Mind Share: Right Pricing LTE ... and Mobile Broadband in general (A Technologist's observations)
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

Mind Share: Right Pricing LTE ... and Mobile Broadband in general (A Technologist's observations)

on

  • 8,679 views

I facilitated a discussion on "Right pricing LTE … . " @ Informa's Mind Share sessions at LTE World Summit, 22th May 2012, Barcelona, Spain. I should emphasize that this presentation really is a ...

I facilitated a discussion on "Right pricing LTE … . " @ Informa's Mind Share sessions at LTE World Summit, 22th May 2012, Barcelona, Spain. I should emphasize that this presentation really is a Technologist's view on mobile data pricing and not that of a Pricing Professional (whatever that might mean) responsible for pricing today's (maybe even tomorrows) mobile data products.

Statistics

Views

Total Views
8,679
Views on SlideShare
2,724
Embed Views
5,955

Actions

Likes
3
Downloads
245
Comments
0

47 Embeds 5,955

http://3g4g.blogspot.com 1990
http://3g4g.blogspot.co.uk 736
http://3g4g.blogspot.in 637
http://3g4g.blogspot.tw 337
http://3g4g.blogspot.de 294
http://blog.3g4g.co.uk 217
http://3g4g.blogspot.kr 202
http://3g4g.blogspot.jp 201
http://3g4g.blogspot.fr 192
http://3g4g.blogspot.fi 132
http://3g4g.blogspot.pt 110
http://3g4g.blogspot.it 102
http://3g4g.blogspot.ca 92
http://3g4g.blogspot.se 70
http://3g4g.blogspot.com.es 66
http://3g4g.blogspot.co.il 64
http://3g4g.blogspot.sg 59
http://3g4g.blogspot.hk 52
http://3g4g.blogspot.com.br 47
http://3g4g.blogspot.be 45
http://feeds.feedburner.com 34
http://3g4g.blogspot.gr 34
http://3g4g.blogspot.com.au 33
http://3g4g.blogspot.ch 32
http://3g4g.blogspot.nl 27
http://www.3g4g.blogspot.com 23
http://www.3g4g.blogspot.in 20
http://3g4g.blogspot.hu 17
http://3g4g.blogspot.ro 16
http://3g4g.blogspot.co.nz 16
https://twitter.com 9
http://3g4g.blogspot.ie 9
http://3g4g.blogspot.mx 8
http://www.linkedin.com 6
http://3g4g.blogspot.sk 4
http://3g4g.blogspot.cz 4
http://3g4g.blogspot.co.at 3
http://3g4g.blogspot.no 3
http://3g4g.blogspot.ru 2
http://quidecco.com 2
http://www.3g4g.blogspot.co.uk 2
http://3g4g.blogspot.dk 1
https://abs.twimg.com 1
http://www.hanrss.com 1
http://techno-sphere.blogspot.com 1
https://www.linkedin.com 1
http://3g4g.blogspot.com.ar 1
More...

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Mind Share: Right Pricing LTE ... and Mobile Broadband in general (A Technologist's observations) Presentation Transcript

