Get away from flat-rate pricing

David Kennedy/Ovum
27 Feb 2012

The transition to LTE is an opportunity for operators to better align data tariffs to the underlying cost of provision. In the 3G world this objective has been hampered by the prevalence of unlimited, flat-rate plans in some markets, such as Japan, Hong Kong and Singapore.

Operators are now devising clever ways to transition to LTE without carrying these burdensome unlimited tariffs forward. Ovum has long held the view that unlimited mobile data is not sustainable, and this realization is now filtering through to LTE pricing strategies in leading markets in the Asia Pacific, as well as the US and Europe.

Operators in markets with well-entrenched unlimited 3.5G data offerings can make the transition to LTE without flat rates, even after originally launching LTE with unlimited data. We already see evidence of this.

LTE can be marketed as a new platform to consumers, one where operators should not feel compelled to simply roll over existing price models. The preferred method for the transition to LTE is to eliminate unlimited tariffs completely from day one. This has been the case in South Korea (SK Telecom, KT and LGU+), Singapore (Singapore Telecom) and the US (AT&T Wireless). This requires 3.5G and LTE to be marketed separately.

Other operators which already have an unlimited LTE offer, including CSL and NTT DoCoMo, are also transitioning to new LTE price models that make sense. CSL has now devised a new LTE strategy, centered on new volume-based tariffs that are attractively priced compared to its unlimited LTE deal. This is drawing customers to its volume-based offers. DoCoMo is offering permanent volume-based plans alongside flat-rates that will be phased out.

US cellco Verizon Wireless' phase out of unlimited data for LTE last July has not stifled LTE subscriber take-up. Verizon Wireless has cleverly ditched unlimited LTE data by keeping its 2GB LTE monthly fee at $30 - the same as its previous unlimited monthly charge for 3.5G/LTE smartphone users. For most users, this makes no difference. It has also set realistic entry-level data plans that suit the majority of users. Crucially, its LTE net additions have not been adversely affected after the removal of unlimited data for LTE. And of course AT&T has already phased out unlimited mobile data.

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