift,” the report says.

FTTH in demand, but what then?

Meanwhile, in the fixed broadband space, there’s a different dynamic in play.

The transition to fiber has had a net positive impact in most cases – partly because fiber offers considerably better quality than xDSL, but also because the COVID pandemic highlighted the value of having better home broadband QoS. Omdia says consumer residential FTTH subscriptions will exceed 1 billion subscriptions by 2027, equivalent to a household penetration of 41.9%. 

On the other hand, Omdia says, markets with high fiber penetration are seeing a significant drop in ARPU such as France, Spain and China due to intensifying competition. Also, there isn’t a clear monetisation path for fiber customers once they transitioned.

It’s about experience, not connectivity

“People don’t buy technology; they buy fun exciting new experiences. There is a misconception that operators should be reselling the technology they buy directly to customers, and it doesn’t work, said Omdia Research Director Ronan de Renesse.

What operators need to understand, he explained, is that the network is “the bedrock on which innovation and creativity can flourish like 4G and mobile apps”.

This means that future ARPUs will no longer be based on monthly subscription fees, but

“It is not just up to operators to solve the ARPU growth challenge, but rather the rest of the digital services ecosystem,” he said.

Or maybe they could drop the ARPU metric altogether. Industry experts and pundits have been saying for years that ARPU is not a great way to measure broadband success. And this is expected to be even more true in the era of the 5G digital cloud economy where most “users” aren’t human.

Perhaps it’s finally time for the industry to seriously consider retiring the ARPU metric in favor of something more relevant to the 21st Century.

Related article: Metrics in telecoms – are they really not fit for purpose anymore?

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