This blog is by Leslie Shannon from NSN.
The other day I saw an intriguing set of results from a survey that one of our operator customers conducted with its subscribers. We all know that people value factors such as network quality, coverage, handset selection, content, etc. We also know that they tend to value some things over others. What this survey suggested was that there is a clear order of preference that’s a bit like Maslow’s hierarchy of needs. People might say that being loved has a higher importance to their quality of life than basic shelter does, but if they have to choose, they will make sure they have a roof over their heads before they start looking for love.
What was revealing about this survey was that it pointed towards network coverage as the most important factor of all, with network consistency at #2 and speed at #3. In other words, subscribers in this Asian market wanted the network to be there – and be everywhere – before they thought much about speed. High speed in selected locations, but no coverage, or unreliable coverage, in the rest of the country was simply unacceptable. This is a great lesson for us all – when rolling out LTE, we need to remember that 2G/3G coverage still needs to be widespread, and good, before people will be interested in superfast data.
But these results are even more intriguing when extrapolated to the medium term. Once LTE networks are everywhere, and reliable, and fast, and all operators in the market have reached the same point – how can they stand out from their competition? We’re already starting to see some signs of what the next battlegrounds might be: handset subsidies and content.
In the United States market, where Verizon has covered its entire substantial 3G footprint with LTE and announced that its rollout is complete, we can already see one model of the next round of turf wars. While T-Mobile and Sprint have reaffirmed their commitments to unlimited data plans (Sprint: Unlimited Data for Life! Fine print: Streaming speeds may be limited to 1 Mbps), Verizon and AT&T have held firm in their refusal to take the path of unlimited data, a decision I wholeheartedly support. Instead, they’re competing with T-Mobile’s rapid handset trade-in program by offering their own trade-in offers. Okay, the Verizon and AT&T offers don’t actually save anyone any money, but they are competing with T-Mobile with easy smartphone trade-ins instead of engaging in a war over the size of data packages. Maybe there’s hope that this time around our industry won’t destroy the value of data by reducing the price to practically zero.
Meanwhile, in Denmark, the opposite has happened. The operators herehave already had an LTE price war. As a result, today you can get a dongle from 3 Denmark for 1000 GB per month at about US$72, or a dongle from Telia Denmark for 500 GB per month for US$69. In terms of making money, this makes no sense! However, after this bloody beginning to LTE in Denmark, Telia has decided to change the game. With that 500 GB dongle plan, you also get a 12-month subscription to HBO, in other words high-value, long-form video content explicitly bundled with an LTE subscription, something that hasn’t been done in too many other markets yet. This move by Telia suggests that operator-provided content will become increasingly significant once LTE rollouts near completion and competition moves beyond basic network availability and quality.
Sure, the open internet will always be the primary source of information and entertainment for most users, but it doesn’t take much imagination to see that certain high-value entertainment and sports content is likely to become a significant differentiating factor in the medium term. Excellent quality counts when you’re watching a penalty shoot-out live, so people may be willing to pay a bit more for it. Smart operators will be looking at their content portfolios and content delivery systems now to make sure they are in the best possible position to attract and retain LTE customers once they’ve achieved those critical first must-haves of network coverage and quality.