Report: LTE commands 20% premium, but competition will throttle it back

LTE tariffs are already being driven lower as operators that pioneered the technology encounter growing competition, according to a report from ABI Research.

The current 20 per cent premium being charged for LTE over an equivalent 3G data plan will yield to downward pressure sooner rather than later, ABI Research said in a new study. The firm points to South Korea, one of the first countries to launch LTE services, where operators are already revising their tariffs to stay in touch with rivals.

"SK Telecom has cut its LTE pricing to remain competitive," said Jake Saunders, vice president for forecasting at ABI Research. "Their 'LTE 62 Plan' for smartphones used to be priced $55 for 3 GB of data, but the monthly download quota has now been increased to 5 GB. We have seen similar LTE mobile data quota and/or pricing revisions in Norway, Hong Kong, and the United States."

The study claims that CSL Hong Kong is offering the world's cheapest LTE data plan, having launched its LTE service in November 2011. The lowest priced 3G mobile data tariff is being marketed by Singapore's M1 with an offer of 4 GB for the notably low tariff of $9.62.

"LTE technology has given operators, not just greater download speeds, but also greater capacity. Therefore there is a degree of price elasticity," said ABI Research associate  Marina Lu. "As LTE devices come down in price, operators will be keen to increase LTE market-share. Cutting tariffs, or boosting data quotas, will be tempting but they need to make sure they achieve greater overall returns."

ABI also highlights that voice tariffs could benefit from LTE as a number of operators deploy Voice over LTE (VoLTE). Analysis conducted by ABI Research into VoLTE services, indicates that the high-fidelity characteristics of VoLTE could help overcome the fall in voice ARPUs. However, ABI notes that VoLTE is not being priced at a premium over existing circuit switched mobile voice services.

Separately, France Telecom's CEO Stephane Richard told Bloomberg last week at the FT ETNO Summit in Brussels that the company has been successful in charging extra for high speed data services, although he admitted that the price for LTE access has not yet been decided.

"There will be a premium [for LTE]. The model with HSPA+ has made it clear that customers will pay," he said. "We want to accelerate the LTE rollout in France in order to get ahead of the competition."

For more:
- see this ABI Research release

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