Last year, we wrote about mobility premium – an index to compare the pricing difference on a ‘$ per gigabyte’ basis, between fixed and mobile broadband services. A little over a year ago, the mobility premium in the US stood at 20-60x based on actual usage or based on data allotments of popular family share plans, and we predicted that the mobility premium will trend downward as a possible competition between and fixed and mobile operators rises.
A lot has happened since. The competition in the U.S. mobile industry has been unrelenting with “unlimited” plans now being the norm. After series of promotions and unlimited data service plans, the weighted average mobile broadband pricing has come down five-fold from about $9 per GB in 2016 to $1.80 per GB this year. Meanwhile, the cable operators, who dominate the fixed broadband market, have upped monthly data caps on popular high-speed Internet plans from 300 GB to 1 TB. As a result, on data allotment basis, the mobility premium has decreased from 60x to 37x in just one year.
The mobility premium based on usage saw a similar decline, though not as dramatic. It declined from 20x in mid-2016 to 14x today as the average traffic growth on both fixed and mobile access has not dramatically accelerated to a point that operators had to significantly alter pricing to impact demand trajectory.
The mobility premium based on usage is arguably a closer reflection of consumer value preference since it is based on actual usage – and not based on market pricing plans which implicitly reflect operators’ view of the consumer demand.
With core markets for mobile operators (i.e., smartphone connectivity) and cable operators (i.e., Pay TV video) in general decline, the likelihood of intermodal competition between these telecom sector rises as both sides look to bundled mobile/video/data services to reduce churn and maintain customers that they already have. In a 5G era with expanding spectrum options from low, mid, and ultra-high millimeter wave bands, and maturing 5G ecosystems, mobile operators are exploring fixed wireless opportunities. Meanwhile, cable operators are exploring mobile wireless services through MVNO and possibly facilities-based wireless services. In our recent Expert INSIGHT report, Mobile Experts takes a deeper look at the mobility premium and forecasts its outlook five years from now, highlighting possible implications for fixed-mobile competition.
The Cable/Mobile M&A rodeo is about to begin…and the “mobility premium” is an important factor for all players.
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