• Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
5,498
On Slideshare
0
From Embeds
0
Number of Embeds
17

Actions

Shares
Downloads
63
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Global LTE Pricing Strategies Steven Hartley, Practice Leader, Telco Strategy Steven.hartley@ovum.com May 20121 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 2. Steven Hartley, Practice Leader, Telco Strategy Topic Focus Next generation business  Leads team of analysts providing case & commercial strategies strategic advice to world’s leading  Mobile broadband operators & vendors Market forecasting  Over 15 years’ experience in fixed &  Femtocells wireless communication market analysis2 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 3. Agenda  Example LTE tariff strategies  LTE premiums  MBB tariff models: What we like, what we don’t…3 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 4. Example LTE tariff strategies4 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 5. LTE tariffs: more of the same  Initial Ovum research on LTE tariffs (conducted May/June 2011) found:  Lack of innovation in LTE pricing models  Large number of unlimited data offerings: Japan, Hong Kong, Singapore, Sweden & US  Dongles dominate  Fast forward to November 2011:  Still lack of innovation in LTE pricing models  More smartphones become available (US, South Korea, Japan)  Asian operators see sense: Unlimited either disappears (Singapore), watered down (Japan, Hong Kong) or does not get rolled over from 3G (South Korea)  LTE tariffs get tweaked – still early days, lot of fluidity in pricing5 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 6. Europe: Big buckets dominate  LTE as fixed broadband replacement service?  Telekom Austria offers one 40GB plan only  Largest data cap in Europe  Up to 30GB buckets in Norway, Denmark, Finland & Germany  Swedish LTE operators offer 20-40GB buckets & unlimited pricing Operator Data/mo. Peak DL Monthly Contract (Sweden) speed fee length Telia 40GB 80Mbps $60 18 mo. Telenor 20GB 80Mbps $60 24 mo. Telenor UL 80Mbps $45 24 mo. Tele2 UL 80Mbps $60 18 mo. Tele2 UL 80Mbps $60 None6 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 7. South Korea: Deliberately expensive  In August 2010 SKT launched unlimited data for 3G users paying Won55,000 (US$50) or more / month  Data traffic increased by 30% a month on average since  Did not roll over unlimited to LTE  LTE sold on premise that can offer killer services, including video calling & HD video streaming  Costs Won100,000/month (US$90) for 10GB Plan Voice SMS Data (SKT) (mins)  Excess data options: pay Won9,000/month or throttling W52K 250 250 1.2GB W62K 350 350 3GB  Expensive vs. 3G (Won55,000 unlimited) W85K 650 650 7GB  Two positives in pipeline for LTE take-up: W100K 1,050 1,050 10GB  Abolishing 3G unlimited plans  Likely rate cuts by govt. in 2012 will reduce LTE tariffs7 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 8. Japan: Competition forces LTE price re-think  NTT DoCoMo launched LTE (big-screen only) December 24, 2010  5GB capped plans & 2 promotions offering unlimited data (ended April 2012)  By October 2011 only 480,000 LTE customers as no handsets  October 2011 announced two new promotions:  Lowered two-year unlimited promotional rate by 12%  Same monthly fee as Softbank’s iPhone 4S plan  Free on-net LTE-to-LTE smartphone calls for additional charge per month  Christmas 2011: 14 of 24 new smartphones LTE-enabled  >2.5m Xi subscribers, April 2012  Throttling rather than charging for excess data usage beyond 5GB8 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 9. Hong Kong‟s CSL makes transition from unlimited  At launch (November 2010) had one big-screen plan:  Unlimited data for HK$399 / month  August 2011 LTE tariffs revamped:  Withdrew all 3G mobile broadband plans from the market  New LTE tariffs:  1GB or 5GB introduced  Unlimited plan survived but expensive  Has only sold 4G big-screen plans since August 2011  Goal is to eliminate unlimited plan & migrate all 3G customers to LTE capped plans  Marketing message: “Why pay more? Pay for what you need”  CSL claims:  Not losing 3G customers  >60% LTE customers on volume-based plans9 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 10. Australia: No premium for LTE  Less than a week after LTE launch in Sept. 2011 Telstra changed its 3G big- screen tariffs  One price plan for 3G & 4G big-screen customers  No premium for LTE!  4GB, 8GB and 15GB plans  Largest plan was 12GB, increased to 15GB for A$10 more  “Primary device” now being sold is LTE USB modem  Assumption is that LTE users download more, reach data caps faster & upgrade to larger, more expensive plans  Telstra has deployed this same price strategy in the past  E.g. when migrating from 21Mbps to 42Mbps big-screen service10 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 11. US: smartphones & larger “limited time” bundles  Verizon wants to