LTE gestation to take time, still headroom for 3G services to grow
Operators shouldn't just milk it for quick profits but must create real value
I HAD been looking forward to the Disrupt panel session on LTE – Long Term Earnings?, a play on the technology acronym LTE or Long-Term Evolution – for some time. And I’m glad that on June 25, I got to listen to what two industry experts had to say on the technology, its potential and the challenges going forward.
In 2012, industry regulator the Malaysian Communications and Multimedia Commission (MCMC) announced that eight operators had been given the green light to roll out LTE networks in Malaysia.
Maxis Communications won bragging rights when it became the first to launch LTE services, on Jan 1, 2013, and in February that year announced that its network would support LTE with three phones: The Apple iPhone 5, Nokia Lumia 920 and HTC One XL.
Not long after, Celcom and DiGi followed suit, although their rollouts were staggered, primarily focused on urban centres. Lastly, U Mobile also got into the game in late 2013, when it launched its service in the Klang Valley and Johor Baru.
Now some 18 months later and with four operators having officially launched their services, the top two questions on my mind at the Disrupt discussion were: What next for LTE now that basic services are up? And what kind of pricing scheme and new data plans can we expect from operators?
Still very new
Disrupt is a monthly panel discussion and industry gathering organised by Digital News Asia (DNA). In a candid admission at this month's event, DiGi chief operating officer Albern Murty (pic) acknowledged that it’s still early days for the third largest operator in Malaysia, and indeed for the Malaysian market as a whole, where LTE is concerned.
He noted that while all four operators in Malaysia [with another four to go] have committed to launching LTE, there is still time for them to figure out the right business formula in terms of pricing, service bundles and the kind of services the market wants.
Currently, the four operators that have launched LTE services have done so in sporadic locations in urban centres, but they have not begun differentiating between their charges for LTE and 3G (third generation) data.
With limited coverage and service offerings, these operators have decided to err on the side of caution, preferring to give thier customers a taste of LTE goodness rather than to make radical moves to tax users just because there’s a new technology in town.
Addressing a comment from a member of the Disrupt audience that Singapore’s StarHub is starting to charge differently for LTE versus 3G data, Albern said that StarHub is going the way of some operators in the United States, where they have standard plans for subscribers. However, if a user want guaranteed speeds, he or she would have to pay more.
“The challenge in Singapore is that it’s a saturated market but here in Malaysia, we are not there yet, although smartphone use and Internet penetration are growing in double digits,” he said.
Albern pointed out that as opposed to Singapore, Malaysia still has a huge market of non-mobile Internet users, particularly those who buy tablets that support WiFi-only connections, and this is the market that operators need to focus on before designing differentiated plans for LTE.
Services not needed yet
Stressing his point, Albern claimed the fact that even advanced markets in Sweden and Norway, where Telenor, DiGi’s parent company is based, are only now trialling differentiated services such as high-definition voice (HD-voice) using a technology called Voice over LTE (VoLTE).
Essentially Voice over Internet Protocol (VoIP) running over LTE networks, VoLTE is being bandied by various mobile equipment vendors as a way for operators to differentiate LTE from 3G services, along with other services such as high-definition video and extremely low latency and fast downloads.
But Albern argued that such services would not yet be needed in Malaysia because the country has yet to reach the stage of maturity it needs to be in to use these services.
His fellow panellist Nipun Jaiswal (pic), an analyst with telco research firm Analysys Mason, concurred, noting that worldwide today, there are only about 200 million subscribers connected via LTE, which is about 3% of total worldwide mobile connections, and that 90% of them are concentrated in the United States, Japan, and South Korea.
“It’s still early for LTE in Asia but we forecast that by 2018, China will become a dominant player ... having approximately 25% of the worldwide market share for LTE,” he said. “Asia is definitely going to be a major player for LTE in the coming years, but it’ll still be some time.”
Incidentally, these numbers somewhat tally with what Ericsson noted in its latest Mobility Report, which also confirmed Asia as the focal point for LTE in the future.
Shun quick profits, create value
What the two panellists said made sense, but I think there are some things that operators can do to boost LTE adoption.
Not shouting about it is a start, but ours is a region where subscribers, especially those potential ones to LTE, are all extremely price-sensitive.
Case in point: While I doubt none of us would say no to LTE and its potential advanced services, we would proceed cautiously and want it to be as cheap as possible – and if these LTE services can be had for free, even better!
This price-sensitivity is best illustrated by the fact that about a quarter of the people owning tablets only use their devices with SIM cards attached to them. About three-quarters of the market depend on WiFi connections for their mobile Internet activity. I even know people who purposely turn off mobile data while on the move just to avoid charges.
This trend is not lost on DiGi’s Albern, who readily acknowledged that this is a real challenge and that mobile data plans need to be better, to cater to all kinds of users.
He also argued that the market needs to be better educated so that consumers will realise that it may not be as expensive as they think to use mobile data while on the move.
Nipun added that operators could take their cue from how they have worked out some form of unlimited price plan for certain apps and bundle them together with new plans to attract users, a similar conclusion that came out of my recent interview with Ericsson executives.
Whatever the case, I do believe that data plans would need to be segmentised further. These plans not only need to be flexible but easy to understand – currently, many such plans are just too complicated for most of us to follow.
Operators should also use the vast quantity of data they have about their customers and tailor-make specific plans based on these customers' data usage and app interests, so as to create other forms of value-added services.
They should also work with companies – both startups and established ones – to come up with apps and services that make sense, that people want to use, and that will help them in their lives.
Thus I believe operators should not be driven purely by the notion of making a profit as quickly as possible, and should instead focus on the long-term goal of building great customer experiences for their millions of subscribers.
Perhaps then, operators can sell the true value of LTE as not merely a turbocharged form of 3G, but as a true technology breakthrough that’s able to change the way we access the Internet and make our personal and business lives better. It should not be yet another way for operators to milk their subscribers.
Perhaps then LTE will make sense to average Joes like you and me, and we would gladly pay for the more advanced services of the future.
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