2019 has witnessed the beginning of the 5G consumer launch bombardment. From this, much can be learned about the current state of the telco industry. However, what has been really interesting when looking at 5G launches across the globe is the rise of unlimited plans.
Unlimited mobile plans are nothing new; a number of mobile operators have deployed them for some time for LTE offers. What is new is that unlimited plans appear to have become the default for 5G. In fact, stats from Ovum suggest as of Q2 2019, some 40% of 5G plans are based on unlimited offers.
What’s driving the race to unlimited mobile plans?
Differentiation, tariff simplification, offer alignment with fixed broadband, “new G, new approach” positions – take your pick. However, we must also ask, who is behind the wheel?
The Lighthouse Customers
In any new launch, products and technologies go through a consistent journey of adoption. Early adopters “geek out” on the very latest products and tech that they can get their hands on. They will typically be a small percent of the target market (maybe 5-10%), pay a premium, put up with limited coverage, act quickly and will also tend to be extremely vocal about the experience they receive. However, their enthusiasm for new technology may be misleading because their rate of adoption and willingness to pay a premium will not be reflective of the bulk of consumers.
The Opinion Leaders
The next (and, for me, the most important) segment is the early majority. This group typically holds the balance as to whether a launch will be successful and reach a critical mass. As a group, they bring volume (around 30-50% of the market), but also bring cautious optimism. They will want to see good reason to move from their existing offer and won’t be swayed by tech alone. This segment will need to be “wowed” by a differentiated, lifestyle-enhancing offer and a clear case made to them for any associated price uplift, or will remain where they are.
The Innovation Skeptic
The late majority (maybe the next 20-30% of the market) will be more driven by proof of mainstream market adoption (predominantly by the early majority) and wait until initial pricing spikes to their existing mobile plans have disappeared where 5G appears “free.” This final group are the laggards who make up the remaining 10% of the market (and can quite frankly be forgotten about in this context).
Where Are We Now?
In the unlimited launches to date, speed tiering has become one of the key ways of positioning 5G. Instead of a typical volume plan of xGBs per month, the offer is now xGBps per month with no limit to the amount of data that can be consumed (other than a fair usage policy in some cases). Interestingly, some MNOs are also talking about bringing a latency component into these new waves of plans as well (at the time of writing this blog, no one has launched such a plan).
Two things strike me about the launches I have seen to date. First, I believe users will find it difficult to compare apples to apples between a volume-based 4G plan and an unlimited, speed-based plan in 5G. It may be intentional on the part of the MNOs. Secondly, speed/bandwidth is “network-centric” by nature and difficult to understand for some in the early majority. Most certainly, it isn’t the “wow factor” that 5G will need to get over the tipping point of adoption.
Getting the best out of 5G’s six monetization levers (bandwidth, latency, QoS, capacity, slicing and spectrum) and delivering a sustainable monetization strategy will be determined by innovative MNOs building a connected content strategy. It will require a combination of both new thinking and new business models and will form the heart of the “wow factor” that is needed to compel the early majority. Content strategy could be a mix of targeted content passes, in-house content plays and, crucially, a new wave of third-party partner offers in areas such as cloud gaming, HD Video and AR/VR apps. The attraction of 5G, its monetization levers and unlimited plans should not be underestimated. This combination will herald a new wave of content and service innovation and MNOs have a great opportunity to play a considerable role.
One other interesting consequence to a move to unlimited plans will be a change in basic user behavior. Currently, according to Cisco’s Global Mobile Data Forecast report from February 2019, some 60% of data traffic generated by a smartphone does not touch the cellular network; it either goes to public wi-fi networks or home broadband networks via wi-fi and is lost to the cellular network. Capacity at a premium in some LTE networks may have been something MNOs were comfortable with. In the case of 5G unlimited plans, there is no real reason for users to hunt for wi-fi to reduce data volume usage; therefore, in theory, much traffic will remain on the 5G cellular network.
The point being that suddenly, much more of the traffic generated by mobile consumers can now be analyzed by the MNO for richer and more accurate insights into content and service usage by geolocation. Alone, this will play a key part in this new content wave.
So, What Next?
Clearly, while the opening salvos have been fired, the industry is at the beginning of a phased journey. Much of what underpins MNO business models today (prepaid and post-paid volume-based LTE plans, roaming, voice and SMS usage, content pass plays, etc.) will continue to sit alongside new 5G unlimited plans for some time, all of which will continue to require innovative monetization strategies in a competitive world.
The 5G crystal ball remains cloudy at such an early juncture and much will need to adapt and change as markets develop. Commercial agility, flexibility and the ability to get things into the market in hours and days, not weeks and months, will be paramount. Unlimited plans have a part to play in the next phase on monetization development but need to be tied to a “powered by 5G” connected content strategy if a value per bit business model is sought.
Executing scale and precision will require a link between the network, a myriad of content sources and a real-time monetization engine that binds an increasingly complex eco-system together.