Friday, 1 July 2011

The introduction of LTE is a great segmentation opportunity for mobile broadband

I'm prepping for the Managing Mobile Data conference in Vienna next week and was updating a few slides on mobile data tariffs and in particular pricing in the US set me thinking.

With the introduction of LTE, MNOs had a way of differentiating higher speed services with premium pricing. Makes sense doesn't it? For a commoditised service such as mobile broadband, any differentiation factor is useful. Size of bundle is one popular way to do it, e.g. charging more for 10GB than 5GB. Yes, great, but for a lot of subscribers bundle size is almost irrelevant. Business users generate much less traffic than consumers (approximately 1/3 in Norway for instance) so larger bundles don't really bother them. What they want is more speed. And they'd be prepared to pay for it. They're pretty price insensitive as a sector. Extra $5/month for higher speed? Sure. In Finland, which has the world's highest MBB penetration, MNOs long ago worked out that speed-based segmentation and premium subscriber prioritisation was the way forward. Things are a little different in the US.

Here are the tariffs for AT&T and Verizon...


What's wrong with this picture? Yep, neither of them charge a premium for LTE. Verizon doesn't distinguish at all. AT&T charges less...yes LESS...for LTE compared to its 3G plan. OK, so we all know it has an unwritten policy of trying to push subscribers off 3G onto 4G (see also their deal with Option for LTE devices) but still. It's a missed opportunity. They do get bonus points for having variable pricing depending on device. However, in a market where most MNOs took a very public decision to abandon unlimited plans you would have thought that there eye would be firmly on how they can segment subscribers. Apparently not though. Our recent research indicates that MNOs basically need to revamp their MBB tariffs every 12 months to reflect changing usage patterns. Hopefully when that happens both of them will have a rethink.

I hope you're joining us for the Managing Mobile Data conference where we'll be talking more about this. If not, watch this space for details of forthcoming mobile broadband reports from Machina Research.

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