Average revenue per user or account is generally falling everywhere in the consumer segment of the connectivity business, including the key mobility business. Analysts at PricewaterhouseCoopers believe declining ARPU also is linked to commoditization of mobile service, though price declines might also be related to lack of competition.
To be sure, the notion that commoditization and differentiation are polar opposites, with higher profit margins for the latter, lower profit margins for the former, also might be confused with the degree of competition in each market, user preferences in each market or service provider strategies.
“Most markets in the region are on the edge of commoditization,” says PwC. “Only Indonesia, still dominated by a single player, remains considerably differentiated.” Analytically, it is difficult to separate commoditization from monopoly power, even if, conceptually, the concepts are distinct.
PwC consultants also have argued that two fundamental paths forward exist for connecitivyt providers: take an applications or networking role. As a rule, the former role is arguably best suited for leading tier-one service providers, the latter role perhaps best suited for the second or third market share holder in each market.
In large part, that is a function of the capital investments the shift to an app provider role entails. One might also question how successful most suppliers have been in their “move up the stack” efforts.
Indeed, with the shift of revenue growth to various connectivity products, ranging from software-defined wide area networks for enterprise customers to internet access for consumers, the revenue driver now is the “dumb pipe” internet access function.
Competition has not helped, in that regard, as price pressure has developed.
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