Today, the UK mobile operator O2 announced that it will offer 4G mobile services in the UK from 29 August. This will mark the start of competition in the UK’s 4G market. The first cities to be covered by O2’s 4G network will be London, Leeds and Bradford, with ten additional cities to follow during 2013. Tariffs will range “from £26 per month” – no further details on pricing have yet been announced.
4G services have been available in the UK since October 2012, but so far the mobile operator EE has had the 4G market all to itself. EE has worked hard to make the most of its exclusive period, rapidly rolling out 4G coverage and bringing out a succession of enhancements to its offering including double-speed 4G, data plans for sharing between devices and people, and prepaid 4G for PCs & tablets. EE has also ensured that that people pay for the benefits of 4G, with monthly service plans priced at a premium of about £5-10 in comparison with its 3G plans.
Now, with the entry of O2, the UK is at last about to become a competitive 4G market. But the big question is: how exactly will O2 compete with EE? Broadly speaking there are four main battlegrounds available: network performance, network coverage, devices and prices. The first three all present substantial difficulties.
- O2 would be hampered in attempts to offer superior network performance, by its radio spectrum holding. The only spectrum that O2 is licensed to use for 4G is in the 800MHz band. This spectrum supports less data capacity than the higher-frequency 1800MHz spectrum that EE is using for its 4G services. O2 also holds a considerably smaller total amount of spectrum than EE, which limits O2’s scope for competing with EE on, for example, double-speed 4G (achieved by doubling the amount of spectrum used)
- The great advantage of the 800MHz spectrum band is that signals travel much further than the high-frequency bands. That means an operator deploying 4G in 800MHz can achieve a greater amount of coverage with a given number of mobile masts. Despite this, however, O2 will find it hard to compete with EE on 4G coverage. Firstly, EE has a long headstart: its 4G network already covers nearly 60% of the UK population. Secondly, EE also holds 800MHz spectrum licences, in addition to its 1800MHz frequencies; so EE could accelerate coverage growth by using the lower frequencies, if it feels the need to do so
- Regarding devices, O2 has a major disadvantage against EE. Apple’s iPhone is compatible with the 1800MHz frequencies used by EE’s 4G network; but it is not compatible with the 800MHz frequencies used by O2’s 4G network. The other most sought-after 4G devices, such as Samsung’s Galaxy S4 and HTC’s One, are compatible with 800MHz, but these are already available from EE. It’s very hard to see how O2 could compete with EE on 4G device availability.
So that leaves price. We would be very surprised if the introduction of competition into the UK’s 4G market does not quickly result in the availability of lower-priced 4G packages. Throughout Europe, starting with Sweden in 2010, the entry of competitors into a country formerly occupied by a single 4G provider has had the effect of bringing down 4G prices in that country. We see no reason why the UK should be exceptional in this regard. At this point, however, O2’s 4G pricing is largely a matter of speculation.
One possible area in which O2 could compete with EE on price is prepaid. So far, EE has not offered prepaid 4G to smartphone users, mainly because of the high price of 4G smartphones. But lower-priced 4G smartphones are quickly becoming available. For example, Nokia recently announced a 4G smartphone, the Lumia 625, priced at €220 (excluding taxes & subsidies). At this level, it starts to look feasible to subsidise 4G handsets for prepaid customers, as well as postpaid. One obstacle in the way of this option, though, would be the fact that O2’s owner, Telefonica, is currently slashing the amount of money it spends on subsidizing handsets.
Another possible area of price competition would be for O2 to offer more generous monthly data allowances at a given price point than EE. We think it is likely that O2 will compete with EE on data allowances. O2 might even have been tempted to trump EE by offering a 4G plan with unlimited data usage. That would certainly be a strong competitive differentiator. However, if O2 has considered such an option, it is likely to have concluded that in the long term, unlimited data would damage both O2 and the UK mobile industry as a whole. Operators have worked hard over the past few years to build linkage between growth in demand for mobile data and higher monthly payments. Unlimited data plans would destroy those links, and would badly compromise operators’ ability to grow their service revenues in future.
<b>Companies Covered:</b>
<p><a href="http://www.idc.com/... Inc.</a>, <a href="http://www.idc.com/...'EUROPEENNE D'ENVOIS S.A.S.</a>, <a href="http://www.idc.com/... S.A.</a>, <a href="http://www.idc.com/... Corporation</a>, <a href="http://www.idc.com/... Corporation</a>, <a href="http://www.idc.com/... HOLDINGS LIMITED</a>, <a href="http://www.idc.com/...> <p>
<b>Regions Covered:</b><p><a href="http://www.idc.com/... Europe</a> <p>
<b>Topics Covered:</b><p><a href="http://www.idc.com/...> <p>
Unternehmen in den Bereichen IT- Publikationen, Research sowie Ausstellungen und Konferenzen. Weitere Informationen sind auf unseren Webseiten unter <a href="http://www.idc.com/" target="_blank">www.idc.com</a> oder <a href="http://www.idc.de/" target="_blank">www.idc.de</a> zu finden. </ul>
4G services have been available in the UK since October 2012, but so far the mobile operator EE has had the 4G market all to itself. EE has worked hard to make the most of its exclusive period, rapidly rolling out 4G coverage and bringing out a succession of enhancements to its offering including double-speed 4G, data plans for sharing between devices and people, and prepaid 4G for PCs & tablets. EE has also ensured that that people pay for the benefits of 4G, with monthly service plans priced at a premium of about £5-10 in comparison with its 3G plans.
