Making money from LTE

Sue Marek

U.S. operators are spending billions to build out their LTE networks--but are they reaping the rewards of their efforts? Currently, there is a huge discrepancy between what operators are charging for data, with some charging a premium and others offering free data.

Consider this scenario: Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T) sell LTE data on a tiered pricing structure, where customers buy buckets of data for a certain price and then share it among several devices, including smartphones and tablets. Others such as Sprint (NYSE:S) are differentiating by offering unlimited data to customers. T-Mobile US (NYSE:TMUS), meanwhile, recently launched a disruptive model for tablets that gives customers 200 MB of LTE data every month for the life of the device.

According to Susan Welsh de Grimaldo, director of the mobile broadband practice at Strategy Analytics, these different LTE pricing strategies reflect the overall marketing philosophy of the operators. For example T-Mobile is a new entrant in the iPad market and wants to create waves and get some traction, so it is offering 200 MB of data per month for free. However, Welsh de Grimaldo also noted that operators have started to react quickly to the competition and mirror what others are doing. In other words, if T-Mobile's free 200 MB of data works, others may follow that lead.

But overall the LTE pricing strategies that U.S. operators have implemented so far have been fairly unimaginative, particularly considering one of the big promises of LTE was that it was going to offer carriers the ability to charge customers in real-time because the operator would know exactly what customers are doing on the network at any time, therefore creating all kinds of interesting marketing opportunities.

Real-time charging hasn't become reality in the United States--at least not yet. Most experts say this is because operators are just now getting all the necessary tools in place to do more creative billing. For example, network mapping and analytics tools are necessary so operators can segment customers and match them to innovative pricing plans.

Another practice that has not gained traction yet is bundling the price of the data with a certain type of content. Welsh de Grimaldo said that she believes operators are looking into this type of pricing and perhaps we will see some momentum in this area in 2014. She noted that some of the delay could be with operator content delivery networks--the network has to leverage the CDN to make this happen.

FierceWireless delved into all these issues in the FierceWireless ebook "Making Money from LTE." To read more about these LTE monetization schemes, click here. --Sue