By
Mike Manzo*, Chief Marketing Officer,
Openet
If you’ve ever seen the film The Incredibles, you may remember a line from the arch villain Syndrome, “
When everyone is super, then no-one is”. Heavy stuff from a kid’s movie, but a good analogy for marketing LTE on network speed and price plans alone. It’s fine at the start to attract new subscribers, when competition is not rife and speed is a major selling point over 3G. But what happens when most operators in a country have LTE networks? They’ll need a significant differentiator other than network speed to attract subscribers. Price is the easy way to go, but operators don’t want a price war, as they’ll need to recoup the investment made in LTE.
So if network speed will not be a long-term differentiator, and having the lowest prices is an unsustainable model, then what’s the strategy to attract subscribers to LTE, retain them and stimulate usage?
According to recent research from Telesperience, price is not the most important attribute in consumer’s decision when selecting a mobile operator. Instead, mobile subscribers ranked “met their needs” and a sense of fairness as being most important. What this means for operators is that understanding subscribers’ needs and matching the offer to their behaviour is well worth the effort in terms of improving satisfaction ratings and loyalty. To keep subscribers happy, the operators must regularly analyse usage and behaviour, and promote the plan that best meets their subscriber needs.
Understanding subscribers’ needs means that operators should be principally concerned with usage, behaviour, context and network experience.
Current LTE offers take into account usage and network speed in an effort to provide a variety of pricing models. A good example of using multi-tier pricing to attract LTE customers is Omnitel Lithuania, which is part of the Telia Group. The Group currently has live LTE networks in Sweden, Norway, Denmark, Finland, Estonia and Lithuania. Omnitel offers tiered data plans based on speeds and monthly data allowances. These offer very different profiles in terms of speed and volume, as can be seen from figure 1 below.
Name | Max Download Speed | Volume | Post-Paid | Premium to 3G | Enforcement |
Internet PC 4G 5 | 30 Mbps | 5GB | $29.22 | 41% | Throttle back to 120 Kbit / s |
Internet PC 4G 10 | 80 Mbps | 10GB | $41.93 | 100% | Throttle back to 120 Kbit / s | <><><>
Figure 1: Omnitel LTE Packages
*Prices represented in US $
Can tiered based pricing deliver value to subscribers? If the subscribers are on the plan that best fits their individual usage, behaviour and expectations (e.g. a decent network speed for the applicable service/content type), then the answer should be yes. With LTE many operators are charging overages, for example Verizon charges $10 for additional 1 GB usage over plan. If a subscriber is using a lot of data heavy applications such as video, then they could quickly use up their monthly data plan allowance and rack up a hefty bill. Operators need to guard against churn of new LTE subscribers and bill shock needs to be avoided. Several operators, such as Omnitel, are throttling back speed when a subscriber reaches their data cap. Deutsche Telekom, which markets LTE as a DSL alternative to regions of Germany with no or limited DSL coverage, uses tiers when throttling back speed: use over 3GB usage and speed is reduced to 1 Mbps. Go above 5GB and speed is reduced to 384 kbps. Some operators will allow customers to buy data top ups – for example customers of Telia in Sweden can buy tops ranging from 1GB to 10GB costing from $4.70 to $28 respectively. Buying data top ups is well and good, but if a subscriber uses up their plan allocation in a couple of days and can’t afford to buy data top ups, then having LTE throttled back to 120K, as is the case in Sweden, may not bode well for the overall user experience. This could lead to churn and subscribers may well switch to the unlimited 3G plan that some operators are providing. So the danger is that operators could actually lose customers after spending money to entice them onto LTE, if the service does not deliver value and the network experience that the subscriber is expecting. So the takeaway should be to monitor usage and communicate to the subscribers – keep them informed and don’t deliver any nasty surprises.3GB usage and speed is reduced to 1 Mbps. Go above 5GB and speed is reduced to 384 kbps. Some operators will allow customers to buy data top ups – for example customers of Telia in Sweden can buy tops ranging from 1GB to 10GB costing from $4.70 to $28 respectively. Buying data top ups is well and good, but if a subscriber uses up their plan allocation in a couple of days and can’t afford to buy data top ups, then having LTE throttled back to 120K, as is the case in Sweden, may not bode well for the overall user experience. This could lead to churn and subscribers may well switch to the unlimited 3G plan that some operators are providing. So the danger is that operators could actually lose customers after spending money to entice them onto LTE, if the service does not deliver value and the network experience that the subscriber is expecting. So the takeaway should be to monitor usage and communicate to the subscribers – keep them informed and don’t deliver any nasty surprises.
