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.