LTE Global Pricing Strategies

Frédéric Pujol, Head of the radio technologies & spectrum practice, IDATE

Frédéric PUJOL
Head of the radio technologies & spectrum practice, IDATE

Expectations and forecasts of the future orientations of the mobile broadband market

Through the analysis of global leading telcos LTE pricing strategies, our team of IDATE analysts have identified four main trends happening in Q1 2013: Multi-device connectivity strategies, Emergence of new high-speed data services, A greater and manageable quality of service resulting in new price plans and the apparition of LTE Advanced, a faster and less costly band for operators.

Multi Device Strategies

Introduced by Verizon Wireless through its shared dataplans, not only is it very successful but also represents a huge opportunity to leverage its LTE network in the long term with two growth opportunities:
- Data consumption growth introduced by the incentive of using “big screen” devices such as tablets, laptops and connected TV’s for HD video watching. The more devices there are, the more data will be consumed and it will make more subscribers to upgrade to larger data cap plans

- Multi-platform approach supporting the new ‘content everywhere’ trend and allowing services ubiquity: a Netflix subscriber can watch the beginning of a video on his mobile and finish it on his tablet or laptop, starting where he left off, with a unique account.

LTE major runners strategic positionning

major Global 2013 LTE actors strategic positionning
Source: Digiworld by IDATE

High-Speed data services

LTE allows developing new services that require a large data bandwidth and that could not exist with 3G: some already existed with fixed broadband (HD VoD, cloud services) and some are dedicated to mobile usages (Rich Communications Suite and car black box among the latter). Moreover telcos are starting to propose LTE services so as to counter OTT (over the top) services.
These services are either free or available through additional monthly subscription. Moreover, the Evolved Multimedia Broadcast Multicast Service will allow new video services without the need of a specific frequency layer.

A greater and manageable quality of service

Quality of service is the most important LTE innovation as it can be managed from end to end on a mobile network. Classes of priority can be created and managed allowing Swisscom to segment their offer not by data usage but by bandwidth, which stresses the need of consistent quality over the totality of the network. For example when 100 Mbps are advertised clients are less prone to accept irregularities.

LTE Advanced

Korean operators expect to launch LTE-Advanced by mid-2013, this is the new generation of LTE. Its spectral efficiency is four to five times greater than 3G where LTE is only 3 times greater. This implies that the cost per MB will fall for operators and will orient strategies towards higher or ultimately unlimited data caps and rate plans differentiated trough quality of service.

LTE Revenue Forecast (by Region, in million EUR)

LTE Revenue Forecast 2012-2016 by region
Source : Digiworld by IDATE

Frédéric PUJOL
Head of Mobile & Spectrum Practice at IDATE

More information on LTE Global Pricing Strategies


Telecommunications versus Over-The-top communications

Soichi Nakajima

Senior Consultant at IDATE

OTT communication service
will account for 6% of total
communication service revenues by 2020

In 2020, for the USA and EU5 combined, OTT communication service revenues will have increased to 15 billion EUR from 7 billion EUR in 2012. Yet they will still only account for 6% of total communication service revenues, with telcos accounting for the remaining 94%. The total market will decline, mainly due to the telcos’ devaluation of the market, rather than the OTTs taking their revenues.

Drawing on IDATE’s extensive work on the latest trends in communication services, this latest study, “Future of Communication 2020: Telco & OTT communication - market forecasts” delves deeper into our analysis and forecasts the paths which the market is expected to take between now and 2020.

The six key trends shaping the market
In this study, IDATE outlines the 6 key trends happening in the communication services market which will shape the market through to 2020.

1. The aggregation of communication types: IDATE notes that most communication service providers are aggregating and providing several communication types to the market. For example, Facebook is primarily a social network (which is a communication tool in itself), but also offers voice, messaging and file sharing services too. In the case of operators, they of course traditionally offer voice and messaging as their core product, but are now looking to diversify into file sharing too, either through cloud products or the GSMA-led RCSe (Rich Communication Suite enhanced) initiative, marketed as ‘joyn’.
* EU5: France, Germany, Italy, Spain, United-Kingdom

2. Beyond traditional communication for telcos: The telcos are now looking to offer more than simply voice and messaging, in order to remain competitive in the market and to remain more than a dumb pipe. IDATE sees three main ways in which telcos are striving to achieve this: providing their own OTT communication service (such as Telefonica with their TU Me app and Orange with their Libon app); partnering with OTT communication service providers (such as Verizon and H3G UK with Skype and H3G HK with WhatsApp); and joining the GSMA-led ‘joyn’ initiative, launched by the three principle operators in Spain (Orange, Telefonica and Vodafone), which aims to offer enhanced communication services across all mobile phones in the same simple way as traditional voice and SMS today.

3. Voice and messaging becoming a telco commodity: The need for telcos to offer more than the traditional voice and messaging service is largely due to the commoditisation of such services. These services are today taken for granted, and virtually all telcos offer them in abundance; that is to say for a certain fee, users get massive amounts of minutes and messages that in reality are hard to use all up, and there are also many cases of unlimited offerings. This means that the value of such services is decreasing. Another trend for telcos is bundling, from double to quadruple play. Whilst such marketing strategies are intended to increase user appeal and also reduce churn, the fee itself is normally reduced and hence further devalues the standard voice and messaging services.

4. Mobile data and WiFi makes strong case for OTTs: For OTT communication services to work on mobile, there needs to be Internet connectivity on the mobile. Especially with the exploding popularity of smartphones, this Internet connection is increasingly provided by both mobile data plans and WiFi. Unlike voice and messaging, unlimited mobile data packages are relatively rare with at the very least throttling usually involved. Especially in the case of messaging there are only small amounts of data involved and thus this poses no problem. Video communication, on the other hand, is often banned by operators, but is possible through WiFi; and in many situations where one wants to use video communication, the user is stationary anyway (such as calling loved ones far away).

5. The rise of video communication: IDATE also notes the increased interest in the market for video communication. The concept is hardly new since operators have in the past tried to market the service, but with limited success. In particular, one of the demerits of operator video-calling propositions was the high cost for users, but now OTTs have come in with a free proposition using WiFi, including the likes of Apple and Facebook. Further, the concept of WebRTC, which allows video calling directly from the browser to any other browser could potentially boost video calling; there is no need for users to download software as WebRTC is an API for developers.

6. Genuinely free OTT offers in exchange of user data: One of the obvious advantages of OTT services is that it often comes for free, or in some cases, a very low fee. As an overall trend in the Internet market, the advertising model is becoming standard and the advertising market is set to grow with better tools and analytics, especially for mobile. The communication market is no exception, and is set to profit from advertising. However, generally speaking, users see advertising as a nuisance, and there is also a market for low-cost services with no advertisements, as demonstrated by the highly successful WhatsApp application.

Project Manager: Soichi Nakajima

Soichi joined IDATE as a senior consultant in January 2009. His main area of endeavour is the mobile communications market, such as the mobile Internet, applications, contents and services, the analysis of strategies employed by the various players, scenario building and forecasts. He also works on other business potentials for the mobile Internet, such as smart grids and VoIP. Before coming to IDATE, Soichi worked for NTT DoCoMo, Japan’s largest mobile network operator by subscriber numbers, where he played a leading role in the strategic planning of the roll-out of Japan’s first 3G M2M data-only tariffs. Soichi holds a Bachelors degree in mathematics, from the University of Nottingham in the UK.

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