migrate its CDMA subscribers over to LTE ASAP  $30 unlimited small-screen data offer abolished in July 2011  Verizon claims 95% of customers use 2GB or less per month, so most users won’t face a price increase  Same tariffs across 3G & LTE / big- & small-screen  2GB for $30, 5GB for $50 and 10GB for $80 for  Big-screen caps intentionally small to protect fiber revenues  Doubled data allowance as a promotion in response to AT&T  AT&T launched one big- & three small-screen plans:  Small-screen: 200MB for $15, 2GB for $25, 2GB for $45 via tethering or MiFi  Big-screen: 5GB for $50  Sprint & Metro PCS still have unlimited offers in market11 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 12. „All-you-can-eat‟ going, but not gone completely  Unlimited plans are easy to communicate & easy to understand  Not all operators are created equal  Great at growing traffic on empty networks  But don’t want to fill up networks too fast  Common sense prevails on ending unlimited data for LTE  Verizon abolishes unlimited data  South Korea: Operators do not offer unlimited data  It removes “any motive in making investments*” Pyo Hyun-myung, KT Mobile President  Japan: No unlimited from May 2012, 5GB caps only  Hong Kong: CSL distances itself from unlimited data  Swedish FUPs: Not really unlimited pricing… Telenor FUP: a users traffic is throttled if monthly data consumption exceeds 10 times the national average. (Monthly average consumption per user :20-25GB) * Korea Herald, July 201112 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 13. LTE premiums13 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 14. LTE premium averaged 123% in Sweden versus 3G 100 95 140% 90 129% 87 119% 121% 120% 79 80 % premium charged for 4G 70 100% Monthly fee (US$) 60 80% 50 43 38 60% 40 36 30 40% 20 20% 10 0 0% Tele2 Telenor Telia Monthly fee of high-end 3G package up to 16Mbps (US$) Monthly fee of high-end 4G package up to 80Mbps (US$) Premium charged for 4G (%) Source: Ovum14 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 15. Asia-Pacific steers clear of premiums for LTE over 3G  Europe: improved latency + faster speed = LTE premium  Norway (Netcom): 52% premium, 275% more data  Denmark (Telia): 56% premium, 50% more data  Finland (Sonera): 150% premium, 50% more data  Austria (Telekom Austria): 156% premium, 30% more data  Asia: cost benefits + migrate to LTE asap = no/low LTE premium  Japan (NTT DoCoMo): 9% premium, (5GB capped plan)  No premium: Australia (Telstra), CSL (Hong Kong), Singapore (M1) Operators must be careful not to alienate high-end customers that have paid a premium by reducing LTE tariffs too quickly or drastically15 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 16. MBB tariff models: What we like, what we don‟t…16 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 17. What we like: Tiering makes sense  Common in the fixed world so why not mobile?  Tiered pricing can be applied on the network for utmost control  Enables segmentation & upsell path  Can use different devices to segment  Tier by speed & data allowance:  E.g. Vodafone Germany’s, Telia in Sweden Source: Telia (Sweden)  Average speed is an opportunity for operators to gain credibility  Fixed & mobile ISPs coming under increasing pressure from advertising standards agencies  Verizon Wireless markets "typical 4G speed" of 5-12Mbps (downlink)  Up to regulators to formulate common methodology for speed claims?  Users need usage monitors & clear upsell path to manage excess usage17 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 18. What we don‟t like: Surprising customers  “Unlimited*” data plans for LTE  Charging & Fair Usage Policies that are not upfront & clear  Another opportunity for operators to earn credibility  Low volume users are subsidising the “bandwidth gluttons” today  Don’t penalise them, e.g. OFTA bans imposing FUP on capped plans  With LTE, more pertinent to charge for excessive data usage?  Operator reluctance to enforce Fair Usage Policies  Creates confusion – does it apply or not?  Wide ranging average speed claims (e.g. 10-80Mbps)  Bill shock  Let customers see what they’re doing  Excessive additional data fees  Does Coca-Cola charge more for additional cans? Source: Daily Record18 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 19. Key messages19 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 20. LTE pricing: key messages  Preferred approach today is to stagger tariffs by speed & allowance  Step outside your comfort zone to ensure profitability  E.g. DoCoMo introducing capped plans  LTE perceived as a “new” service in mind of the consumer  Moving forward:  Simplicity  Honesty & realism  Beware hidden & opaque charging & Fair Usage Policies20 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  • 21. Thank you Steven Hartley, Practice Leader, Telco Strategy Steven.hartley@ovum.com May 201221 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.