This post is by Leslie Shannon from the Nokia Siemens Networks Solutions & Regions Marketing team.
When 3G was first launched nearly ten years ago, the image that many inside and outside the telecommunications industry held of the typical 3G user was of an enterprise user in a mature market with a 3G dongle on his laptop, checking emails on the train on the way into work. And 3G was initially sold to exactly that person by almost all operators: as a premium product, focusing on the dongle as the main driver of data consumption.
However, time would soon prove that every single bit of that customer scenario was just plain wrong. Instead of some yuppie using a dongle, the typical 3G user of 2012 has turned out to be a teenager in an emerging market in her bedroom at home in the evening, using Facebook and instant messaging to chat with her friends. 3G has moved from being a premium product to being the bread and butter of smartphone connectivity, and is now priced and sold accordingly.
This change has posed significant questions for operators who are now making plans for how to sell their new LTE offerings. Do they begin the same way that almost everyone began in 3G, charging a premium and including LTE only in top-end offerings, or do they look at the mass market offering that 3G has developed into and use the market position of today’s 3G as a starting point? Telia Sweden, the first operator in the world to launch LTE in December 2009, began with the premium pricing strategy, offering LTE only in their top-end packages and only on dongles (this last of course because of device availability at the time). This was an approach that was almost identical to the way that 3G had been introduced to the world back in 2003-2004, and made total sense for a new experiment with a new technology.
New pricing plans for LTE
But Telia’s offering didn’t stay this way. Competition in Sweden meant that LTE prices soon dropped, and over time, Telia began incorporating LTE into pricing plans lower and lower on the price scale. Today, LTE is available from Telia in data packages at all pricing levels, including prepaid – a remarkably quick evolution from a premium product position to a mass-market product position. 3G took far longer to make the same transition.
And this is true not just in Sweden. The first startling development in the launch of “direct to mass-market LTE” was that many operators around the world, such as Verizon in the US, started charging the same price for LTE and 3G (or, in Verizon’s case, EV-DO), right from the beginning. Instead of positioning LTE as an “upsell”, or a new and separate technology that must earn its Return of Investment (ROI) completely on its own, some operators approached their LTE investment as an upgrade to their mobile broadband offering, and it was this total mobile broadband experience that they brought to their customers. The promise is not, “Buy LTE and you’ll be able to use it when you’re in a 4G zone,” but instead, “Buy our mobile broadband and we’ll give you the best speed and experience available wherever you are.”
The “total mobile broadband” approach
More and more operators globally are embracing this “total mobile broadband” approach to selling LTE instead of keeping it barricaded away from 3G as a separate data offering. Verizon and AT&T in the US, Telstra in Australia, and, yes, Telia in Sweden all now sell “mobile broadband” instead of “4G” or “3G”. Swisscom in Switzerland and 3 in Denmark have announced that when they introduce LTE before the end of the year, it will simply be integrated into existing packages (the higher-end packages in Swisscom’s case).
So will we continue to see LTE sold at a premium price? Undoubtedly. We’ll even see “mass market premium” offerings such as M1 in Singapore’s smartphone packages, in which 3G and LTE packages are sold separately, but LTE only costs US$8.50 per month more than 3G at each package level. LTE is still being sold at a higher price, but not so high that it will only attract those with big cars and deep pockets.
But in terms of pure market success, it is worth considering that all of the significant LTE market leaders in terms of subscriber numbers – Verizon, Japan’s DoCoMo, and Korea’s KT, LG U+, and SKT, who collectively had nearly 22 million LTE subscribers at the end of Q2 2012 – today chiefly sell LTE as a mass-market mobile broadband smartphone offering, bundled together with text and voice. What’s appropriate for individual markets and operator brands may of course be a completely different option, but the important thing to consider is that the market has moved a long way since the early days of 3G – so the way that LTE is offered to the market should evolve, too.
Check out our web pages for more information about Nokia Siemens Networks’ LTE portfolio. Please join the discussion on Twitter using #1GBperday$, #LTE and #mobilebroadband.
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