Is ‘superfast’ enough to pry an extra tenner from our wallets for 5G?

The US market is one which has suffered in the ‘race to the bottom’ but a $10 add-on for 5G connectivity from Verizon is certainly an interesting way to get ARPU heading the other direction.

With 5G networks officially ‘running’ in various markets around the world, one of the big questions which remained is how much the telcos would actually charge for the superfast bonanza. Verizon has been one of the first to twitch off the starting line with a new offer which will use 5G as somewhat of an ‘added value’ proposition to existing and new subscribers, and only for $10 a month.

“Continuing our track record of 5G ‘firsts,’ we are thrilled to bring the first 5G-upgradeable smartphone exclusively to Verizon customers,” said Verizon’s CTO, Kyle Malady.

“Not all 5G networks are the same. Verizon’s 5G Ultra-Wideband network is built by the company with the nation’s best and most reliable 4G LTE network. It will change the way we live, work, learn and play, starting in Chicago and Minneapolis and rapidly expanding to more than 30 US markets this year.”

Starting in Chicago and Minneapolis the 5G euphoria will quickly spread throughout the US. What is worth noting is coverage will of course be limited in the first instance, but that will unlikely be a roadblock for the early adopters who want to have 5G for the sake of having 5G.

For those who are concerned the network will be available without the compatible devices, Verizon has also partnered with Motorola to launch what the telco is promising will be the world’s first 5G smartphone. The device itself will not be 5G compatible, but users will have the option to purchase a 5G moto mod, which can be attached to the devices to plug into the superfast networks.

What we’re more interested in here is the sales strategy.

This has been one of the big questions which the industry has faced over the last couple of months; how will 5G connectivity be sold to the consumer? As it stands, there are few demands on the consumers digital lifestyle which are not answered by 4G. This will not be the case in a few years when new products and services emerge, but right now, 5G is an answer without a question; it’s a tricky conundrum for the telcos.

This is an interesting approach from Verizon however. We suspect anyone selling a 5G contract to subscribers will face failure, aside from the early adopters, though positioning the superfast connectivity as an add-on to subscriptions could be an interesting way to gain traction. And then there is the price.

$10 extra each month is affordable, and it is a very good play on nuance. If Verizon attempted to sell subscribers 5G connectivity for $60 a month, most would probably ignore it. However, by selling a 4G contract for $50 a month and offering an upgrade for $10, more would possibly consider it. It’s fundamentally the same outcome, but clever manipulation of the customer could achieve the desired results.

Buying something for $60 a month is scary, because that is a lot of money, but adding on an extra $10 onto a necessity becomes much more palatable. It’s the very same reason Netflix or Amazon Prime are priced so low compared to some other premium content platforms; spending $10 a month doesn’t sound like it will break your bank account, but scale of subscribers makes a difference for the provider.

While we still believe consumers are too cash conscious for consumer 5G tariffs to be a roaring success in the immediate future, this is certainly an interesting approach to generating ROI. Other telcos should take note, this is the sort of initiative which will give the best opportunity for success.

Data survey suggests UK consumers should be more price savvy

Cable.co.uk has released data which suggests the UK is 136th in the world for affordability when it comes to mobile data plans.

Data is increasingly running our lives and while many might feel they have struck the right balance between quantity and affordability this survey suggests otherwise. After comparing 6,313 mobile data plans in 230 countries, the UK ranks at 136 worldwide, and in the bottom half of the table for Europe.

“When looking at the UK compared to our European and EU counterparts, it’s disappointing to see the UK among the most expensive countries for mobile data,” said Dan Howdle of Cable.co.uk.

“Despite a healthy UK marketplace, our study has uncovered that EU nations such as Finland, Poland, Denmark, Italy, Austria and France pay a fraction of what we pay in the UK for similar data usage. It will be interesting to see how our position is affected post-Brexit.”

On average, UK consumers are currently paying £4.97 per GB a month ($6.42), with the lowest being £0.7 and the most expensive as high as £32 per GB a month. What is worth taking into account is the survey only measured SIM-only plans, excluding the complicated task of factoring in the price of a subsidized device. But how does this compare to other countries?

India was the cheapest worldwide, with a GB costing only $0.26 per month, though all of the telcos are struggling to remain profitable. Asian countries take up 50% of the top 20 in fact. Finland was the cheapest in Europe, $1.16 per GB a month, while across the pond, US consumers are paying $12.37 per GB a month and the Canadians came out at $12.02. The global average was $8.53.

As there haven’t been riots on the streets, it does seem most consumers are relatively content with the price they are paying. Admittedly in some cases it is extortionately expensive, something which should be addressed, but many of the markets are pricing plans in-line with the relative wealth of the nation.

That said, there is a wide chasm between the most and least expensive plans more often than not. This suggests consumers are not being savvy enough when purchasing mobile contracts in the first place, are not aware of other deals which are available or do not believe there is value in changing provider. It may be easy to blame the telcos for the high-price of data, but this can be a lazy route to take.

