Mobile pricing
With an increasingly complex array of services on offer, pricing has become a major challenge for mobile network operators. Just one example is the introduction and subsequent watering down of all-you-can-eat tariffs for mobile broadband services. For many years we have been writing about pricing strategies for mobile services, including both voice and data. Here we present a collection of our free blog posts on mobile service pricing.
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Vodafone Germany seeks to migrate DSL customers to LTE
Now that LTE deployment is increasing, significant differences are emerging in the marketing approaches being followed by mobile network operators. At one extreme, Vodafone Germany is targeting LTE at competing with fixed broadband services.
LTE provides mobile network operators with the ability to support significantly higher usage than possible with HSPA networks, by reducing the short-term threat of network congestion. This significant threat has been driving operators in countries where LTE has not yet been launched to constrain usage by substantially reducing data allowances for mobile broadband services. For example, O2 UK’s standard mobile broadband USB dongle HSPA service now has a monthly data allowance of only 1GB. Vodafone UK now offers 30-day plans for “very occasional” and “occasional” users with 250MB and 500MB monthly data allowances, respectively. Through the use of such tariffs, mobile operators have been quickly distancing themselves from the notion that their HSPA services can (or should) compete directly with fixed broadband services.
LTE potentially allows operators to support significantly higher levels of usage than possible with HSPA, particularly in the short term when LTE networks are under-utilised. Despite having more flexibility with LTE, many operators are clearly nervous about positioning LTE as a fixed replacement service, to avoid LTE network capacities being quickly used up. In the USA, Verizon Wireless is rapidly deploying LTE, and is planning to cover two-thirds of the US population by mid-2012, and cover its entire existing nationwide 3G footprint by the end of 2013. Currently, Verizon Wireless charges USD50.00 for its LTE mobile broadband service, with a monthly data allowance of 5GB, which is similar to competitor offerings that use HSPA+ technology. Verizon Wireless also offers a service with an increased monthly data allowance of 10GB for USD80.00 per month.
These allowances are clearly higher than those for HSPA services. Nevertheless, the pricing is higher, and the allowances lower, than would be required for a service to compete aggressively with fixed broadband services.
In contrast, Vodafone Germany is adopting a more ambitious strategy for LTE, and is clearly positioning LTE as an effective substitute for fixed broadband services. Vodafone is seeking to encourage four million of its DSL fixed broadband customers to migrate to LTE. In part, this is being driven by Vodafone’s desire to avoid paying Deutsche Telekom an estimated EUR500 million (USD693 million) per year as part of its provision of local loop unbundled services. Vodafone is already looking to enhance conventional broadcast TV services by delivering video-on-demand using LTE to enhance the appeal of LTE services yet further.
Vodafone offers a monthly data allowance of 30GB for EUR59.99 (USD83.28) per month, while a more modest allowance of 15 GB is available for EUR39.99 (USD55.56) per month. These allowances are three times those of Verizon Wireless. Offering download speeds of up to 50Mbps and upload speeds up to 10Mbps, Vodafone’s LTE service compares relatively favourably with DSL services in terms of performance and usage allowances.
In rural areas, LTE certainly has the opportunity to make inroads, particularly in countries where fixed broadband services are not well developed. Furthermore, the low population densities of rural areas may lessen the risk of network congestion as a result of high usage of LTE services. However, the challenge for LTE will be in urban areas, particularly once LTE penetration levels become significant. Mobile operators must be cautious with fixed-broadband-displacement strategies and we will watch Vodafone’s progress with great interest.
About the author:
Mark Heath is co-founder of telecom strategy and telecommunication consultancy company Unwired Insight. He provides regular in-depth analysis on LTE and 4G, and has co-authored over 40 research reports on the biggest issues in the telecom industry.
Early examples of LTE pricing in Europe relatively affordable
In his wireless blog, Alastair Brydon reviews early examples of LTE pricing, in Denmark, Germany and Sweden.
Now that a number of European LTE services have been launched, I’ve reviewed the early pricing models being adopted in three countries. The table below shows the current LTE pricing charged by Telia (Denmark), Telia (Sweden) and Vodafone (Germany).
The most expensive LTE tariffs are charged at similar level in all three countries – between EUR53.50 and EUR67.12. These services provide download speeds up to 50-80Mbps, with a 30GB monthly data allowance. While these prices are higher than equivalent so-called ‘superfast’ fibre-to-the-cabinet (FTTC) fixed broadband services, there is not a huge price premium.
These tariffs correspond to a minimum price per gigabyte that varies between EUR1.78 (in Denmark for a 30GB data allowance) and EUR2.67 (in Germany for a 15GB data allowance). The price per GB is generally lower than most HSPA mobile broadband services, where operators provide significantly lower monthly allowances in general. For example, in the UK, where mobile network operators are facing significant capacity challenges, O2 now offers just a single HSPA mobile broadband service, with a 1GB monthly allowance for £10.21, which corresponds to a price per GB of EUR11.49. This is around five times greater than the price per GB of these LTE services.
As with superfast fixed broadband services in Europe, mobile operators are pricing according to both the monthly data allowance and the speed of the service, with the highest speeds reserved for customers on the most expensive tariffs.
Prices are much more affordable for customers willing to accept lower levels of performance and a lower monthly data allowance, with services offering up to about 20Mbps download speed costing around EUR40 per month in all three countries.
Table of LTE Pricing in Denmark, Germany and Sweden
[Note that the price per GB applies only if the
customer consumes the entire monthly allowance.]
About the author:
Alastair Brydon is co-founder of telecom analysis and telecom consultancy company Unwired Insight. He provides regular in-depth analysis on LTE and 4G. He has written over 40 reports on the biggest issues in the wireless industry.
Wireless blog: Mobile broadband pricing will drive 3G traffic
Mobile data pricing for traffic-intensive services is becoming more affordable for consumers, with a proliferation of flat-rate tariffs for smartphones and flat-rate mobile broadband bundles, with generous monthly usage allocations (for example, 5GB or more).
Flat-rate pricing for smartphones is becoming increasingly prevalent, to give mobile users the freedom to access a broadening range of services with their smartphones (such as accessing catch-up TV services).
Consumers are increasingly adopting mobile broadband services instead of fixed broadband services. Flat-rate bundles now represent the most common form of mobile broadband pricing across Europe, with the average bundle being about 4GB (at end of 2008). The trend is for ever-increasing bundles of data, with monthly usage allowances above 10GB not uncommon. Some operators are resisting mobile broadband price decreases by increasing usage allowances, and this trend is set to continue.
There are significant differences in pricing of mobile broadband services between operators and countries, as shown in the table below, which shows examples of current mobile broadband pricing in Europe, where the equivalent price per gigabyte varies by more than a factor of 10.
New-entrant 3G operators, such as 3 in the UK and Play in Poland, have been more proactive with mobile broadband services than many incumbent 3G operators. They have greater capacity per customer and have a strong need to increase market share. For example, Play in Poland only had about 2 million customers in March 2009. In the UK, 3 has a customer base of about a quarter of the size of other UK operators. In March 2009, 3 UK had 5.38 million customers compared with 20.4 million customers for Telefónica O2. Furthermore, 3 has a 50% greater allocation of paired 3G spectrum than incumbent 3G operators Telefónica O2, Orange and T-Mobile. As shown in the table, the cheapest mobile broadband services had an equivalent price of less than USD2 per gigabyte in June 2009.
Mobile broadband service pricing for selected 3G operators, June 2009
