LTE pricing: a missed opportunity

Nicole McCormick/Ovum
06 Jul 2011

Mobile broadband pricing is one of the hottest topics in the telecoms industry, especially when it comes to LTE.

As a “new” service, LTE provides operators with the opportunity to experiment with new and innovative pricing models. However, most operators have not grasped this opportunity. Instead, LTE tariffs in the US, Europe, and Asia-Pacific are dominated by unlimited offerings and large data buckets.

Ovum’s upcoming report, LTE Tariff Comparisons: Europe, US, and Asia-Pacific, found that most LTE pricing models are similar to existing tariff plans. However, there were some bright spots including Vodafone Germany’s tiered speed-based tariffs and NTT DoCoMo’s introduction of capped (rather than flat-rate) data pricing for LTE.

While most operators charge a premium for LTE compared to 3G, Ovum cautions against operators imposing too high a premium on LTE. The dilemma for operators is that they need to provide customers that have paid a large premium with a quality, high-speed service, while using lower rates to entice customers off their overstretched 3G networks.

Operators in the US and Hong Kong offer unlimited LTE plans. Swedish operators also offer unlimited plans, but use fair usage policies (FUPs) to restrict acceptable usage to a predetermined limit. After this limit is reached, a user’s traffic is given a lower priority or the speed of their service is throttled.

In South Korea, operators are planning to scrap unlimited pricing tariffs for upcoming LTE launches to avoid repeating the mistakes made when 3G networks were launched that resulted in networks becoming overburdened.

Operators that offer unlimited tariffs with lenient FUPs need to be careful in the video-led LTE world, and must consider making heavy data users pay. However, some operators are coming under pressure from regulators to prevent “bill shock”. In these cases, using a FUP that throttles speeds may be a more viable option.

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