Cable.co.uk and other consumer groups might use this data to punish telcos, we suspect the increased price in the UK is more to do with consumers not being savvy enough. After years as a Vodafone customer, your correspondent switched to Giffgaff and a data plan which was much more generous. Admittedly a subsidized phone is not included in the deal, but in paying £1.33 per GB ($1.75), the monthly bill is substantially lower than what Vodafone was offering, or what Cable.co.uk have identified as the monthly average in the UK.

We believe the consumer is not blameless. For example, a now-available Vodafone 24-month contract with a Huawei Mate 20 Pro would cost £38 per month. Adding in the upfront cost of £179, the total would be £3.03 per GB a month. This is still below the average quoted by Cable.co.uk and would still be lower if the cost of the handset was factored into the equation.

Cable.co.uk has only taken into account tariffs which are currently available to consumers, therefore removing data points from legacy and on-going tariffs which might have thrown the averages, but the availability of cheaper contracts suggests some of the blame has to be taken by the consumer.

The price of tariffs are generally relative to the market which they are in. In the UK, we are relatively lucky due to competition keeping the price of data down (in comparison to the geographically vast markets such as the US) but squeeze too tight and the telcos don’t have enough to invest in networks in a commercially viable fashion, or they prioritise markets which are more profitable. Both would impact experience and the latter would create a digital divide.

While your correspondent cannot comment on other markets, being based in the UK, the outcome of this survey seems to be relatively clear. If you’re not happy with the price of your tariff, move, as there are cheaper options on the market.

Trump takes next step in Chinese trade war

The United States Trade Representative will place a second round of tariffs on roughly $200 billion of imports from China, effective September 24, though it looks like Apple is passing through unscathed for the moment.

The 10% tariffs will be introduced on September 24, rising to 25% on January 1. Should China take retaliatory action, President Trump has promised to move onto phase three of the strategy, placing tariffs on an additional $267 billion of imports. While these tariffs are thought to spread to consumer goods, it seems some tech companies will escape any financial burdens, at least for the moment.

“After a thorough study, the USTR concluded that China is engaged in numerous unfair policies and practices relating to United States technology and intellectual property – such as forcing United States companies to transfer technology to Chinese counterparts,” said Trump. “These practices plainly constitute a grave threat to the long-term health and prosperity of the United States economy.”

While the White House has attempted to shield the consumer from the negative impacts of the tariff strategy, it was only going to be a matter of time. Not only would the domino effect of the initial tariffs eventually spread through various ecosystems, the US only imports so much from China. Two rounds of tariffs worth $250 billion was bound to hit the consumer pocket before too long. That said, certain products feature on the 300-list of exempt products.

You can see the full list of products on the tariff list here. It is of course incredibly wide ranging, it’s 192 pages long, though the consumer’s back pocket will almost certainly be hit. Seafood features heavily to start, and fans of frogs legs will also suffer. Vegetables are there, as is vinegar. Suitcases, golf bags, baseball mitts, bible paper, carpets, hats and car seats will also be included.

Looking at the technology industry, smart watches, wireless headphones and smart speakers are believed to be on an exempt list, though this is only from the US side. US heavyweights such as Apple might be largely free of collateral damage for the moment, though China will hit back before too long.

Trump might be looking to protect industries and consumers which will largely be in his support camp, though this is not to say Beijing won’t look to inflict damage here. In response to the tariffs imposed in June, China hit back against the farmers, and while iLifers might have been protected thus far it would certainly be a big scalp to claim. Considering the reliance Apple has on China, this would certainly be an effective move.

So far the consumer may not be that concerned about the escalating trade war, as the short-term benefits are a PR win for Trump. Presidential speeches can focus on driving more jobs back onto US shores and the bank accounts are bulging thanks to the tariffs. But this round of tariffs will certainly make life more expensive day to day.

In excluding certain products from tariffs, the Trump administration has simply pointed towards products which it believes could cause political damage. With such an open goal, we imagine the Chinese government will take an incredibly long run up at the consumer technology industry. Look out Apple, Beijing might be eying you up.

Korean operators set to switch to usage-based billing – report

In a sign of the disruption set to be unleashed by the 5G era is has been reported that Korea’s main operators are all expected to switch to usage-based tariffs next year.

This is the view of Hana Financial Investment and was reported by the Yonhap news agency. The rationale stated in the report is that usage-based billing will offer higher ARPU and thus cover the cost of investing in 5G, but that seems like a pretty tenuous theory. Yes, some people will pay a premium to be able to constantly stream HD video over 5G but a lot more may end up paying very little because they’re on wifi most of the time.

“There is a high possibility that mobile carriers may change their current high definition content into UHD or virtual reality, which will inevitably lead to an increase in traffic and jack up their sales sharply,” Kim Hong-sik, an analyst at Hana Financial Investment, was quoted as saying in the report.

Usage-based billing is expected to become more commonplace, but the assumption that it will be a cash cow seems hasty. Assuming telcos every get their digital transformation act together, they should be able to get into deals with OTT players like Netflix and app developers to introduce dynamic billing models that allow premiums to be paid for certain scenarios.