  • 1. Right pricing LTE … and mobile broadband in general. (a Technologist’ Observations). Mind Share @ Informa’s LTE World Summit, 22th May 2012, Barcelona, Spain. .Dr. Kim Kyllesbech Larsen,Technology, Deutsche Telekom AG.
  • 2. Some key questions to be passionate about. Do operators capture enough value of mobile broadband? Do we understand data profitability vis-à-vis demand & cost? How to change the pricing game from quantity to quality ... Is it possible? Last but not least why should a customer pay extra for WiFi?
  • 3. Would you give up internet for a Million Dollars?For the rest of your Life! A million USD correspond to ca. $20,000+ per year for the rest of your life. Being inter-connected has a lot of perceived value! Source: Full clip can be found at YouTube http://www.youtube.com/watch?v=0FB0EhPM_M4. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 3
  • 4. Would you give up internet for a year?…and for what price? Cash today to give up internet for a year. Never 28% 1 Million Euro 39% €500k 11% €100k 11% €20k 11% 0% 10% 20% 30% 40% 50% The unthinkable? … “giving up the internet” (even for a year!). Source: What amount of cash today would make you give up internet access for a year starting from tomorrow? http://linkd.in/J7fabN Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 4
  • 5. Value of internet1…Worth massive lifestyle changes!What would you give up a year for internet access. 80 80 75 74 68 48 30 27 22 1 Source: The Boston Consulting Group Report on “The Internet Economy in the G-20”, March 2012. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 5
  • 6. Value of internet1 …the customer perspective.Need, Love and then taken for granted? Perceived Value of Internet Perceived Value of Internet (relative to GDP per Capita) (relative to GDP per Capita) 40% 40% Internet penetration < 50% Internet penetration > 50% 30% 30% Taken for granted Japen & South-Korea 20% 20% 10% 10% ! 0% 0% 0% 2% 4% 6% 0% 25% 50% 75% 100% Price of Internet Internet Penetration (relative to GDP per Capita) The perceived value of internet drops as internet becomes a commodity 1 Source: Analysis based on The Boston Consulting Group Report on “The Internet Economy in the G-20”, March 2012. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 6
  • 7. The “arms race” of price reductions.Current mobile data pricing is Lose – Lose Game. Margin Change in market share to maintain margin 50% 30% MNO A 40% 20% MNO C 10% 30% Decision 0% 20% interactivity -10% MNO C 10% MNO B -20% MNO A 0% -30% 0% 20% 40% 60% 80% 100% -40% -20% 0% 20% 40% Subscriber market share Change in price per customer  MNO C has most to gain (and in principle  MNO C needs to add substantial less market loose) from gaining market share. share in comparison to MNO A (& B) to  MNO A’s margin is less sensitive to swing in mitigate (keep margin) price reductions. market share. Its strategy should be different  This leaves MNO C to gain proportionally from MNO C. more market share to not only keep margin  Price changes will have impact on (while reducing price) but also gain margin profitability as well as market share by over-compensating on market share. dynamics between operators. Illustration Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 7
  • 8. The Game of Price…Strategic lock-down on downward pricing direction. Assume MNO A Raise Price MNO A MNO C should Lower Price Ranked Value of 55% market share Data price Strategy Price Price Assume MNO A Lower Price Up Down MNO C should Lower Price (2,3) Assume MNO C Raise Price Price Regulatory (0,2) MNO A should keep or Raise Price, other Up no-no MNO C wise MNO A should Lower Price.. 15% market share A realistic strategic outcome (in this very Price simplified example1) would be to lower price. (3,0) (1,1) Down It will force both market players to reduce their prices (i.e., tit-for-tat). Quantitative pricing drives continuous price decline. Illustration 1 This is only serving as illustration. In a 3 player market one would (obviously) have to consider all players and include the option of not changing price in the market dynamics. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 8
