Getting LTE pricing right

Getting LTE pricing right

Anna Arlorio, Ami Arora, James Ong, Mar Pages/Delta Partners  |   November 20, 2012
With the advent of LTE technology, mobile operators across emerging and advanced markets are riding a wave of change. Together with providers in the US, Asian players are leading what will likely become a new era of data connectivity and technological advances and they are now given a new chance to get their charging models right.
 
Having learned from their 3G experiences, operators know that unlimited offers in the LTE era of 50 Gbps+ are a risky proposition. Of 65 operators polled, only 3% are offering unlimited LTE plans. The combination of new billing options and reluctance to offer unlimited plans is bringing about a new wave of pricing innovation.
 
We, however, acknowledge that with the exception of shared plans, most of the pricing alternatives are not new in concept but are simply being perfected, applied more aggressively and with greater success with the advent of LTE.
  
Although still in its infancy, LTE pricing is evolving differently in various regions around the world.
  
Different models
Being LTE pioneers and concerned about the consequences of unlimited pricing, European operators opted for an LTE premium in a range of 50-80%, according to Wireless Intelligence, but with a unit cost (per MB) of almost half of the world average.
 
This speed-based pricing approach is not new, but the higher speeds of LTE allow for a broader pricing range. This model has two advantages: it monetizes additional LTE investments, thereby gaining the confidence of investors, and it enables differentiated value propositions for operators whose network quality is visibly superior.
 
However, higher prices for early adopters result in a flatter penetration curve. Two years after launch in Sweden, take-up remains below 5%.

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