Hard to Say Whether LTE Boosts Revenue for Mobile Operators

Long Term Evolution, in some cases, is boosting mobile service provider revenues in a direct way, as was hoped. In many other cases, LTE provides indirect revenue value, even when 4G prices are not formally higher than 3G data access prices.

Bharti Airtel, for example, now has started offering an LTE data plan which is even cheaper than the equivalent 3G plan.

But South Korean operators are generating significantly increased revenue from their 4G customers. EE, in the United Kingdom, likewise seems to be generating incremental recurring revenue from 4G services.

In France, Free Mobile introduced a 4G offering at no additional charge to its existing 3G service, forcing rivals to lower their 4G tariffs.

3UK is allowing customers to migrate to 4G without switching from their 3G contracts and will continue to offer unlimited data allowances. Telefonica Movistar in Spain also is offering 4G at the same price as 3G.

Of 65 LTE mobile operators surveyed by GSMA, almost half of them have used the deployment of LTE as an opportunity to introduce a new form of pricing for mobile broadband services.

For many of those mobile operators, differentiation drives the incremental revenue. That is particularly the case when unlimited data plans are replaced by new offers where speed tiers as well as volume-based data allowances are available for purchase.

The speed-based tariffs are most common in Europe, where 90 percent of operators surveyed offer them. Such tariffs are less popular across the Middle East, Asia Pacific and Africa, and least prevalent in North and Latin America where they are yet to emerge.

Bharti Airtel’s move suggests there will be pricing pressure in the Indian market. As elsewhere, though, one indirect benefit and advantage of encouraging LTE usage is that the cost of supplying Internet access is lower with 4G than 3G. For that reason, Bharti Airtel gains benefits when shifting its heaviest users to 4G, and off the 3G network.

Some might ask how 4G deployment will affect the financial return from new 3G networks still being built in India, as both networks represent new mobile Internet access services, and 4G might not be priced higher than 3G.

How Long Term Evolution affects use of Wi-Fi is not completely clear, either. Some studies suggest LTE users reduce use of Wi-Fi while other studies suggest use of Wi-Fi increases. Say
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