The launch of LTE in many markets is driving operators to look for new monetization strategies for mobile data.
Analysys Mason's recent work has focused on pricing of 4G mid-screen and large-screen mobile broadband offerings, and on growth in take-up of these services. We forecast that global 4G mobile broadband connections will grow from 22 million at the end of 2012 to over 290 million by the end of 2018.
A review of global mobile broadband in LTE markets reveals a number of trends in the way service providers are pricing and bundling LTE mobile broadband. Advertising specific headline speed levels, for example, is a phenomenon that is mostly found in western Europe. Most operators in developed Asia Pacific and the US do not advertise specific headline speeds, but highlight the faster speed that LTE enables in a more general way.
Operators commonly use three different strategies in pricing their data:
- Volume-based pricing: differentiating tariff tiers with monthly data allowance, which is implemented either through an advertised cap (monthly data allowance as part of the marketing proposition) or with a cap or throttling as part of operators' fair use policy. Around 40% of operators in western Europe apply pure volume-based pricing. More than 70% of operators in Central & Eastern Europe, developing APAC and the US used pure volume-based pricing, making it the most common pricing model in those regions in the second quarter of 2013. For example, NTT DoCoMo applies a pure volume-based tariff differentiation with maximum theoretical download speeds of 112.5-Mbps across its Xi data plan tariff tiers.
- Speed-based pricing: tariffs differentiated only by speed while offering unlimited data are rare. No operator in our study outside of western Europe and only 4% of operators in western Europe use them. For example, Elisa Finland, which offers a truly unlimited data allowance across all tiers, differentiates these tiers with download speeds from 21 to 100 Mbps.
- Hybrid volume-speed-based pricing combines volume-based and speed-based pricing. This is the most popular pricing model in western Europe, but less relevant in other regions.
Operators in the US focus their marketing efforts largely on coverage rather than emphasizing headline speeds. Consumers in most countries in western Europe are used to speed levels being advertised and are familiar with different speed levels from fixed broadband tariffs. We do not therefore expect a shift away from this marketing strategy there. Some operators in western Europe have, however, revised LTE headline speeds down for their mobile broadband offers. This is likely to give more realistic speed levels and leave further room for monetization by re-introducing higher speed tiers later.