  • 9. Price setting in mobile.Today’s data price philosophies are volume centric. Price ( Volume ( Quality, Product, Time ) , Cost, Competition1, Regulation) Volume Time e.g., MTR, roaming tariffs, … FUP based feedback Quality2 Product COST mainly driven by Quality & Product Illustration 1 Most price levels are not designed in isolation from competition, In fact often competition is the main “inspiration” for pricing. 2 Quality could be speed but is not exclusively so. nd Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22 2012, Barcelona, Spain. 9
  • 10. Dimensions of pricingEnough to choose from … why then only volume? Mobile Data pricing policies Most WiFi pricing policies focus on Volume focus on Time or bundled with Volume Time mobile data plans + Fixed Data pricing policies focus on Speed  Mobile bundled sometimes combined products mainly with Volume limits. Quality Product Voice, SMS, and Data.  Fixed bundles with Media, Broadband Data, Voice & mobile access (if available). Illustration Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 10
  • 11. Mobile data pricing almost exclusively volume driven.It’s easy! but not a very meaningful driver! Volume Time + Speed Product Illustration 1 …. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 11
  • 12. Fundamentals.How to price? Price Ceiling Price Price Strategic price Range Price Floor Price leakage Maximize Revenues Minimum Profit Revenues = Price × Missing Quantity volumes Cost Quantity Subject to Cost Illustration 1 …. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 12
  • 13. Fundamentals.How to price or not to price. Benefits internet1 ? Value of internet1 > 10× Benefits = Value / Price Value Ca. €300+ pm Benefits to Ca. 8% of GDPpc Customer Price Value Ceiling Ceded Total Cost Price Value = Price Value Added f(Benefits) Floor Extracted Price of internet1 Cost of internet2 Profit of internet > €18 pm <€30 pm < €12 pm Cost Profit @ 40% margin. Price – Cost = Profit Illustration Source: K.E. Homa’s notes on Pricing Fundamentals, 1 BCG Report Connected World, perceived customer value. Analysis is fixed focus. 2 Opex only not considering Capex. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 13
  • 14. Right pricing LTE … Changing the game!New philosophies … new dimensions. Differentiate on Quality. Speed. Latency. Coverage. Quality1 Volume Time. Customer care & support, etc.. Always-Best-Connected Leverage Fixed and Mobile. Reduce Small Cell deployments. WiFi / Femto-cell off-load, etc.. Product value add-on VoIP. Product Time Msg & notifications. Internet Access. Social media. Mobile media player. Cost of Handset, etc.. Providing data Illustration 1 Quality could be speed but is not exclusively so. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 14
  • 15. A typical data traffic day in Europe.Almost all Mobile data traffic occurs at Home & Work. Illustration data voice 00:00 6:00 8:00 10:00 12:00 17:00 22:00 Small Cells @Home On the @Work On the @Home (1 – 2 Cells) Go (2 – 4 Cells) Go (2 – 3 Cells) Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 15
  • 16. Surprisingly? Across countries there is a high degreepricing uniformity on a per MB level. All countries follow a near perfect power-law behavior US$-cent 1,000.00 per MB P(B) = C × B-d P is price per Mega Byte, C is a constant, B is Giga Bytes for a given price plan, d is the a constant exponent. Note If 100.00 pricing would be linear d would be 0 for = 0 (i.e., Price is directly related to Volume). For >> B (i.e., customers pay very high right-to use fee unrelated to usage), d would be approaching 1. 10.00 DE 1.00 USA NL BE PL 0.10 HU FR IT Giga Byte 0.01 per 0.01 0.1 1 10 100 price plan Source: Analysis based on Teligen, Strategy Analytics pricing data. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 16
