Will Everything Everywhere’s superfast mobile broadband see superfast customer take-up? James Verrinder reports
Everything Everywhere (EE), the mobile network formed from the merger of Orange and T-Mobile, launched 4G services in the UK last month. The firm promises that the new “superfast” mobile broadband network will allow users to browse the web without having to wait for pages to load, download high definition videos in “minutes”, watch live TV without buffering, play multi-player games on the go and make better quality video calls.
Everything Everywhere claims that by Christmas the 4G service will be live in 16 cities and will cover 20 million people. The rollout will continue throughout 2013, and by the end of 2014 the company estimates that 98% of the UK population will be 4G-enabled.
Kantar Worldpanel’s consumer insight director Imran Choudhray believes that the launch of 4G is being “heralded” in the telecoms industry as “a moment to remember” -on a par with the shift that took place when consumers switched their household internet connection from dial-up to broadband.
But can Everything Everywhere, and other mobile networks, expect a rush of consumers ready to make the switch from 3G to 4G? The economy remains in the doldrums - although in September consumer spending did rise at its fastest rate for three years.
And what about those who are already tied down to long-term contracts with other providers -some as long as 24 months. Can they afford to upgrade early? And won’t faster download speeds mean increased data usage, and thus bigger phone bills?
We asked three experts to consider some of the stumbling blocks as we move to the fourth generation of mobile communications. Welcome to the Research Clinic.
HANDSET COST AND AVAILABILITY
Imran Choudhray: There is a lack of 4G handsets in the UK market at the moment. Manufacturers were not expecting 4G in 2012 - however, with Everything Everywhere launching, some manufacturers have put handsets in place that will be 4G-capable, including the iPhone 5.
Paul Flatters: There are clearly a lot of consumers who lean towards the leading edge and want the latest technology. But 4G faces an economic situation that none of the other mobile launches has had to go through. Consumers are willing to spend on things like broadband and technology, even now, but the costs of 4G handsets are expensive and will inhibit some people.
Samuel Gee: Although the most visible handsets capable of accessing a 4G signal at the moment are all premium level - such as iPhone 5 - the high rate of development means there will likely soon emerge a number of more mid-market leaning Android alternatives. Operators keen to begin recouping network rollout costs will likely subsidise various mid-range devices to provide the widest possible set of entry points to the market, bringing in as many consumers as possible to 24-month contracts.
EXPENSIVE DATA PLANS
IC: Seldom does a new service get put to consumers without a new pricing structure to match. This could prove the ultimate deciding factor, especially in the infancy of 4G. Most of us in years to come will have some sort of 4G service as part of our contract in the same way that 77% of current contract owners do 3G data plans. With the improved speed 4G will bring, 1GB allowances will no longer be sufficient and the average data allowance could rise to 3GB by 2014. If priced too steeply consumers will delay this migration.
SG: I’m not sure I see the long-term continuation of capped, 1GB data plans on high-speed networks - especially once streaming services that leverage the higher bandwidth become popular. It’s more likely that unlimited data will become the standard offering, with operators trying to recoup costs either by bundling data in and then raising contract prices across the board, or trying to monetise users with subsidiary services. Early market reluctance due to high cost data plans compared to 3G alternatives is going to need to be addressed by operators as the technology becomes the de facto standard. Tiering contract costs by accessible network speed rather than data would be an unusual, but possible move.
PF: I think getting people to switch data plans is going to be tricky as consumers know that they are only going to have to wait until summer before the other providers catch up and start offering 4G in competition to EE. A lot of things have to fall into place for them to elegantly switch contracts. Had it been another year or 18 months people may have taken the plunge and the expense and changed over, but if they know it’s coming within six or nine months they’re likely to hang in there.
EXITING LONG TERM CONTRACTS
IC: This is probably the least difficult barrier to overcome. With most contracts in the market being 24 months, consumers have become used to the idea of being tied down to long contracts (despite it no doubt annoying them). However it must be remembered that extending beyond the two-year threshold in exchange for 4G services and capable devices is not likely to yield positive results.
PF: I think this will be a real inhibitor. It reminds me of those people who are switching from Sky TV to Virgin Media or vice versa. You make the call to cancel but you get some pretty compelling reasons and offers to induce you to stay. I assume that if you’re a Vodafone customer and want to move so you can get 4G, I think your existing provider is going to do everything they can to keep you.
SG: Consumers currently serving out the remainder of their 24-month contracts may well resent the time they have to wait before they can enjoy a 4G handset, but in market terms it will make little difference, and indeed may well have a net positive effect. A slight delay before widespread adoption will simply allow operators more time to optimise their service and build more competitive offerings, and more time for phone manufacturers to integrate 4G functionality into a wider set of cost-competitive handsets.
This will, over the next 24 months, encourage and ease the entrance of consumers into the market. If the high rate of Android handset releases continues, operators may start experimenting with leasing schemes to give consumers rolling access to the newest devices.
SG: Realise that the highest value for consumers of a 4G network is the increased ability to acquire content, or share larger pieces of content, while on the go. Ignore low-level data capping to that end, and work on a business model that facilitates seamless use of the available bandwidth. Building an HTML5 payment portal would allow any given operator to integrate themselves tightly with the mobile web at this important stage of its growth.
IC: Network carriers should segment the market into consumer groups that range from priority targets who will seek out 4G to those laggards who will resist it and then target accordingly. However they must offer 4G handsets at heavily subsidised levels across the board to encourage the use of 4G. Failing to adopt a high-subsidy business model will only pass on the cost to the consumer and result in a sluggish uptake of 4G. Pricing of the 4G data plans shouldn’t be too steep or consumers won’t migrate, especially when they are yet to experience the benefits.
PF: 4G needs to figure out what its killer app is and what it offers consumers over and above 3G - and it’s not just megabits per second. It’s about what it allows you do, so the important thing to focus on is educating the mainstream. There’s a lot of speculation about what the main advantage may be, like watching TV, the iPlayer or M-commerce - but whatever it is, that’s the message mobile operators need to convey.