Two conflicting ideas about LTE pricing came out yesterday. On one said was Verizon Wireless' (NYSE:VZ) CFO John Killian saying the operator can charge subscribers a premium for LTE because they will be willing to pay for a higher speed and better quality service. On the other end was Mark Neild, head of business transformation, Western Europe, with Nokia Siemens Networks who indicated that consumers are unlikely to buy 4G mobile services based on throughput speed.
Who's right? To me, the answer isn't black and white.
In today's market, the key differentiators are devices. Smartphones are clearly driving subscriber uptake. Sprint has already shown that subscribers are willing to pay a premium--an extra $10 per month--for WiMAX service to have the HTC Evo in their hands. Verizon won't have access to LTE tablets and smartphones until the middle of next year.
Of course, Verizon is expected to be the only operator in the market to have introduced LTE by the by the end of the year. It plans to offer services in 25 to 30 markets before the end of the year with real-world speeds promised at 5-12 Mbps in the downlink and 2-5 Mbps in the uplink. Will that exclusivity in the short term enable Verizon to charge more?
T-Mobile USA might be the one that squashes that idea as it aggressively rolls out HSPA+ with aggressive pricing plans and HSPA+ smartphones promised for this year. Real-world tests are now pegging T-Mobile's service (via its webConnect Rocket laptop stick) and an average of 5-8 Mbps range on the downlink with peak speeds of 10 Mbps or higher. Analysts reckon that HSPA+ smartphones will deliver average downloads of about 5 Mbps in city environments. T-Mobile's HSPA+ network is currently available in almost 50 major cities in the U.S. Clearwire is ramping up WiMAX rollouts too.
Of course we don't know the full details of what Verizon Wireless' offering is going to be, but I have a hard time believing the operator's full marketing message will simply be based on the speed of its network alone.
Verizon has hinted that its LTE offering will have many synergies with Verizon Communications' FiOS high-speed fixed-line broadband/TV offering. I can see some sort of bundled offering at the start and eventually a service offering that combines applications on the two networks. Earlier this month a report surfaced in the Financial Times that indicated Motorola (NYSE:MOT) is developing a tablet that will run on Google's Android platform and will link to Verizon's FiOS TV service. There seems to be lots of opportunities for some premium services there.
And of course, high-speed mobile broadband will unleash a slew of new content and connected capabilities that are appealing just because they operate more efficiently on a high-speed network. So in an indirect way, yes, consumers are willing to pay more for higher speed services.--Lynnette