France Telecom Promises Higher LTE Prices

France Telecom CEO Stephane Richard says the coming Long Term Evolution 4G network will be priced at a premium to the 3G network. That isn’t terribly surprising. The established pricing model for fixed or mobile broadband access is that faster networks cost more than slower networks.

And since there is a relatively linear relationship between network speed and data consumption, as a rule, there will be a tendency for usage-based plans to cost more when customers are on faster networks.

Beyond that, service providers always have used “new features” or “new capabilities” as a rationale for higher retail prices. Aside from the fact that LTE is more bandwidth efficient, an advantage for carriers, LTE does feature lower latency, for example, an advantage for end users.

Also, as a practical matter, expensive networks, with high fixed costs, facing significant loss of current revenue, necessarily will look to price increases. Consumers of electricity and water services, for example, sometimes are exhorted to “reduce” use as a “green” effort, or to conserve resources. But if too many electricity or water customers really do so, then revenue for the suppliers drops, and they raise their prices.

So, in a real sense, the growing competition in the market, not just evolving product demand, also would force suppliers to make up revenue losses, somehow.

Executives of European carriers including Vodafone and Spain’s Telefonica say European regulators need to ease restrictions on consolidation to free up resources for investments into faster networks.

“There are hundreds of telecom operators in Europe while there are three or four in major markets like the U.S. and China,” said Jose Maria Alvarez-Pallete, Telefonica’s COO.

For all of those reasons, higher mobile broadband pricing is coming, as mobile service providers build 4G LTE networks.