There’s been some speculation around the introduction of time-based LTE tiers in the US in the last couple of months. Meanwhile in South Africa, mobile operator 8ta, which is the mobile arm of Telkom South Africa, launched a 3G data service with a ‘Midnight Surfer’ option, which offers half price 3G between midnight and 5am.
Tiers based on applications are also becoming more popular. Telefónica Columbia has recently introduced 5 different packages bundled with applications – ranging from basic mail and browsing service to an option with 9 different applications including You Tube. Pricing this way enables lower cost entry points for mobile data and will see more mobile data adoption.
Operators launching LTE services can take ideas from the best 3G plans and packages and add the element of speed and dynamism that LTE enables, and a deep customer understanding to develop offers that will deliver value to customers. This will mean a multi-tiered micro-segmentation approach where there is a move towards personalised services.
However, at present most traditional mobile phone plans are tiered on usage. With LTE network speed also becoming a dominant pricing variable, understanding the subscriber and ensuring they are on the right plan involves looking at the subscribers’ volume of usage and what they are primarily using LTE for – e.g. heavy data usage, video, online gaming – as well as the context in which it’s being used.
With LTE one of the main selling points (at present) is speed. Telia in Sweden goes as far as to offer a ‘speed promise’. They will guarantee a minimum of 10Mb/s for customers in an area of LTE coverage. In Sweden LTE offers are priced at premium over 3G, but not too high to dissuade 3G customers from trading up. Even in 3G we’re now starting to see some innovation in terms of marketing network speed. In Singapore, SingTel has introduced Priority Pass for higher end 3G data packages. This means that customers who have a priority pass will see their data traffic get priority at peak periods. SingTel have also been promoting their 3G packages based on ‘typical download speeds’, as opposed to the traditional ‘up to’ speeds.
To provide an LTE service that delivers value to each subscriber, it is important to understand an individual’s usage, behaviour and network/service expectations. What and how subscribers pay for LTE service will contain more variables that standard 2G or 3G pricing. Analyst firm Yankee Group recently described the Holy Grail of mobile broadband pricing as convergent, personalised and dynamic.
This could lead to a natural progression in the business support systems (BSS) of mobile operators and the introduction of subscriber optimised charging. Such an approach to charging involves understanding how a subscriber is using the LTE service, including which services, which devices, in what context and their overall network experience, in order to provide plans and make offers that subscribers will value as they are personalised and/or dynamic. An example of such an offer could be upselling a ‘speed boost’ direct to the device, just as a subscriber has selected to download a video. This is an example of using subscriber intelligence in real-time to offer a triggered service which enhances the subscriber’s network experience and creates additional revenue for the operator.
To provide optimised charging requires delivering the optimal network experience by dynamically allocating bandwidth, providing real-time charging capabilities for any payment mechanism and having a single view of the subscriber. This is a significant advancement on traditional charging platforms used for 2G services. LTE subscribers’ needs will be more complex than say 2G or even 3G, so having the technology in place to deliver services that meets these needs will be required. These functions for LTE can co-exist on an adjunct basis with existing 2G and 3G IN platforms and billing systems, thus protecting an operator’s investment in 2G and 3G BSS.
Winning and retaining LTE customers while stimulating usage needs a strong marketing proposition. As research has shown, the ability to understand subscribers’ needs and provide compelling plans or offers is key when looking to attract and nurture subscribers. With LTE there will be more variables in the subscribers’ needs and meeting these needs will require an in-depth understanding of subscribers - delivering what they want, when they want it and how they want it. Having optimised charging in place will play a significant role in the effective delivery of LTE services and enhanced experience that subscribers want and makes them feel valued. If subscribers feel a sense of value then they may also feel just a little bit like they’ve got a superhero on their side.
*As Chief Marketing Officer, Michael Manzo oversees all aspects of marketing and product management. Prior to joining Openet in July 2006, Michael worked in the Enterprise Solutions group at Nokia, where he consulted on M & A integration and marketing of enterprise mobility solutions. Michael has also held executive positions at Traverse Networks (acquired by Avaya), Omnisky (acquired by EarthLink), Telocity (acquired by Hughes DirecTV), and Notify Technology Corporation. Michael has a BA in Journalism from the University of New Hampshire.
LTE and the Rise of Optimised Charging
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