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4G Networks - Cellco Savior or Black Hole?
Rethink Research, April 2011
Mobile data will increase by 70% a year in key cellular markets through 2015, but associated revenues will rise by only 17% under current charging structures. The rise in data is good news for web players like Facebook and Google, but it's the carriers who are investing billions in building out mobile broadband during this same period.
So what does the operator plan so they can get payback? If flat rate pricing and handset subsidies lead to huge losses, and data caps and premium charges won't go down well with users, what's the answer? More creative thinking is essential, otherwise 4G will be more disappointing than 3G was, with revenues underperforming predictions dramatically.
Rethink Technology Research has talked with 90 operators with plans to deploy LTE or HSPA+ and found their charging strategies all combine five key weapons:
- Charging structures that looking well beyond simple tiered pricing
- An end to device subsidies
- New revenue from new devices such as tablets
- Entirely new revenue streams (such as M2M)
- Lower data delivery costs in 4G
“4G Networks – Cellco savior or black hole?” contains details of tariff and pricing strategies, which you can cut and paste into your own business plans, so that operators, equipment and software suppliers, and handset vendors can make sense out of the unavoidable 4G era.
Key findings:
- 28% of operators say their primary reason for investing in LTE is to reduce cost of data delivery – but over half of those remain unconvinced of the positive revenue model.
- The opportunity to introduce new approaches to data charging is seen as the most powerful competitive weapon for 4G.
- Cellcos believe 4G will enable them to increase overall data revenue by over 40%, and to treble revenue from non-traditional sources (eg M2M). The report indicates that their assumptions are still too optimistic.
- The typical cellco will use 12 different data pricing instruments by 2014, compared to three now. Popular approaches will include QoS and time-of-day pricing and many carriers will experiment with consumer designed tariffs.
- The most important change in terms of consumer appeal will be the introduction of data plans that can be shared between many devices. These will only be profitable for the carrier where intelligent data offload policies are in place, so despite the greater capacity of 4G, the reliance on Wi-Fi and femtocells will not diminish.
- The value of a Mbyte to the carrier has fallen from $260 for SMS at the start of the 3G era, to less than one cent for mobile broadband in 2014.
Who is this report for?
Every business involved in the cellular industry will need a take on LTE charging
mechanisms. Operators need a firm grip of what's possible and a clear strategic plan, their equipment and device suppliers must offer pricing and partnership based on what is possible for the operator. Software and service businesses need to help enable new pricing paradigms. This report is for device manufacturers and designers, applications houses, content owners, wireless operators, components makers, device and content distributors, and the financial community.
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