This blog is by Leslie Shannon at Nokia Solutions and Networks.
Yesterday I was talking to one of our LTE customers in Europe. It launched LTE but has had disappointing take-up, with less than 1% of its total customer base taking up the service within the first six months. Okay, I said, let’s take a look at the LTE Success Checklist that SKT in Korea has shown the world through its LTE-A launch actions and see how you’re doing against these points. Here’s how the conversation went:
Do you have excellent network quality and a good range of handsets?
“Yes, we have your network, see very high network speeds, and sell all the top handset brands.”
That’s good. Do you have wide coverage?
“ No, we don’t want to heavily invest in LTE until we know it will make money.”
Oh. Well, do you automatically give LTE connectivity to every LTE-capable phone in your network?
“No, that would dilute the value of LTE and we can’t do that. We have to monetize LTE.”
And there you have it – the conservative approach that has held much of Europe back from LTE success. This idea that “4G must pay for itself” is, to my mind, a very siloed approach, particularly when you consider that end users don’t actually pay much attention to the technology they’re on. They only notice when the connection is good or bad, and especially when it’s bad. With LTE, the connection is very, very good – so people use their connectivity much, much more.
But the premium pricing for LTE across much of Europe (i.e. making LTE “pay for itself”) has kept LTE out of the hands of the majority of subscribers. And if they don’t get to experience LTE directly, then they certainly don’t know that they need or even want it. So, the idea of adding onto the price for LTE so that it can pay its own way is actually creating a formidable barrier to LTE uptake and therefore reducing LTE-generated revenues – exactly the opposite effect from what’s hoped for. How frustrating.
“Wait,” I hear from European operators, “you’re not being fair. Those other countries that have been successful with LTE are all in the Americas and Asia and they’re just different from us. It’s cultural.” Well, the fact remains that none of the most successful LTE operators in the world require end users to do anything special to get LTE, whereas most European operators do.
And then there’s the lovely case of Orange Switzerland, who launched LTE earlier this year with plans that boldly ignored the local norm and gave LTE connectivity to every LTE-capable handset. In the first month, 4G traffic surpassed 2G traffic. Just six months after launch, the active 4G devices in their network are increasing by 20% every month and the number of users taking mid- to high-end data plans – driven by the higher levels of data they’re consuming on that “free” LTE they received with their LTE handsets – has exploded fourfold. Informa estimates that its LTE customers already comprise over 10% of its total customer base, a benchmark that many other European operators who launched well over six months ago have yet to achieve.
There are other European operators acting like Orange Switzerland, bravely showing the rest of Europe that LTE can pay for itself when you don’t slap a higher price on it in the first place. Here’s hoping the rest of the continent takes note…