Monetising LTE : A review of savvy pricing strategies !!

Presentation1Whilst LTE is spreading across the globe,( 222 commercial LTE operators in 83 countries GSA Evolution to LTE report: October 17, 2013 ) the question remains how to best leverage the speed and capacity that LTE brings to create value for customers and generate more revenue.).The introduction of LTE should be used to enhance the value offered to consumers. Operators should introduce new pricing schemes (e.g., leverage quality of service differentiation), enter new markets (e.g., fixed broadband, services such as video streaming and calling), and gain market share (e.g.,in mobile broadband and in sub-segments such as the high-end customer segment). Based on improved technical features and economics, operators can selectively utilize customers’ greater willingness to pay to counter the price reduction trend. New mobile Internet customers need to be educated on the superior service quality on offer and drawn to the brand with introductory offers to counteract low willingness to pay.

With LTE, tiered pricing is evolving from volume-based tiers to speed-based tiers with data packages based on varying speed entitlements, but often a combination of both.Bear in mind that implementing speed-base packages requires sophisticated policy control architecture connected to an online charging system. Typically when a subscriber begins a data session it triggers a message to a Policy Manager which reviews the Subscriber Profile Repository for the customer’s entitlements. The Policy Manager enforces the rules through the Enforcement Point (a network packet gateway or deep packet inspection node). Policy management can play a significant role in this initiative by providing operators with a way to offer their customers innovative, personalized bundles of services that are consistent across multiple channels. Via initiatives such as cross-sell/upsell, highly targeted services and creative packaging, operators can provide their customers and prospects with more value and, in doing so, drive loyalty behavior

There have been a lot of discussions around unlimited data offers, with many analysts arguing that they were unsustainable and that operators needed to create more differentiated and value-based offers. Swisscom has actually been using speed as the differentiating value whilst offering unlimited data on LTE – with its Infinity tariffs launched in July 2012. Based on the fact that the value of speed is easier for customers to grasp than data volumes, this approach gives customers the worry-free “unlimited data” that they like, whilst still differentiating to optimize revenue. As a result, Swisscom has seen its overall ARPU grow, although it initially declined its market share is increasingly growing. KPN Holland are packaging speed as the main promoted value of LTE. It enables them to create differentiated packages where speed is used to create perceptible value – and encourage customers to upgrade to higher tiers and 3G customers to switch to LTE for a premium.

3 Austria follows the same strategy as Swisscom with its Hello and Hello Europe tariffs that include unlimited data with differentiated speeds and mobile TV channels. However, whilst offering unlimited data, both Swisscom and 3 Austria restrict the speed to 64Kbit/s once a certain amount of data is consumed; 3 Austria clearly highlights this to its customers and shows for each tariff the full speed data volume in addition to the maximum download and upload speeds. However, 3 Austria also offers a premium package with unlimited and unthrottled data speed.Mobile US for instance offers high speed data volume tiers with its “Simple Choice” plans and then throttles to 2G data speed once the high speed data allowance is exceeded, until the next billing cycle. In effect, this approach is equivalent to offering unlimited data to customers at differing speeds. Orange France also throttles the speed when the data allowance is exceeded. Optus in Australia automatically moves customers to the next tier for the rest of the month. AT&T sends data usage alerts to its customers and then charges when they go over their allowance.

In terms of roaming, T-Mobile US offers unlimited data while roaming as part of its Simple Choice plans; however the speed is limited to 128Kbit/s , the aim being to upsell “speed packs” when higher speed is required. The plans are subject to fair usage rules and also include unlimited SMS while roaming. This approach is very attractive to customers whilst enabling the company to continue to drive roaming revenues by upselling speed. Temporary speed boost offers may also bring additional revenue from travelers by allowing them to quickly download movies or games to enjoy during their trips.

LTE has brought the opportunity for operators to upsell high-speed add-ons to supplement a base package or temporary speed boosts, enabling customers to purchase higher speeds as required. For example, A1 Telekom Austria upsells high speed options to its customers in addition to basic packages that incorporate lower speeds. A1Telekom Austria offers a data add-on (Eur 8.25) to its business customers, with night time access (22:00-08:00) to unlimited data, at full speed as per their base package. This is an interesting approach to managing speed and network resources whilst offering the always popular “unlimited” to create a new data revenue stream.

EE UK applies a speed cap of 30mbps to all new customers not on its premium post-pay package “4GEE Extra” while premium customers can enjoy speeds of up to 150 mbps. Their packages also include unlimited minutes and texts as well as free roaming calls and texts to selected countries and includes the Deezer music service. Telia, the world’s first LTE operator offers its 4G post-paid “Mobil Komplett” customers a speed up to 100 Mbit/s whilst all its 4G pre-paid customers are capped to 20 Mbit/s. Telia’s Mobil Komplett plan also comes with data volume tiers and shared data allowing customers to use up to 7 mobile/tablets on the same subscription. The plan includes unlimited calls, SMS and MMS.Orange France launched its low cost sub-brand Sosh which uses speed caps to differentiate from the main brand. Whilst Orange customers can enjoy LTE speeds up to 150 Mbit/s, Sosh offers a maximum of 42Mbit/s with its best package.

As the telecom market becomes increasingly saturated, operators are looking for ways to stand out without resorting to price wars. Core services such as voice or data are becoming commodities; in order to avoid being limited to charging commoditized prices, operators must be able to create and deliver services that offer additional value, but are limited by the rigidity of many legacy service creation and OSS/BSS environments. A flexible policy management solution deployed either as a standalone implementation or as part of a larger OS S/BSS and service delivery transformation initiative, can enable value-added, differentiated services that can run on top of existing core services. While pricing can never be low enough from a consumer perspective, the ongoing quest for operators is to find a balance between competiveness and the ability to fund future investments.

Sadiq Malik ( Telco Strategist )

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