Now, with the entry of O2, the UK is at last about to become a competitive 4G market. But the big question is: how exactly will O2 compete with EE? Broadly speaking there are four main battlegrounds available: network performance, network coverage, devices and prices. The first three all present substantial difficulties.
- O2 would be hampered in attempts to offer superior network performance, by its radio spectrum holding. The only spectrum that O2 is licensed to use for 4G is in the 800MHz band. This spectrum supports less data capacity than the higher-frequency 1800MHz spectrum that EE is using for its 4G services. O2 also holds a considerably smaller total amount of spectrum than EE, which limits O2’s scope for competing with EE on, for example, double-speed 4G (achieved by doubling the amount of spectrum used)
- The great advantage of the 800MHz spectrum band is that signals travel much further than the high-frequency bands. That means an operator deploying 4G in 800MHz can achieve a greater amount of coverage with a given number of mobile masts. Despite this, however, O2 will find it hard to compete with EE on 4G coverage. Firstly, EE has a long headstart: its 4G network already covers nearly 60% of the UK population. Secondly, EE also holds 800MHz spectrum licences, in addition to its 1800MHz frequencies; so EE could accelerate coverage growth by using the lower frequencies, if it feels the need to do so
- Regarding devices, O2 has a major disadvantage against EE. Apple’s iPhone is compatible with the 1800MHz frequencies used by EE’s 4G network; but it is not compatible with the 800MHz frequencies used by O2’s 4G network. The other most sought-after 4G devices, such as Samsung’s Galaxy S4 and HTC’s One, are compatible with 800MHz, but these are already available from EE. It’s very hard to see how O2 could compete with EE on 4G device availability.
So that leaves price. We would be very surprised if the introduction of competition into the UK’s 4G market does not quickly result in the availability of lower-priced 4G packages. Throughout Europe, starting with Sweden in 2010, the entry of competitors into a country formerly occupied by a single 4G provider has had the effect of bringing down 4G prices in that country. We see no reason why the UK should be exceptional in this regard. At this point, however, O2’s 4G pricing is largely a matter of speculation.
One possible area in which O2 could compete with EE on price is prepaid. So far, EE has not offered prepaid 4G to smartphone users, mainly because of the high price of 4G smartphones. But lower-priced 4G smartphones are quickly becoming available. For example, Nokia recently announced a 4G smartphone, the Lumia 625, priced at €220 (excluding taxes & subsidies). At this level, it starts to look feasible to subsidise 4G handsets for prepaid customers, as well as postpaid. One obstacle in the way of this option, though, would be the fact that O2’s owner, Telefonica, is currently slashing the amount of money it spends on subsidizing handsets.
Another possible area of price competition would be for O2 to offer more generous monthly data allowances at a given price point than EE. We think it is likely that O2 will compete with EE on data allowances. O2 might even have been tempted to trump EE by offering a 4G plan with unlimited data usage. That would certainly be a strong competitive differentiator. However, if O2 has considered such an option, it is likely to have concluded that in the long term, unlimited data would damage both O2 and the UK mobile industry as a whole. Operators have worked hard over the past few years to build linkage between growth in demand for mobile data and higher monthly payments. Unlimited data plans would destroy those links, and would badly compromise operators’ ability to grow their service revenues in future.
<b>Companies Covered:</b>
<p><a href="http://www.idc.com/... Inc.</a>, <a href="http://www.idc.com/...'EUROPEENNE D'ENVOIS S.A.S.</a>, <a href="http://www.idc.com/... S.A.</a>, <a href="http://www.idc.com/... Corporation</a>, <a href="http://www.idc.com/... Corporation</a>, <a href="http://www.idc.com/... HOLDINGS LIMITED</a>, <a href="http://www.idc.com/...> <p>
<b>Regions Covered:</b><p><a href="http://www.idc.com/... Europe</a> <p>
<b>Topics Covered:</b><p><a href="http://www.idc.com/...> <p>
Unternehmen in den Bereichen IT- Publikationen, Research sowie Ausstellungen und Konferenzen. Weitere Informationen sind auf unseren Webseiten unter <a href="http://www.idc.com/" target="_blank">www.idc.com</a> oder <a href="http://www.idc.de/" target="_blank">www.idc.de</a> zu finden. </ul>
