LTE: It ain't easy money

10 Jun 2015

LTE has become a mainstream technology - at least from the operator side of the equation. Out of 600+ operators worldwide committed to LTE rollouts, 393 have already launched commercial LTE operations as of April 2015, according to the Global mobile Suppliers Association (GSA).

The GSA expects another 67 LTE networks to go live before the year is out. Meanwhile, 64 of them have already moved up the evolutionary chain to LTE-Advanced.

But while the majority of cellcos have launched LTE, the actual number of LTE subscribers remains firmly in the minority - on a global and regional level. And it will remain that way for some time, according to market projections. While individual markets may see the majority of mobile users migrate to LTE over the next few years (it’s already happened in South Korea), the majority of overall mobile users in the next five years will still be using HSPA or even 2G networks, despite the fact that LTE will be available pretty much everywhere. An Ericsson Mobility report from November 2014 projects 4.4 billion W-CDMA/HSPA subscriptions in 2020, compared to 3.5 billion LTE subscriptions.

For some time now, when it comes to monetizing LTE, cellcos have found it a challenge to figure out a pricing strategy that wasn’t a duplicate of the old 3G model - i.e. unlimited data.

“Monetizing LTE comes in two ways, and the first is about having the right tariff structure in place that aligns revenues with cost,” says Nicole McCormick, principal analyst for Service Provider & Markets at Ovum. “Unlimited data tariffs do not do this, nor do they encourage an upsell opportunity. Tiered pricing, which comes in different flavors, still dominates as the most sensible tariff strategy.”

The second aspect of LTE monetization, she continues, is finding ways to eke incremental revenue from these subscribers, either through discount data top-up packs or other value-added services, such as roaming packs or exclusive content. “Ultimately, the telco will hope that increased data usage will result in a subscriber upselling to a larger, more expensive, data allowance.”
The good news for cellcos is that LTE creates many new opportunities to get creative with service packages and bundles - provided the backend is flexible enough to handle it. There are a number of tools that will help, but the real challenge will be bridging the gap between what is theoretically possible and the hard reality that, at the end of the day, monetizing LTE is still an incremental play - so much so that any decent monetization strategy won’t be just about making money.

Packaging LTE today

With LTE now mainstream, there are plenty of live case studies of the kinds of service packages LTE operators are putting together and how they’re being leveraged to upsell customers.

For example, says Ann Hatchell, head of networks marketing at Amdocs, some cellcos are creating plans and bundles specifically geared to video content.

“One of the main usages of LTE with smartphones is enhanced video consumption, so we’re seeing mobile service operators [MSOs] gaining by selling bigger data plans which cater to that,” she says. “We also see content bundles where certain MSOs are offering their LTE and LTE-Advanced customers dedicated content - such as HDTV live streaming - which they can use the higher data speeds for.”

Some cellcos are even offering packages for connected cars, Hatchell adds. “4G-LTE data plans with in-car dedicated services enable MSOs to sell much more data and make money off of new infotainment and telematics services.”

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