steven hartley ovum-thurs_zone-2_masterclass-2_thurs
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LTE World Summit Barcelona May 2012MASTERCLASSTRANSCRIPT
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Global LTE Pricing Strategies
Steven Hartley, Practice Leader, Telco Strategy
May 2012
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Steven Hartley, Practice Leader, Telco
Strategy
Leads team of analysts providing
strategic advice to world’s leading
operators & vendors
Over 15 years’ experience in fixed &
wireless communication market
analysis
Topic Focus
Next generation business
case & commercial strategies
Mobile broadband
Market forecasting
Femtocells
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Agenda
Example LTE tariff strategies
LTE premiums
MBB tariff models: What we like, what we don’t…
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Example LTE tariff strategies
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LTE tariffs: more of the same
Initial Ovum research on LTE tariffs (conducted May/June 2011) found:
Lack of innovation in LTE pricing models
Large number of unlimited data offerings: Japan, Hong Kong, Singapore, Sweden & US
Dongles dominate
Fast forward to November 2011:
Still lack of innovation in LTE pricing models
More smartphones become available (US, South Korea, Japan)
Asian operators see sense: Unlimited either disappears (Singapore), watered down (Japan, Hong Kong) or does not get rolled over from 3G (South Korea)
LTE tariffs get tweaked – still early days, lot of fluidity in pricing
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Europe: Big buckets dominate
LTE as fixed broadband replacement service?
Telekom Austria offers one 40GB plan only
Largest data cap in Europe
Up to 30GB buckets in Norway, Denmark, Finland & Germany
Swedish LTE operators offer 20-40GB buckets & unlimited pricing
Operator
(Sweden)
Data/mo. Peak DL
speed
Monthly
fee
Contract
length
Telia 40GB 80Mbps $60 18 mo.
Telenor 20GB 80Mbps $60 24 mo.
Telenor UL 80Mbps $45 24 mo.
Tele2 UL 80Mbps $60 18 mo.
Tele2 UL 80Mbps $60 None
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South Korea: Deliberately expensive
In August 2010 SKT launched unlimited data for 3G users paying Won55,000 (US$50) or more / month
Data traffic increased by 30% a month on average since
Did not roll over unlimited to LTE
LTE sold on premise that can offer killer services, including video calling & HD video streaming
Costs Won100,000/month (US$90) for 10GB
Excess data options: pay Won9,000/month or throttling
Expensive vs. 3G (Won55,000 unlimited)
Two positives in pipeline for LTE take-up:
Abolishing 3G unlimited plans
Likely rate cuts by govt. in 2012 will reduce LTE tariffs
Plan
(SKT)
Voice
(mins)
SMS Data
W52K 250 250 1.2GB
W62K 350 350 3GB
W85K 650 650 7GB
W100K 1,050 1,050 10GB
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Japan: Competition forces LTE price re-think
NTT DoCoMo launched LTE (big-screen only) December 24, 2010
5GB capped plans & 2 promotions offering unlimited data (ended April 2012)
By October 2011 only 480,000 LTE customers as no handsets
October 2011 announced two new promotions:
Lowered two-year unlimited promotional rate by 12%
Same monthly fee as Softbank’s iPhone 4S plan
Free on-net LTE-to-LTE smartphone calls for additional charge per month
Christmas 2011: 14 of 24 new smartphones LTE-enabled
>2.5m Xi subscribers, April 2012
Throttling rather than charging for excess data usage beyond 5GB
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Hong Kong‟s CSL makes transition from unlimited
At launch (November 2010) had one big-screen plan:
Unlimited data for HK$399 / month
August 2011 LTE tariffs revamped:
Withdrew all 3G mobile broadband plans from the market
New LTE tariffs:
1GB or 5GB introduced
Unlimited plan survived but expensive
Has only sold 4G big-screen plans since August 2011
Goal is to eliminate unlimited plan & migrate all 3G customers to LTE capped plans
Marketing message: “Why pay more? Pay for what you need”
CSL claims:
Not losing 3G customers
>60% LTE customers on volume-based plans
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Australia: No premium for LTE
Less than a week after LTE launch in Sept. 2011 Telstra changed its 3G big-
screen tariffs
One price plan for 3G & 4G big-screen customers
No premium for LTE!