  • 17. Big variation in what consumers pay for mobile data… pricing seems to have little to do with cost or value. US$ per 100 P(B) = + B, It would expected that would be close to zero (ideally zero), i.e., zero volume is price plan priced at zero dollars. Data strongly indicates that data pricing is NOT linear in nature. 80 DE 60 USA NL BE PL 40 HU FR 20 Giga Byte 0 per 0 10 20 30 40 50 60 price plan Source: Analysis based on Teligen Strategy Analytics pricing data. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 17
  • 18. … not all customers eat what they pay for! MByte 1,200 Policy Limit LIMIT & AV USAGE Average Used 1,000 800 Unlimited average 600 usage is 60% +60% higher than 1GB capped usage (in 400 this example). 31% 200 46% 32% 58% 0 250MB 500MB 800MB 1GB UNLIM Smartphone volume limit per price plan Illustration Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 18
  • 19. Relative cost and pricing … where did my margin go? Technology Cost of mobile data 2.00 In €-cent per MB 1.50 Todays typical Mobile data prices 1.00 ca. 0.5 – 10 €-cent per MB 0.50 Min 0.10±0.05 €-cent per MB Long-term incremental cost: 0.00 €25 per incremental MB Network BH Mbps Illustration Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 19
  • 20. What you really should care about! … Absolute cost! Relative 2014 – 2018 (pending on country and MNO) Mobile Data 8 TCO Limited resources 6 A Gap too far to bridge? 4 “Unlimited” resources 2 Todays Total Technology Cost Level 0 Network BH Mbps (or equivalent time scale) Illustration Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 20
  • 21. The land of plenty ..a fairy tale?What really matters is the absolute NOT the relative. Data volume vs Revenue – so what? Unlimited capacity provided … hmm! CAGR +40% (*) Data Revenues / MB CAGR +9% (**) Data Revenues Margin% Data Volume Margin / MB Time Time (*) LTE data growth is 89%. (**) at end point Msg & CS-Voice amounts to less than 10%. Source: based on real market projections (from Pyramid Research) applying technology diffusion models to mobile data growth. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 21
  • 22. Economical disconnect with most pricing strategies.Volume is not an economical driver and thus problematic for pricing. Same volumetric demand can cause vastly different network Throughput cost and invest levels. TRAFFIC PROFILE 4 HOURS 9 HOURS 2 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Hour of Day Traffic profile 2 To keep same user same volume as 1 experience in busy Higher CAPEX level but 40% higher hour more network and network OPEX busy hour capacity needed. required. throughput. 1 …. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 22
  • 23. Not all services are born equal.Different use cases will have a very different Network and thus Cost! Same volumetric demand canVolume in MB cause vastly different network @Home surfing 100.0% cost and invest levels. Peer-2-peer generating 58.2% 53.2% volume but having little 42.4% throughput impact 19.1% BH Throughput in Mbps Mobile TV 8.1% 6.6% high BW 0.4% 0.2% 0.2% impact but 2.6% 2.1% 1.8% 1.2% 1.1% 0.5% 0.5% 0.5% 0.5% relative little volume. ity es Em e s e ng it y ty ng er Em ad e IM ty ng ne l g h l ul ul ic ic in us ivi Pe tiv ivi t iv on on oi r fi lo M lP rfi hi rv lP rv m ct lP ct ec tg Su ac wn ec Su Se gt gt Se ai co 2 ne ai ne ou nn in in ai M nn do er in e e m on c on R R Em m Co S 2 Pe m Co si iu S ic al al C M Ho ll C Ba Ho n s. M em us hi Re Re s. ed M ed ll Bu M Fu Fu Bu ac At M TV At Pr in in M nf nf s. s. TV ile Co Co Bu Bu ob ile s. M ob Bu M Illustration Source: 2006 study, serves as an illustration on service impact on Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 23
