Price of 4G LTE: right now you pay 20% premium over 3G, but competition will push it down
posted by Victor H.
Oct 08, 2012, 6:32 AM
The arrival of 4G LTE networks with their high speeds matching and often even surpassing the speeds of your cable internet is a great thing, but as a novelty you are paying the tax for that. Right now, 4G is nearly 20% more expensive than an equivalent 3G plan, according to a report from ABI Research.
Still, the growing competition is expected to push prices down in the near future.
We’ve already seen the first changes in South Korea where SK Telecom had to increase data allowance for its $55 plan from 3GB to 5GB. Similar price and data allowance tunings have been made in Norway, Hong Kong and the United States.
Interestingly, right now 4G LTE is cheapest not in the United States, where it is most widespread, but in Hong Kong, which launched a 4G network in November last year.
Still, it’s clear that the nascent LTE is an opportunity carriers aren’t likely to miss.
"There will be a premium [for LTE]. The model with HSPA+ has made it clear that customers will pay," France Telecom's CEO Stephane Richard said. "We want to accelerate the LTE rollout in France in order to get ahead of the competition."
In a nutshell, prices will come down, and we have the first signs showing right now. The real question is how fast.
Compared to 3G data pricing, 4G is around 20% higher than 3G for the equivalent data-plan but there are signs 4G tariffs will succumb to the downward pull of competition sooner rather than later. "In South Korea, SK Telecom has cut its 4G pricing to remain competitive. Their 'LTE 62 Plan' for smartphones used to be priced US$55.04 for 3 GB of data, but the monthly download quota has now been increased to 5 GB. ABI Research has seen similar 4G mobile data quota and/or pricing revisions in Norway, Hong Kong, and the US," said Jake Saunders, VP for forecasting at ABI Research.
According to ABI Research's cross-country comparison of mobile data pricing, the world's cheapest 4G data plan is currently on offer by CSL Hong Kong, which launched its 4G service in November 2011. For 3G mobile data, the lowest tariff can be found in Singapore. Singapore's M1 offers a 4 GB data plan for the remarkable tariff of US$9.62.
"4G technology has given operators, not just greater download speeds, but also greater capacity. Therefore there is a degree of price elasticity," added Research associate Marina Lu. "As 4G devices come down in price, operators will be keen to increase 4G market-share. Cutting tariffs, or boosting data quotas, will be tempting but they need to make sure they achieve greater overall returns."
Voice tariffs are also benefiting from LTE. A number of operators are rolling out Voice over LTE (VoLTE). From analysis carried out by ABI Research into VoLTE services, the higher fidelity offered by VoLTE could help overcome the decline in voice-related ARPU. However, VoLTE is not being priced at a premium over existing circuit switched mobile voice services.
For more information, please visit ABI Research's "Mobile Data Price Tracker." This study is part of the firm's Mobile ARPU Database Service, which also includes additional Market Data products, ABI Insights, and analyst inquiry support.
ABI Research provides in-depth analysis and quantitative forecasting of trends in global connectivity and other emerging technologies. From offices in North America, Europe and Asia, ABI Research's worldwide team of experts advises thousands of decision makers through 70+ research and advisory services.
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