4GB, 8GB and 15GB plans
Largest plan was 12GB, increased to 15GB for A$10 more
“Primary device” now being sold is LTE USB modem
Assumption is that LTE users download more, reach data caps faster & upgrade
to larger, more expensive plans
Telstra has deployed this same price strategy in the past
E.g. when migrating from 21Mbps to 42Mbps big-screen service
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US: smartphones & larger “limited time” bundles
Verizon wants to migrate its CDMA subscribers over to LTE ASAP
$30 unlimited small-screen data offer abolished in July 2011
Verizon claims 95% of customers use 2GB or less per month, so most users won’t face a price increase
Same tariffs across 3G & LTE / big- & small-screen
2GB for $30, 5GB for $50 and 10GB for $80 for
Big-screen caps intentionally small to protect fiber revenues
Doubled data allowance as a promotion in response to AT&T
AT&T launched one big- & three small-screen plans:
Small-screen: 200MB for $15, 2GB for $25, 2GB for $45 via tethering or MiFi
Big-screen: 5GB for $50
Sprint & Metro PCS still have unlimited offers in market
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„All-you-can-eat‟ going, but not gone completely
Unlimited plans are easy to communicate & easy to understand
Not all operators are created equal
Great at growing traffic on empty networks
But don’t want to fill up networks too fast
Common sense prevails on ending unlimited data for LTE
Verizon abolishes unlimited data
South Korea: Operators do not offer unlimited data
It removes “any motive in making investments*” Pyo Hyun-myung, KT Mobile President
Japan: No unlimited from May 2012, 5GB caps only
Hong Kong: CSL distances itself from unlimited data
Swedish FUPs: Not really unlimited pricing…
Telenor FUP: a user's traffic is throttled if monthly data
consumption exceeds 10 times the national average.
(Monthly average consumption per user :20-25GB)
* Korea Herald, July 2011
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LTE premiums
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LTE premium averaged 123% in Sweden versus 3G
36 3843
79
95
87
119%
129%
121%
0
10
20
30
40
50
60
70
80
90
100
Tele2 Telenor Telia
Mo
nth
ly f
ee (
US
$)
0%
20%
40%
60%
80%
100%
120%
140%
% p
rem
ium
ch
arg
ed
fo
r 4G
Monthly fee of high-end 3G package up to 16Mbps (US$)
Monthly fee of high-end 4G package up to 80Mbps (US$)
Premium charged for 4G (%)
Source: Ovum
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Asia-Pacific steers clear of premiums for LTE over 3G
Europe: improved latency + faster speed = LTE premium
Norway (Netcom): 52% premium, 275% more data
Denmark (Telia): 56% premium, 50% more data
Finland (Sonera): 150% premium, 50% more data
Austria (Telekom Austria): 156% premium, 30% more data
Asia: cost benefits + migrate to LTE asap = no/low LTE premium
Japan (NTT DoCoMo): 9% premium, (5GB capped plan)
No premium: Australia (Telstra), CSL (Hong Kong), Singapore (M1)
Operators must be careful not to alienate high-end
customers that have paid a premium by reducing LTE
tariffs too quickly or drastically
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MBB tariff models:
What we like, what we don‟t…
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What we like: Tiering makes sense
Common in the fixed world so why not mobile?
Tiered pricing can be applied on the network
for utmost control
Enables segmentation & upsell path
Can use different devices to segment
Tier by speed & data allowance:
E.g. Vodafone Germany’s, Telia in Sweden
Average speed is an opportunity for operators to gain credibility
Fixed & mobile ISPs coming under increasing pressure from advertising
standards agencies
Verizon Wireless markets "typical 4G speed" of 5-12Mbps (downlink)
Up to regulators to formulate common methodology for speed claims?
Users need usage monitors & clear upsell path to manage excess usage
Source: Telia (Sweden)
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What we don‟t like: Surprising customers
“Unlimited*” data plans for LTE
Charging & Fair Usage Policies that are not upfront & clear
Another opportunity for operators to earn credibility
Low volume users are subsidising the “bandwidth gluttons” today
Don’t penalise them, e.g. OFTA bans imposing FUP on capped plans
With LTE, more pertinent to charge for excessive data usage?
Operator reluctance to enforce Fair Usage Policies
Creates confusion – does it apply or not?
Wide ranging average speed claims (e.g. 10-80Mbps)
Bill shock
Let customers see what they’re doing
Excessive additional data fees
Does Coca-Cola charge more for additional cans?
Source: Daily Record
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Key messages
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LTE pricing: key messages
Preferred approach today is to stagger tariffs by speed & allowance
Step outside your comfort zone to ensure profitability
E.g. DoCoMo introducing capped plans
LTE perceived as a “new” service in mind of the consumer
Moving forward:
Simplicity
Honesty & realism
Beware hidden & opaque charging & Fair Usage Policies
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Thank you
Steven Hartley, Practice Leader, Telco Strategy
May 2012