When I wrote a piece on the mobility premium concept a few years back (and a subsequent follow-up) to highlight the fact that consumers place a higher value on mobile connectivity over fixed broadband, I noted that American consumers were willing to pay 14X more for mobile data compared with fixed broadband data. I received a note from a reader in Europe asking about the mobility premium for Europe. I didn’t have the answer, but noted that it would likely be smaller, since the fixed-mobile convergence trend in Europe is generally further ahead for various reasons, including data consumption and diverse fixed and mobile competitive dynamics.
With Finland operator Elisa’s 5G commercial launch and innovative service pricing, we now have a data point to examine Europe more closely. Elisa is the leading mobile and fixed operator in Finland, with about 4 million mobile subscriptions. It recently announced its 5G pricing plans based on speed tiers for its mobile and fixed wireless (FWA) broadband services, as shown below. Elisa is breaking the pattern established by other operators.
To my knowledge, Elisa is the first operator to announce 5G pricing based on speed tiers instead of volume. As shown above, Elisa’s 5G pricing plans indicate that the mobility premium in Finland is pretty small: 7-14%. While this data point from Finland does not represent the diverse telecom markets in Europe as a whole, it guides what the potential mobility premium could look like in an arguably fully converged mobile-fixed market.
Could the mobility premium in the U.S. reach that low level? The short answer is, no—not in the near- to mid-term. The mobile and fixed data usages in Finland and the USA are quite different. According to the Elisa CTO at a recent Huawei event, an average mobile subscriber consumes 25 GB per month vs. 172 GB per month for a fixed household. That’s a roughly 7:1 ratio between fixed (household) vs. mobile (subscriber).
In the USA, our estimate is roughly a 30:1 ratio between fixed (300 GB per month estimate) and mobile (10 GB per month estimate) data usage. In other words, the distinction between fixed and mobile data usage is pretty stark. The U.S. mobile operators would have to make significant investments in spectrum and network densification to generate enough network capacity to satisfy the overall fixed and mobile broadband demands.
In addition to leveraging the millimeter wave and unlicensed and shared spectrum bands via LAA and CBRS/OnGo, operators would need to deploy large swaths of the C-band spectrum to deliver the “hundreds of Mbps” speed broadly.
So, what are the lessons of the Finland case study for the U.S. telecom market? First, 5G with a newly available spectrum in the millimeter wave and the 2-4 GHz mid-bands can provide an FWA alternative to wired broadband—but a broad rollout will be less likely for the reasons noted above.
While a faster 5G connectivity blurs the “speed” distinction between fixed and mobile broadband, the “volume” distinction between fixed and mobile data usage in the USA will likely remain for the foreseeable future.
Secondly, with the possibility of diminishing return in a converged fixed-mobile consumer market, the operators may focus their attention on the industrial enterprise segments where the massive and critical IoT and low-latency features of 5G can bring new network capabilities to these potentially more lucrative markets.
Finland’s Elisa shows us that an operator can deliver truly converged fixed and mobile services with 5G with increased network capacity and faster speeds. Also, the Finland case study indicates that the mobility premium is real—even in a fully converged fixed-mobile market—although it is pretty small.
Ultimately, the mobility premium is a reflection of consumer broadband usage and the competitive landscape among fixed and mobile operators. This is a glimpse of the future: as networks are more converged, ROI gets more difficult to achieve on big investments. At the same time, the operators know that they have no other choice but to satisfy the growing traffic demand. It is better to see their networks being utilized rather than sitting idle.
Kyung Mun is a senior analyst at Mobile Experts LLC, a network of market and technology experts that provides market analysis on the mobile infrastructure and mobile handset markets. Over the course of his 20+ years in the wireless and cable industries in a dynamic range of roles from engineer to product manager and technology strategist, Mun has contributed to the advancement of mobile communication while working at leading companies in the mobile value chain including Motorola, Texas Instruments, Alcatel-Lucent and a few startups in between. He holds undergraduate and graduate degrees in electrical engineering from the University of Texas at Austin and Georgia Tech, and studied finance and strategy at Southern Methodist University.
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