It is already clear from the US experience that operators will not boost ARPU simply by launching LTE services, particularly as competition intensifies. LTE will be more about cost efficiency than revenue uplift.
From a competitive perspective, Verizon’s major advantage over its competitors will be coverage. However, it must also contend with the potential disadvantage that its network will be slower than other players in the market. Its 5–12Mbps average downlink speed offers little advantage over T-Mobile’s current HSPA+ network, and this will be even less when T-Mobile adopts dual-carrier HSPA from 2011.
We have had a number of conversations with operators from around the world that assume that launching LTE will provide them with a boost to their mobile broadband ARPU. However, evidence from the US strongly undermines this argument. While it is true that an operator with early-mover advantage can charge a premium for LTE, that premium erodes rapidly as more competition enters the market.
In addition, LTE uptake will be limited at first so any ARPU boost from LTE will have a minimal impact on overall mobile broadband ARPU. As most customers will still be using 3G services, ARPU from 3G will continue to have the greatest impact on overall mobile broadband ARPU. By the time a company’s LTE business is large enough to influence overall ARPU, the price premium will be long gone. Therefore, cost efficiencies must be at the center of operators’ business plans.
In the US, Verizon Wireless offers two tiers of pricing: $50 per month for 5GB or $80 for 10GB, with both plans offered on a two-year contract. Verizon stated at the press conference that its larger data allowance package is expected to be the most popular.