A couple of operators in emerging markets already offer "instant messaging only" or "email only" or "social networking services only" applications-based tariffs for 3G. What about tiered applications-based pricing as the future model for LTE, where voice traffic such as VoIP is carried as data traffic as well?
We think pricing models staggered by speed will ultimately become most common in the short to medium term at least. For end-users the approach is used in fixed broadband so is easy to roll over to mobile. For operators they enable customer segmentation and a subsequent up-sell path. But so far only Vodafone Germany and Telia in Sweden offer extensive tiered tariffs for LTE, based on data size and peak speed.
Honest broker approach
Whatever the pricing model, an honest and transparent approach is best. Upfront and transparent pricing, speed claims and FUPs will help operators gain credibility with consumers. We prefer average speed claims for instance, over-peak speed claims. One operator markets an "expected" download speed of 10-80 Mbps for LTE. This is not realistic and will not find merit with consumers and increasingly regulators, such as Ofcom in the UK and IDA in Singapore, have taken note of the disparity between advertised and achieved mobile broadband speeds.
Honesty will also require tools to help the average user. Tools that help LTE customers understand what data they can get on a 5GB or 10GB plan make sense. Setting a monthly cap at a reasonable level to prevent bill shock (a la CSL's new pricing) is also logical. Operators will also need to send regular texts advising of monthly data usage.
The long and short of it is that operators' FUPs are thrown into the limelight with LTE. However, many operators have been reluctant to enforce fair usage policies and hide them in legalize amidst lengthy contracts. But low volume users are subsidizing the "bandwidth gluttons" today. LTE is a new world where video will play a lead role. With LTE, FUPs need to keep the data hogs honest as well and it is in operators' best interests to be up front about it.
Nicole McCormick is a senior analyst for telco strategy at Ovum