  • 24. Every new generation of smartphone increases dataload above & beyond the old ... and thus Cost! Data volume per Smartphone Improvements in intrinsic smartphone speed Dramatically increases the data usage ×4 @ UL=5.8Mbps Data volume @ UL=384kbps per Smartphone GPRS ×6 iPhone 0 10 20 30 ×5 Max. DL Speed in Mbps ×2.7 Improved air-interface speed likewise increases data usage 400 600 800 1000 1200 1400 1600 Smartphone CPU clock frequency Source: Network data. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 24
  • 25. The end-to-profit and excess spectral capacity …”The writing on the wall” … why mobile data philosophy should be changing Spectral efficiency cannot make up for Mounting cash pressure resulting in increased mobile data demand1 End-to-profit exposure for MNOs. The real “scissor effect”: CAGR 33% 2014 - 2016 CAGR 26% Mounting cash pressure Business Spectral supply model breakdown Spectral demand Time Western Europe assessment Illustration 1 Analysis based on realWireless report for Ofcom,: 4G Capacity Gains, Final Report, January 2011. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 25
  • 26. So speed differentiated pricing is the solution?QoS or Speed guaranty in a radio environment is very difficult1! Price X for Price Y for Price Y for up-to 3.6Mbps up-to 7.2Mbps up-to 14.4Mbps & Speed differentiated pricing might not be the magic bullet as <Speed> higher than 7.2Mbps Price use cases might not be consistent Stdev less than 14.4 - <Speed> with sustainable high speed 2 Range <Speed> between 3.6 – 7.2 Mbps Price Minimum Stdev less than 7.2 - <Speed> Range Profit Price Minimum Range <Speed> < 3.6 Minimum Profit Stdev less than Profit 3.6 - <Speed> Cost Cost Cost Illustration 1 Some may even argue that it is impossible to provide a guarantied cellular service. Though one may not need to be exactly right but only statistically right to the level where the customer perceive his service to be in line with the price paid. 2 A customer may have paid for high speed price plan but dominantly using lower bandwidth applications. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 26
  • 27. Mobile data pricing overview.FUP as a topline boost remedy may have its merits. Policies at overage usage Unhappy customer speed reduction Sample of 45% Topline 1,869 service stops 53% price plans potential overage charge Very unhappy Illustration 1% customer Source: Analysis based on Teligen Strategy Analytics pricing data; December 2011. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 27
  • 28. FUP implementation.There are fairly minor network benefits to be gained by FUP. Daily Tail Volume Profile Daily Active Customer Profile >2 GB usage > 2 GB usage Max. 0.25% of total 55% of total traffic Active Base -15% Drop Max -0.05% Drop Pre-FUP Max -10% Drop Pre-FUP Post-FUP Post-FUP 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 As a top-line & educational remedy FUP might be more meaningful Illustration Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 28
  • 29. FUP or FAD?Volume-driven FUP (of today) has little structural impact. Time to 80% 98% < 0.5% FUP Addressable FUP limit < 2% >2,500 Years Example: >250 Years 2,000 FUP relevant users >25 Years 20,000 Cells in Network >2.5 Year 50% of FUP in 20% of Cells 1,000 FUP served by 4,000 Cells 100 Days 30 Days = Reset 10 Days BH mean value of users per cell Days to reach 500MB is 185 (approx. log-norm distributed) 1 Day Days to reach 2GB in the Top 20% Cells. 2.5 Hour 1 FUP relevant customer would compete for resources with at least 185 others in the BH (in max ¼ of the Top-20% cells).Illustration Daily usage per active user Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 29
  • 30. Mobile data pricing sample as of April 2012.Non-linear data pricing at play US$-cent $c 18 VRZ 3G VRZ LTE per MB $c 16 ATT 3G ATT LTE TMUS 3G (market as 4G) $c 14 CSL HK LTE VF LTE Zuhause (1) VF LTE MI (1) $c 12 TMUK Sticks TMUK smartphones $c 10 TS SE 3G & LTE (1) Orange FR (2) Bouygues FR $c 8 $c 6 $c 4 $c 2 $c 0 0 5 10 15 20 25 30 35 Volume limit in GB per price policy Source: Tariff web pages of respective companies dated as of April 2012. (1) Speed dependent pricing with Volume limits, (2) De-coupled from TV bundles (i.e., 0, 30 and 70 TV channels). Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 30
