Despite COVID-19’s challenges, 5G tariff innovation just got interesting. Taiwan operators have priced 5G by not only data size, but also by speed, while the US has indicated that speed tiers for 5G could be a reality by end-2020.
Straight Talk Consumer and Entertainment Services
Currently, the 5G tariff innovation story seems to be changing on a weekly basis. Usually, the change has to do with a speed tier being added, or a price adjustment (usually down due to competition). But sometimes, something eye-catching comes along—in the case of 3Q20, there were several things that did so.
First, Taiwan operators—Chunghwa Telecom and FarEasTone—launched speed and data tiers for 5G (for more information, see Omdia’s upcoming 5G Consumer Broadband Pricing Report: 3Q20). Tiering by data usage is common in the mobile space, but adding speed tiers to the mix provides a new lever to encourage customers to move further up the stack. To sweeten the deal, the Taiwanese operators also bundled in 5G-rich services—in this case, AR, VR, 4K streaming, and cloud games. This is the first time speed and data tiers have emerged for 5G.
Second, more monetization efforts emerged in Australia. Telstra scrapped plans to charge AUD15 extra a month for 5G customers on low-end tariffs. Rather, it unveiled new, more expensive plans that can be used by those with a 4G or 5G smartphone. With Optus, if you want bonus 5G data, you pay incrementally more. In the US, Verizon also ditched plans to charge $10 extra for 5G on unlimited plans. Rather, it reportedly intends to launch speed tiers for 5G by the end of the year.
Third, dedicated 5G gamer plans emerged in Israel, although they do not come with speed or latency guarantees. They do, however, come bundled with an Acer monitor or zero-rated premium games. And finally, 21 operators launched commercial 5G plans in 3Q20, versus 13 apiece in each of 1Q20 and 2Q20. Some 76% of telcos launched new 5G plans or pricing models in 3Q20, despite COVID-19 challenges.
Hats off to the Taiwanese and US telcos for using 5G as a catalyst to introduce a new pricing model. These two markets are highly competitive. If they can innovate then it’s time for other markets to think outside of the box on how to price 5G for consumers. Of course, telcos will need more than just 5G hotspot network coverage if they are to implement a new way to charge for 5G. Bundling 5G-rich content can also help to differentiate from 4G. Moreover, standalone 5G network capabilities (particularly its lower latency, and faster speed) could be the catalyst for operators rethinking pricing.
Is the worst of COVID-19’s impact on pricing behind us? Maybe. 2Q20 was challenging as several operators postponed plans to charge incremental fees for 5G. But still, in 3Q20, free 5G offers emerged in Japan (Rakuten Mobile) and Singapore (Singtel). We are not fans of giving 5G away for no charge. Data monetization, upselling, and moderate 5G price plan premiums should be operators’ priorities.
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