Marek’s Take: Solving the 5G pricing conundrum

Marek's take

Transformational. Revolutionary. Those are just two of the adjectives that the wireless industry uses to describe 5G. But if this next-generation of wireless technology is so great then why aren’t operators also coming up with transformational and revolutionary pricing scenarios that will entice customers to upgrade to 5G? So far, all I’m hearing is more of the same monetization models that have been used in 4G and with home broadband. For 5G to succeed, I believe operators will need to think beyond speed-based pricing and data buckets.

For example, when Verizon launched its mobile 5G service, called 5G Ultra Wideband, in Chicago and Minneapolis in April, the operator added an extra $10 per month to the price-tag for customers with any unlimited plan. But, that strategy didn’t work very well, particularly considering Verizon’s 5G footprint in those cities is still very limited. In less than a month Verizon backpedaled, and now is waiving that $10 fee in hopes of getting more customers on the service.

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AT&T doesn’t seem to have a better plan. The company said in December that customers in its initial five 5G markets (which had limited coverage) would be able to use a 5G hotspot from Nighthawk to get the service. AT&T charged $70 per month for 15 GB of data and no annual contract. The company plans to offer two 5G-capable smartphones this year but has not yet announced how the mobile service will be priced. During the company’s earnings call late last month, CEO Randall Stephenson hinted that AT&T will price its 5G service similar to broadband internet in the home with different prices for different broadband speeds.

But, U.S. operators aren’t the only ones lacking in inspiration. South Korean operator KT is offering unlimited 5G data packages, which is similar to how it sold 4G service. The only difference is that with 4G data plans, KT throttles data speeds once a user hits a certain level of data usage. With its 5G plans, the operator doesn’t have a speed cap. But, maybe South Korean operators don’t need to do anything differently to entice customers to 5G. According to recent reports, South Korea’s 5G subscriber base is growing rapidly. All three operators —KT, SK Telecom and LG U+ — launched commercial 5G services on April 3 and in just one month the country is reporting that it has more than 260,000 5G subscribers across all three operators.

RELATED: South Korea carriers announce 5G pricing, data plans

Lynnette Luna, principal analyst with GlobalData, cautions against comparing the U.S. market to South Korea. “It’s a different market, and it doesn’t always translate,” she said. “Consumers there seem very willing to try new things.”

What will work?

It’s probably a bit unfair to be critical of U.S. operators for not thinking outside the box when it comes to 5G pricing. After all, it is still very early in the launch process, and perhaps there are some interesting 5G monetization models in the works that we just haven’t heard about yet. Luna thinks one option operators should consider is to bundle the price of data with a service. For example, if you want Hulu delivered in high-definition to your smartphone you’ll pay a flat monthly fee for that service and the data will be included. Or, if you want to play an augmented reality game, you’ll pay a flat fee as well. “There are a lot of ways carriers can play,” Luna says. “But they need to provide a little more value in the value chain. In other words, be more than just a connectivity provider.”

And that also means playing up the things that 5G offers that 4G does not. For example, 5G is about being able to do things like network slicing and using software to program the network. Why not charge more for some of the services that will be made possible by edge computing? Or, why not layer software on top of 5G connectivity that will enable a service like cloud computing? Of course, these last two examples are much more targeted to enterprises and not consumers. But, many of the concepts that make 5G transformational and revolutionary are really targeted at enterprises.

Maybe the answer here is not to try to solve the consumer 5G pricing conundrum right away but instead to focus on how to make 5G a success with enterprises and business users. That may not be as sexy as augmented reality gaming, but it will make 5G a success in the long run. — Sue

After a two-and-a-half-year hiatus from Fierce to work for a startup, I’m currently taking some time off to travel the world and see some sights other than trade show convention halls. However, I’ll be checking in every now and then to provide you with my latest insights and observations on the telecom world.