Customers see 4G mobile as an extension of current data plans, and will not expect to pay a premium for faster service.
Research suggests that users of mobile phones see 4G LTE simply as a faster version of what they have already – 3G data plans. In global markets, users have shown no inkling that any premium price points will be sustainable, which may dismay UK telcos reeling from falling margins on services.
So far, the major global 4G LTE networks have focused on selling customers into extended data plans to drive adoption of 4G mobile, a model seen with Verizon (of which Vodafone UK owns 45%) and AT&T in the US and NTT DoCoMo in Japan.
This has seen high demand where available, and will drive adoption of the new technology, suggests Paul Lambert, Informa’s Telecoms and Media Senior Analyst.
"Because LTE technology, at the moment at least, is an extension of the mobile broadband experience, initial evidence suggests that mobile users aren’t prepared to pay a significant premium for LTE access," he said.
"Most of the operators that have been successful in signing up LTE subscribers have decided not to charge a premium for 4G access, but instead are bundling it into existing data plans. When operators have done this, and effectively communicated the benefits 4G offers, market reaction has been very positive. This indicates that 4G should, in the first instance at least, be seen as a way to improve the overall mobile broadband experience rather than as a way to generate "new revenues"," he says.
An Informa report suggests that the main reasons operators are launching LTE is to create new revenue streams (34.7%); to increase capacity to offer mobile broadband services (23.3%); and to build brand value through technology leadership (31.3%).
The UK has yet to launch any 4G LTE networks, as local operators wait for Ofcom to perform the 4G radio spectrum auction at year end (see CBRs special report). Everything Everywhere (owners of T-Mobile and Orange) has been attempting to launch a 4G service on its existing spectrum, but will require Ofcom approval.
According to Informa’s research, 70% of operators worldwide believe now is the right time to launch 4G services, and 60% plan to launch 4G services by end of 2013. 33% will launch 4G services this year, and a further 24.9% next year.
The main reason 4G LTE hasn’t been more dominant in the markets where it is available is the lack of handset choice. Informa estimates that smartphones comprise only 18% of all LTE devices available.
That is expected to change this year, with high profile devices such as the Samsung Galaxy S3 offering a 4G version later in the year. The iPhone 5 is also expected to be a 4G device, its iPad 3 launched with US 4G support earlier in the year, and has been a huge success.