Steven hartley ovum-thurs_zone-2_masterclass-2_thurs

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LTE World Summit Barcelona May 2012
MASTERCLASS

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Steven hartley ovum-thurs_zone-2_masterclass-2_thurs

  1. 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. 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. 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. 4. Example LTE tariff strategies4 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  5. 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. 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. 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. 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. 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. 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. 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 $50  Sprint & Metro PCS still have unlimited offers in market11 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  12. 12. „All-you-can-eat‟ going, but not gone completely  Unlimited plans are easy to communicate & easy to understand  Not all operators are created equal  Great at growing traffic on empty networks  But don’t want to fill up networks too fast  Common sense prevails on ending unlimited data for LTE  Verizon abolishes unlimited data  South Korea: Operators do not offer unlimited data  It removes “any motive in making investments*” Pyo Hyun-myung, KT Mobile President  Japan: No unlimited from May 2012, 5GB caps only  Hong Kong: CSL distances itself from unlimited data  Swedish FUPs: Not really unlimited pricing… Telenor FUP: a users traffic is throttled if monthly data consumption exceeds 10 times the national average. (Monthly average consumption per user :20-25GB) * Korea Herald, July 201112 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  13. 13. LTE premiums13 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  14. 14. LTE premium averaged 123% in Sweden versus 3G 100 95 140% 90 129% 87 119% 121% 120% 79 80 % premium charged for 4G 70 100% Monthly fee (US$) 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. 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. 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. 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. 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. 19. Key messages19 © Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
  20. 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. 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.

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