March 20, 2006

Extra Mobile Features May Not Attract U.S. Consumers

NEW YORK - Telecommunications executives are banking on big revenue increases during the next few years from new mobile phone services, but getting customers to pay more may not be so easy, according to a report released on Monday.

More than half of global telecoms executives said they see revenue increases coming from services such as music and video downloads, but more than a third of North American consumers said they would not pay a premium for them, according to the report by audit, tax and advisory firm KPMG LLP.

"They feel they're paying enough today," said Carl Geppert of KPMG's Americas Communications and Media Practice, in an interview.

Further underscoring that point was that 20 percent of mobile device users said they would pay no more than 10 percent above their current bill.

About 44 percent of telecoms executives, meanwhile, expect revenue growth of at least 15 percent between now and 2007, spurred primarily by new offerings, new customers and more spending by existing customers.

"We just kind of assumed all along that this is something consumers would want and demand and pay for," Geppert said.

Mobile device customers are using their phones and other handhelds for an ever-increasing list of services beyond just making a phone call, including e-mail, Internet access, photographs and video.

Internet service often requires an extra fee on top of normal monthly subscription plans, however, as does video delivery.

Cingular Wireless, a joint venture of AT&T Inc. and BellSouth Corp., for example, offers a MEdia Net Unlimited video package for $19.99 more a month, with HBO programing available for $4.99 a month and the HBO Family Mobile offering at $2.99 a month.

Verizon Wireless, owned by Verizon Communications Inc. and Vodaphone Group Plc, charges $15 a month for its VCast service, as well as premium prices for some music, video and games, but that has not stopped increasing numbers of customers from signing up, said spokesman Tom Pica.

In the 2005 fourth quarter, the company made $731 million from data services, Pica said. About 23 million Verizon Wireless customers, or 46 percent of the total, use services like mobile broadband and VCast, he said.

In a statement accompanying the report, Geppert said telecommunications companies and cable providers should develop a new business model for mobile device offerings because "attempting to exploit converged services purely to squeeze more cash from consumers on a traditional subscription model will not work."

The report, which was released at the start of the Telecom-Next conference in Las Vegas, included results of surveys of 48 telecommunications executives and more than 3,500 global mobile phone customers.

Telecom-Next will feature more than a dozen executives from some of the world's top telecoms, cable and media companies, including Verizon Communications, Walt Disney Co., Cisco Systems Inc., AT&T and Time Warner Cable.