Wireless carriers around the world are digging themselves into a deeper hole by neglecting to experiment with innovative pricing models for 4G LTE services. While consumers have exhibited concern surrounding tiered data plans and bandwidth throttling, Ovum believes such models are necessary to combat the growing capacity crunch plaguing cellular service providers. This crunch, of course, is serious enough that AT&T is hoping to soon $39 billion in order to acquire T-Mobile USA and use the carrier’s precious spectrum for its 4G LTE network build-out. Smartphone and mobile broadband users are pumping more data over wireless networks than ever before, and speedier 4G LTE service only stands to exacerbate the situation. Additionally, carriers are missing the opportunity to find new ways to squeeze more revenue out of this new premium high-speed service. “We looked at the LTE pricing strategies of operators in Europe, Asia-Pacific, and the US, and were disappointed with our findings,” Ovum analyst Nicole McCormick said in a statement. “LTE provides operators with the opportunity to experiment with new and innovative pricing models, which allows them to find the best way of deriving revenues from the premium service. However, most operators have not grasped this opportunity. Instead, LTE tariffs in the regions Ovum analysed are dominated by unlimited offerings and large data buckets, which can be problematic.” Ovum’s full press release follows below.
Lack of innovation in LTE pricing models, report finds
5 August 2011 | Published by Ovum
Operators that offer high-speed mobile broadband technology LTE are failing to deliver innovative pricing models, according to Ovum.
In a new report*, the independent telecoms analyst firm claims that there is a lack of new and innovative LTE (long term evolution) tariffs, which is a missed opportunity for operators given that LTE is a new service in the eyes of consumers.
Nicole McCormick, Ovum senior analyst and author of the report, commented: “We looked at the LTE pricing strategies of operators in Europe, Asia-Pacific, and theUS, and were disappointed with our findings.
“LTE provides operators with the opportunity to experiment with new and innovative pricing models, which allows them to find the best way of deriving revenues from the premium service.
“However, most operators have not grasped this opportunity. Instead, LTE tariffs in the regions Ovum analysed are dominated by unlimited offerings and large data buckets, which can be problematic.”
According to the report, unlimited data plans for LTE can present significant problems for operators, especially if they are accompanied by a lenient fair usage policy.
McCormick commented: “Operators should not offer unlimited LTE tariffs without some sort of deterrent as they could have an impact on the quality of the service given LTE’s data-intensive nature. However, we note that some leading operators –Verizon Wireless,SKTelecom, NTT DoCoMo and LG U+ – have steered clear of unlimited LTE offerings despite offering such packages in the 3G arena.”
The report also found that charging high premiums for LTE is unsustainable in the long-term due to competitive pressures in the industry and increased migration to 4G services. McCormick added: “Operators will need to be careful not to alienate high-end customers that have paid a premium for a fast, high-quality service by reducing LTE tariffs too quickly or drastically.”