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25 April 2019

Verizon joins KT, SK in 5G price parade – prompting ARPU ambiguity

After the big announcements about network architecture plans which dominated the talk from 5G early movers last year, now they are getting down to the nitty-gritty of pricing, and providing at least some preliminary indicators of how that might vary, if at all, from 4G.

A big dilemma for operators is how to increase the revenue they can squeeze out of existing consumer bases with 5G. New applications may generate new revenue streams, especially when next generation technologies fully support critical and IoT communications. Verizon and AT&T are aiming get additional dollars from the consumer base by offering fixed 5G in some areas, though how far this is succeeding so far is open to doubt.

But the first priority for most MNOs will be to target enhanced mobile broadband speeds and applications at their consumer markets, and in that environment, it is hard to understand how they will make a dramatic boost to their ARPUs. When LTE was new, only a few early adopters managed to charge a premium compared to 3G, but at least there was pent-up demand in many markets for faster data rates, and many MNOs had moved away from unlimited data plans.

With 5G, it is hard to see many users being prepared to pay extra, as few of them use all the speed and capacity available with 4G. And the world has shifted back to unlimited data.

The aim will presumably be to encourage customers to buy bigger ‘unlimited’ buckets in order to take advantage of new applications such as augmented reality gaming, but outside a small base of enthusiasts, that is likely to be a slow process.

The first pricing indications are coming from the recent commercial launches in South Korea, and from Verizon. Korea’s KT is offering three unlimited 5G plans in its consumer plans, plus a conventional 5G Slim plan offering 8GB for $48.50 a month. It says there are no speed caps and is offering a three-tiered approach. First up is 5G Super Plan Basic – offering unlimited smartphone data plus 5GB of tethering for around $70. Next is 5G Super Plan Special – with unlimited smartphone data plus 50GB of tethering for around $88. And lastly, 5G Super Plan Premium – boasting unlimited smartphone data, 100GB of tethering for around $115 (The additional charge for tethering will act as a deterrent to users feeding video to TVs from their handsets, potentially eating into the wireline broadband business).

The operator is also offering other incentives, such as eight ‘super power’ services in communications, games and media categories. These will be enhanced by the deployment of edge computing centers in eight major cities plus Jeju Island, to improve streaming quality. It is even planning the “world’s first 5G theme park” on the outskirts of Seoul, to add to its existing VRIGHT virtual reality theme park.

Verizon has also announced pricing for its mobile service, though it does not yet have handsets available, unlike its counterparts in Korea. For now, subscribers need a $350 attachment for the Moto Z3 smartphone to use 5G, and the mobile service is only currently available in parts of Chicago or Minneapolis.

It is also offering three tiers of unlimited data, choking speeds when the network is congested or users exhaust their allowances. The lower the ARPU, the further down the service goes when choked.

In contrast, Verizon’s three tiers kick off with Go Unlimited, which chokes hotspot usage down to 600Kbps and limiting video playback to DVD standard if the network is congested – priced at $75 a month. The middle tier is called Beyond Unlimited, offering 15GB of hotspot at LTE speeds and streaming video at HD standard. It only reduces the speed to LTE levels after a customer has used 22GB that month – costing $85 a month. Verizon’s premium offer, Above Unlimited, offers 20GB hotspot at LTE speeds with video at HD quality, only reducing the speed to LTE levels after a customer has used 75GB that month. This comes in at $95 a month with cloud storage. All the Verizon plans offer unlimited talk and text in the US.

SK Telecom, meanwhile, has rolled out four plans which it dubs 5GX. These are the Slim package – 8GB of data at $49 a month and 1Mbps speeds after the data cap. 5GX Standard – 150GB of data for $66 a month and 5Mbps after the data cap. 5GX Prime – 200GB of data for $84 a month but no data cap revealed yet. Finally, 5GX Platinum – 300GB of data for $125 a month, again with data cap not revealed yet.

Until the end of this year, 5GX Prime and 5GX Platinum offer unlimited data and no speed restrictions for $78 and $110 a month respectively as a special promotion.

SK Telecom has deployed 34,000 5G base stations around South Korea and plans to expand 5G coverage to subways, national parks and festival sites during the second half of 2019. It has also been working on indoor coverage in 120 department stores, shopping malls and airports, claiming its home-designed ‘total in-building solution’ offers four times faster data rates than its competitors.

Meanwhile, LG Uplus is offering three 5G packages with far smaller data plans. It is offering 9GB for $49 a month, 150GB for $66 a month, and 250GB for $84 a month, with promotional deals including VR headsets, smartphone insurance vouchers, or YouTube Premium subscriptions.

It remains to be seen whether applications like VR will enable operators to convert increased usage into higher ARPU with 5G – or whether they will end up supporting far more traffic while generating similar per-user revenues. In 4G, it has been a very mixed bag. According to recent analysis by tefficient, in 2018, data usage per SIM grew for all the 90 MNOs which the company tracked. Of these, 46% were able to convert the data traffic boost into higher ARPU, but 54% could not.

Of the 90 operators, 11 reported monthly SIM usage of above 10 GB, with Zain Kuwait taking the world’s top spot for data usage, with average consumption of 21.5GB per SIM a month. It did manage to achieve revenue growth, offering unlimited data-only plans for €46, and smartphone plans with up to 1TB of data for a hefty €116.

Finland’s DNA was second, with a rise in average SIM usage a month from 15.9GB in 2017, to 20.8GB in 2018. After DNA came Three Austria, Elisa of Finland, Zain Bahrain, Taiwan Mobile, FarEasTone Taiwan, Zain Saudi Arabia, Telia Finland and Chunghwa from Taiwan.

The report noted, “All three Finnish operators (DNA, Elisa and Telia) have been able to grow ARPU thanks to more and more customers upgrading to faster (and more expensive) speed tiers on their unlimited plans.”