  • 31. The higher the usage the lower the cost per usage.On a log-log scale pricing do become clearer. US$-cent per MB $c 10.00 $c 1.00 VRZ 3G VRZ LTE ATT 3G ATT LTE TMUS 3G (market as 4G) CSL HK LTE VF LTE Zuhause (1) $c 0.10 VF LTE MI (1) TMUK Sticks TMUK smartphones TS SE 3G & LTE (1) Orange FR (2) Bouygues FR $c 0.01 0.01 0.1 1 10 100 Volume limit per price policy Source: Tariff web pages of respective companies dated as of April 2012. (1) Speed dependent pricing with Volume limits, (2) De-coupled from TV bundles (i.e., 0, 30 and 70 TV channels). Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 31
  • 32. 3G vs LTE pricing.Mobile data pricing fairly independent of technology. LTE pricing 3G pricing. A bridge to very high consumption. US$-cent per MB US$-cent per MB $c 10.00 $c 10.00 $c 1.00 $c 1.00 VRZ ATT TMUS VRZ $c 0.10 $c 0.10 TMUK (1) ATT TMUK (2) TeliaSonera (1) Orange FR CSL HK Bouygues FR VF DE (1) $c 0.01 $c 0.01 0.1 1 10 100 0.1 1 10 100 Data Volume in GB per price policy Data Volume in GB per price policy (1) Data Sticks, (2) Smartphones. (1) Speed-Volume combined pricing. Source: Tariff web pages of respective companies dated as of April 2012. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 32
  • 33. LTE pricing strategies.What we know and what we do today. Stimulate LTE migration LTE premium – fixed substitution. US smartphone focused. Europe PC/Laptop focused. US$-cent per MB US-$ per month LTE 3G ca. 15% less for LTE 3G LTE 0 10 20 30 0 50 100 150 Data Volume in GB per price policy Up-to speed limit in Mbps per price policy Source: Tariff web pages of respective companies dated as of April 2012. Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 33
  • 34. Quality versus Quantity Quality combined with Volume. Power-law of Data Pricing $-cent per MB $c 100.0 VRZ (1) $-cent/MB VRZ LTE Price ATT 3G ATT LTE TMUS 3G (2) $c 10.0 TMUS 3G (3) -60% ×2.5 Price $Cent per MB = 2.7732 Vol(in GB) -0.596 R² = 0.9735 $c 1.0 ×18 in Quality 0 20 40 60 $c 0.1 0.01 0.1 1 10 100 Data Speed in Mbps per price policy Data Volume in GB per price policy Source: Tariff web pages of respective companies dated as of April 2012. (1) 3G Smartphone tariffs, (2) Monthly payment, (3) Mobile Broadband tariffs. nd Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22 2012, Barcelona, Spain. 34
  • 35. WiFi is free! … ?Think again! Re-defining the meaning of Free1. WiFi MB higher priced than Mobile. Mobile Data price in €-cent per MB 100.00 Mobile Data Price per MB 10.00 1GB 2GB 0.5GB 0.25 €c/MB 1GB 1.00 Cost of Mobile data No WiFi Incl. WiFi 0.30 0.40 0.50 €c/MB €c/MB €c/MB 0.10 0.01 0.10 1.00 10.00 100.00 Cost of WiFi Price per MB Mobile Data allowed volume limit WiFi 1:10 – 1:20 WiFi premium between 34% and 3× of mobile data. that of mobile data only Source: Tariff web pages of respective companies dated as of April 2012. 1 Caution: Some care should be taken as the data interpretation is not completely un- ambiguous due to the great variety in price plan structures even for same MNO (i.e., different bundling strategies). Dr. Kim Kyllesbech Larsen, Mind Share, LTE World Summit, May 22nd 2012, Barcelona, Spain. 35
  • 36. What we need to be (insanely) passionate about. Understand data profitability vis-à-vis demand & pricing. Price innovation! … changing from quantity to quality based pricing. Understand mobile data is fundamentally different from mobile voice. Narrow the gap between customer perceived value and actual price.
  • 37. Acknowledgement: I am indebted to Nicole Niedermeier, Bin Xi, Veli-Pekka Contact: kim.larsen@telekom.deKroger and Dejan Radosavljevik for greatly supporting and enhancing thiswork. Last but not least I acknowledge my wife Eva Varadi for her great Mobile: +31 6 2409 5202support and understanding during the creation of this presentation. http://nl.linkedin.com/in/kimklarsen http://www.slideshare.net/KimKyllesbechLarsen