Acing 5G Pricing: How To Price 5G For Optimal Monetization
Acing 5G Pricing: How To Price 5G For Optimal Monetization
Acing 5G Pricing: How To Price 5G For Optimal Monetization
Acing 5G pricing
How to price 5G for optimal monetization
Leading telcos have switched on their 5G networks and launched commercial offers to acquire early adopters. With the scale
of investments required for 5G, the consumer pricing strategy becomes a critical lever for recouping these investments.
In this viewpoint we aim to provide a framework for increasing customers’ willingness-to-pay for 5G services and B2C 5G
pricing guidelines, in order to achieve optimal monetization. In summary, operators must leverage the key benefits of 5G,
i.e., data generosity, quality of service, and new applications and services, to increase customers’ willingness to pay for 5G
services and aim for price premiums. In parallel, they must address the downward pricing pressure from 5G device costs,
market competition, and initial coverage and quality glitches.
Every month, more operators are announcing commercial VR cloud Health Virtual
gaming wearables robots
AR maps
launches of their 5G services. Countries such as South Korea,
Complexity
Virtual
the US, the UK, Finland, and Austria have taken big steps Early
alarms events
VR movies
in bringing the 5G experience to their consumers. South Home
AR/ VR -
broadband In-vehicle
learning
Korea reached 1 million subscribers within 69 days of the streaming VR
shopping
5G commercial launch, compared to 58 days for 4G in 2011. eMBB
Home
sensors
Other countries have launched multiple pilots and will start
commercialization soon. Year 1 Year 2 Year 3 Year 3
onwards
In parallel, a new set of consumer applications are emerging, Source: Arthur D. Little analysis
2 Acing 5G pricing
Viewpoint
In unlimited data tariffs, introduce speed-/latency- Effectively monetize UL data plans, as monetization
/reliability-based tiers based on data volumes will slowly lose significance
Bring 5G to the masses, capturing customer
Competitive play Introduce 5G in smaller data bundles
volumes
As 5G use-cases evolve, introduce use case-based Monetize 5G using innovative add-ons (e.g. AR/VR
service packages & pricing experiences) targeted at specific segments
Commodity play
Source: Arthur D. Little analysis
Acing 5G pricing 3
Viewpoint
For 4G, an extreme discounting example was observed in India: France Singapore
duvaud-schelnast.julien@adlittle. [email protected]
Reliance Jio disrupted the market by offering 4G services for com
free for six months. The zero price tag helped the company Spain
Germany [email protected]
acquire a significant market share with over 100m+ customers [email protected]
in record time, and at the same time, customers couldn’t Sweden
India [email protected]
complain about technical glitches because the service was for [email protected]
free. Therefore, delaying monetization to acquire a solid base is a Switzerland
Italy [email protected]
viable strategy, especially for challengers. [email protected]
Turkey
Japan [email protected]
Way forward for executives [email protected]
UK
Operators must leverage data generosity, QoS, and new 5G Korea [email protected]
applications and services to increase customers’ WTP for 5G [email protected]
USA
services and aim for an ARPU uplift. At the same time, they Latin America [email protected]
need to address downward pressure due to device costs, [email protected]
market competition, and initial coverage/quality glitches. The
right balance between the above factors will help achieve Authors
optimal monetization. Karim Taga, Agron Lasku, Paritosh Mukhija, Pranav Prince,
Even though the extent of these individual factors varies, Kumar Dhruv Soni
based on market context, operator positioning and strategy, we
recommend some common 5G pricing guidelines as operators
Arthur D. Little
embark on their 5G monetization journeys (see figure above). Arthur D. Little has been at the forefront of innovation since
1886. We are an acknowledged thought leader in linking
At the 5G commercial launch, an operator could gain first-
strategy, innovation and transformation in technology-intensive
mover advantage and leverage an “innovator’s play” with
and converging industries. We navigate our clients through
strengthened brand positioning founded on 5G, attractive 5G
changing business ecosystems to uncover new growth
device schemes, and focus on premium large-data-volume
opportunities. We enable our clients to build innovation
tariff plans. This would enable the operator to acquire early
capabilities and transform their organizations.
5G adopters and potentially gain an ARPU uplift by upgrading
mid-to-large 4G customers to 5G. As the 5G ecosystem gains
Our consultants have strong practical industry experience
maturity, the operator should introduce speed-, latency-,
combined with excellent knowledge of key trends and
and reliability-based tiers in tariff plans (for monetization of
dynamics. ADL is present in the most important business
unlimited data plans). We expect 5G pricing to eventually
centers around the world. We are proud to serve most of the
enter a “commodity play” in its matured state. The key for
Fortune 1000 companies, in addition to other leading firms and
gaining pricing advantage then, would be to leverage use case-
public sector organizations.
based service packages. This would allow the operator to still
differentiate and monetize 5G using innovative 5G add-ons.
For further information please visit www.adlittle.com or
While these guidelines offer valuable actions, how quickly an
www.adl.com.
operator moves from one action to another depends on its
market context. Copyright © Arthur D. Little Luxembourg S.A. 2019.
Arthur D. Little is helping leading telecom players globally All rights reserved.
in defining and implementing their 5G strategy and value
propositions. Please reach out for more details. www.adl.com/5GPricing