Feature Article

January 08, 2013

LTE Could Change Retail Packaging in Big Ways

For industry observers or practitioners who dislike the notion that high speed access is an undifferentiated commodity, Long Term Evolution fourth generation networks might be one of the biggest marketplace changes to affect markets in 2013, not least of the reasons being that LTE sets the stage for a segmentation of the access market, sets the stage for different retail packaging and potentially enables new lead apps.

Observers will disagree about the potential impact of large telcos substituting LTE for fixed broadband, but such substitution could change local competitive dynamics.

In the retail pricing arena, Verizon Wireless already is moving to make domestic voice and text messaging a simple part of the fee to use the network, and not a variable cost element.

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Finally, as was the case for third generation networks, supporters believe new lead applications will be created specifically because of network features and capabilities.

How much change actually happens is not yet clear. Will customers readily adapt to high-bandwidth mobile networks as viable substitutes? And if so, what are the implications for all other competitors in those markets?

Those changes, though, mostly concern market shares for broadband access providers. It arguably is more important whether retail packaging and rating will change. Some would argue the shift to usage-based mechanisms, of some sort, already is well underway, and will be a staple for LTE services, for the most part.

What remains to be seen is whether other refinements, such as quality of service features, or pricing based to some extent on “value,” will develop. Up to this point, QoS-based services have generally not been attempted in the consumer markets, though there have been some experiments with mobile service plans that charge differently based on whether users want to use YouTube, for example.

And nobody seems to be quite sure what “brand new “lead apps” might emerge. Some think mobile video is the most-likely new category, while others might argue for personal hotspots.

The answers will be highly significant, as industry executives already are hard at work trying to jumpstart new revenue-creating applications that will replace revenue growth once mobile data plans themselves reach saturation.

Of the potential changes, the biggest unknown is whether some form of “pricing by value” will develop, and who will pay. Entertainment video will consume quite a lot of network capacity, but that has to happen in the context of what people expect to pay for a single movie or TV episode.

On the other hand, quality of service for a work-related videoconference might command a premium unrelated to bandwidth consumption. Other applications might have different opportunities for pricing based on value of the applications.

Some might argue the creation of new retail charging mechanisms is as important as the discovery of big new revenue-generating applications.

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