Is 5G Really Here? A Look at Early Pricing Strategies Featured

Is 5G Really Here? A Look at Early Pricing Strategies Image Credit: peshkov/

The race to 5G network service has begun in earnest, and it’s shaping up to be quite an exciting ride. More and more communication service providers (CSPs) are launching their 5G networks and the number of 5G devices - including mobile phones - is growing month over month. To top that, some players have officially rolled out commercial 5G price plans for mobile, becoming the first in their respective markets to do so. However, in many cases the announcement itself is the most exciting part of the launch. Most plans are not offering new schemes, mainly just the promise of better performance and speed. In other words, while a few players have launched commercial 5G plans, the strategy toward pricing in the 5G era is still in question.

At this early stage, most of the commercial 5G launches are very simple and straightforward. Mostly, they are a replication of operators’ 4G price plans with the same or sometimes even higher price tags. In other words, relying on the promise of a better and faster connection, operators launched commercial 5G price plans with little discernible added value over 4G. What can we learn from these early 5G service offerings to help service providers craft a winning strategy that will carry them over the finish line?

At the starting gate

By examining the mobile pricing strategies of several early 5G deployments, some important trends emerge. And while 5G promises better performance, it’s not clear whether end users will understand the difference or see the value and be willing to pay more, especially with limited coverage so far.

Here are a few examples of 5G plans to date:

Verizon Wireless, was the first to commercially launch 5G in a few cities across the United States, and is a good example of a ‘first to market’ strategy with a higher price. Verizon has three 4G price plans - Go Unlimited, Beyond Unlimited and Above Unlimited, all of which have been emulated for 5G. However, the 5G variants of those plans are $10 more expensive for the exact same plan; although more recently, they introduced a time-limited promotion with some discounted price for 5G.

A short time later in May this year, Sprint announced its 5G plans - with a simple and straightforward scheme offering a similar price across 4G and 5G. While ‘keeping it simple’ has a lot of value to consumers, plus better speed and performance at the same price, it seems Sprint may be missing an opportunity to use 5G to initiate change and innovation in their tariff scheme.

A related example can also be seen in South Korea - where both SK Telecom and LG U+ launched 5G commercial price plans taking a similar, but more subtle, approach. The basic 5G plan, which is comparable to its 4G plan, adds a few gigabytes of data but maintains the same price. As additional data is added - there is an option for 150GB and another for 250GB per month - the price increases to double the price of a basic plan. Interestingly, this has not impacted the success of the 5G launch in South Korea.

So what do we have here? Operators are rolling out 5G commercial price plans, and 5G service is becoming more available for consumers with relevant mobile devices. However, it seems that most of those rolling out such plans are really after “early bird” consumers - those who are tech savvy enough to understand the value that they get from 5G, such as the higher speed and performance.

A slightly different example, but still in the same category is EE, who was the first to launch 5G in the United Kingdom. EE offered a 5G SIM-only plan with 20GB data, which is £12 more per month than the SIM-only 4G plan. So while schemes stayed the same, the price went up. As a marketing technique, as well as a preview demonstration of the potential value of 5G, EE promised to provide 5G coverage at the Glastonbury festival in June. Afterward, they announced that during the event “an epic 103.6 terabytes of mobile data was used, almost double the total from 2017.” With that, EE highlighted the value attached to 5G, hinting towards its ability to support connectivity in busy locations like sporting and music events.

As these examples illustrate, early 5G service is here. And while the technology by itself gives consumers value, the pricing schemes stayed the same and did not offer a new way of thinking. These players are probably aiming to attract and retain those early adopters with a sense of what they could do with 5G, who are not only looking to be the first to experience the performance, but are also willing to pay a premium when needed. For sure, these launches are probably intended to reinforce a CSP’s brand as the ‘first to launch 5G’ in their country and in the region as well.

Winning strategies

As 5G networks expand and enable the enhanced speeds and network quality that this technology has promised in more areas, it’s quite likely that price plans will change dramatically and will aim to attract the long tail of customers, not just the first to adopt new technologies. Having more players launch 5G in the same market is assumed to drive down prices, but also to accelerate innovative pricing schemes, as well as the acquisition and penetration of these plans.

An interesting example can be seen in Vodafone’s latest move, announcing new pricing schemes with real tariffing innovation. Instead of focusing on the allowance (i.e., number of GBs), Vodafone is offering three ‘unlimited’ plans differentiated by the speed tiers - 2Mbps, 10Mbps and the maximum speed the network will allow (presumably up to tens of Mbps). The tariffs are a new type of unlimited service, offered across 4G and 5G (as many consumers are still in non-5G coverage areas). What is yet to be seen is the network’s ability to support this in many areas and across peak times, as well as the end user’s ability to understand the value of these tariffs.

There are several thoughts that come to mind from these 5G pricing schemes. By studying the early market movers, the fast followers have the opportunity to differentiate their offerings better and develop reasonable economic strategies that benefit both the operator and the consumer.

First and foremost, it’s important to remember that 5G offers much more than just better and faster connections. 5G networks enable reduced latency, increased capacity and improved network flexibility. In fact, the most exciting value can be delivered through completely new services. These include enhanced mobile entertainment, AR/VR applications, smart home, automotive and retail, where shopping will integrate with immersive communications. Operators should think how they can couple these new capabilities with their pricing schemes, and potentially set pricing based on other factors than data limits.

Second, there is always a question of who ‘wins’ in the end - the CSPs that launch a new technology first, seeking immediate gratification of being “first to market”, or the ones who develop compelling offerings that are more attractive than purely mobile service. Doing so requires leveraging the full promise of 5G, which will take several years, but risks of market share loss always exist. We believe there is tremendous opportunity for CSPs that choose to deliver the most innovative, revenue-generating services in a couple of years. The question is how much - if at all - you should wait.

Finally, it’s essential for CSPs to strategically plan how they will develop, monetize and deliver 5G services. Doing so necessitates reevaluating the business support system (BSS) that ultimately enables them to profit from innovative new services made possible by 5G technology. To successfully monetize 5G capabilities, CSPs need charging and billing systems that can track every account, customer, subscriber and connected thing in a 5G network, and that also deliver flexibility, agility and scalability on demand.

Eyes on the prize

There is no question that 5G offers promise with new services empowered by this technology, enabling end users to benefit tremendously from new use cases. But before we get ahead of ourselves, it’s important to remember that success will belong to those CSPs that develop new innovative 5G monetization strategies. Those who develop true next-generation services, as well as unique pricing schemes, can win the big prize. So if you’re thinking about placing bets on who the winners and losers will be, my advice is to hold off a bit … the race has only just begun.

Shay Assaraf is the CMO of Optiva. He has vast B2B and B2C experience in marketing and strategy with more than 15 years in the telecoms industry. At Amdocs and before that with Pontis (acquired by Amdocs), he held various positions. In his last role, he led the marketing consulting and analytics teams addressing customers’ challenges using analytical data, machine learning, and artificial intelligence tools and expertise.

In Shay’s role at Optiva, he counsels CSPs to help them be more successful. This includes how to reap the benefits of the public cloud and maximize savings by migrating their OSS/BSS solutions to a cloud-native solution on the public cloud. He also helps CSPs to monetize their assets and act on their marketing strategies with hands-on guidance on data monetization, customer experience, and growth opportunity strategies in the digital era. Shay and the Optiva Business Value team help CSPs to stay ahead of market disruption, increasing competition, and shifting revenues to realize real business value.


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