Finally some sense on LTE pricing

Nicole McCormick/Ovum
19 Oct 2011
00:00

OvumBack in May, our research of LTE tariffs in nine countries concluded that there was a lack of innovation in pricing models. In fact, we were left disappointed with the "more of the same" approach to pricing that operators had embarked upon. Just four months on, we are slightly more optimistic that the message that operators need to think "outside the box" on LTE pricing is seeping though - as operators ditch unlimited data pricing.

How are operators pricing LTE? In Europe, big buckets dominate. For example, Telekom Austria offers a 40GB bucket for LTE, and that's it. Buckets of 20-30GB are prevalent for dongle services in Norway, Denmark, Finland, Germany and Sweden.

In contrast US operator Verizon caps its LTE data usage as low as 2GB for big- and small-screen users for fear of cannibalizing its own fiber play. Verizon abolished its unlimited data offer for 3G and LTE smartphones in July, but MetroPCS offers unlimited data on its premium plan.

Common sense on unlimited data for LTE has also prevailed in other markets. For example, Japan's only LTE operator NTT DoCoMo will stop offering unlimited data for LTE in early 2012. It will continue to offer a 5GB flat-rate plan, and indications are that disruptive player Softbank Mobile will also not roll over unlimited data to LTE next year. The move away from unlimited data is a bold move for Japan. In a similar vein, South Korean operators KT and LGU+, which launched LTE in July, have not adopted unlimited data tariffs for LTE.

Even Hong Kong's CSL has had a change of heart. To mark its full-scale consumer LTE launch last month, CSL unveiled new volume-based plans for LTE, although an unlimited data offer is still available. So far, however, some 60% of users have opted for the new volume-based plans, part of CSL's new consumer-friendly "pay for what you need" philosophy.

Ovum cautions operators against offering unlimited LTE tariffs without some sort of deterrent, such as a non-lenient FUP, as they could have an impact on the quality of the service given the data-intensive nature of LTE.

While we commend operators in Hong Kong, Japan and South Korea for breaking the mould on unlimited data, we are waiting to see what the next pricing wave brings after unlimited data pricing and volume-based pricing. This is what Ericsson refers to as "value-based" pricing for LTE.

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