Lest we forget, usage-based (or metered) billing was common back in the 3G era, but if failed because it dissuaded people from using data at all. Then they jumped to unlimited and everyone got carried away in the opposite direction, before the industry settled on the monthly allowance model that prevails today.

Unless metered billing is introduced in a much more sophisticated way this time there’s no reason to assume it will fare any better. Another billing revolution expected to accompany 5G is a return to unlimited, which would presumably appeal to heavy users, so it will be interesting to see how they manage this. The fact that all three of them seem to be planning to make the move unison is also noteworthy.

US unveils China tariff list

Last month President Trump signed a memorandum which confirmed the US would be kicking off a trade-war with the Chinese and now the 1300-strong list of products subject to tariffs has been released.

The list will target approximately $50 billion worth of Chinese imports in an effort to prevent China from ‘coercing’ US companies into snubbing domestic alternatives. The trade-war is officially on, and we are not too sure how this will be of benefit to the US economy in the long-run whatsoever.

“The proposed list of products is based on extensive interagency economic analysis and would target products that benefit from China’s industrial plans while minimizing the impact on the U.S. economy,” the Office of the US Trade Representative said in a statement. “Sectors subject to the proposed tariffs include industries such as aerospace, information and communication technology, robotics, and machinery.”

This is not a specific attack on the telecommunications sector, rather the wider Chinese technology sector. However, considering the upcoming investments which will be made in communications infrastructure, the Chinese telco space will definitely feel the impact. You can check out the full list here. What is worth noting is this list is still a proposal, but it shouldn’t be too long before the tweaks are made and it is official.

While the list goes into very specific detail in some areas, the approach to telecoms is with a much broader stroke. Some of areas subject to the proposed tariffs include:

  • Printed circuit assemblies of the goods of subheading 8504.40 or 8504.50 for telecommunication apparatus
  • Electrical machines and apparatus nesoi, designed for connection to telegraphic or telephonic apparatus, instruments or networks
  • Oscilloscopes and oscillographs, specially designed for telecommunications
  • Instruments and apparatus specially designed for telecommunications
  • Optical fiber cables made up of individually sheathed fibres

Other areas under threat include critical components for the manufacture of robotics or computing hardware. Communications infrastructure isn’t the only area targeted by the US Government as devices and more general hardware fall under the tariffs as well.

One of the repercussions we have focused on is the impact such tariffs will have on the ability for American companies to do business in China, the Chinese government has already pointed towards potential 25% tariffs on 128 American imports, but the list confirms consumers will likely be hit as well.

“As we’ve said all along, tariffs are taxes on consumers and a drag on the nation’s economy,” said Matthew Shay, CEO of the National Retail Federation. “While we are pleased that many everyday products such as clothing and shoes are not on the list, we remain concerned that other goods such as consumer electronics and home appliances are targets. And we believe that tariffs on certain machinery will make American-made products more expensive.

“This entire process creates uncertainty and makes it difficult for retail companies that must rely on complicated global supply chains. Tariffs threaten to hurt consumers, jeopardize job creation and increase the cost of doing business here in the United States.”

President Trump might point to the fact Chinese companies are taking jobs away from American workers but there is a very good reason for this; it isn’t economically feasible to have these jobs in Western economies and, quite frankly, most people in Western economies think themselves above manufacturing jobs which are eagerly fought for in developing countries. The American economy has greatly benefited from outsourcing manufacturing processes let’s not forget.

There might be some political point scoring to be done in the short term, but it won’t be long before US tech companies are losing out to international competitors and the price of electronics goods in the US start to increase. Protectionism in a global economy does not work and those blindly supporting this move will find that out very soon.

Trump finishes posturing and squares up to China

President Donald Trump has often proved consistent with campaign promises, and kicking off a trade-war with China is just another example of his reliability.

The Mexican wall is still in the works, a bill to ease gun-carrying rights in schools passed House in December and federal regulations are disappearing faster than a toupee in a hurricane. Protecting the US people from the evil foreigners and their dastardly business ambitions was another which is now moving from dream to reality. Steel and aluminium tariffs are close and now Chinese technology is firmly on the radar.

Yesterday saw the signing of a Memorandum which the spin doctors in the White House say targets China’s economic aggression. 1300 products and services have been reviewed over the last couple of weeks, though the list has not been published yet. Ambassador Robert Lighthizer has been tasked with releasing this list within the next 15 days, though it is suspected there will be a heavy Chinese technology influence to it.

“This has been long in the making,” said President Trump during the signing ceremony. “You’ve heard many, many speeches by me and talks by me, and interviews where I talk about unfair trade practices.

“But we have one particular problem.  And I view them as a friend; I have tremendous respect for President Xi.  We have a great relationship.  They’re helping us a lot in North Korea.  And that’s China [the problem].”

The US has a trade deficit which Trump wants to address, and part of reversing this trend is to put Silicon Valley back on its mantle. While Silicon Valley still is viewed as the place to be worldwide for technology firms, this strangle-hold on the industry has been waning in recent years. Eastern Europe, India and China are just three of the regions across the world which has been making waves in technology, but part of the reason for China’s rise could be deemed as an uneven playing field.

China’s economy is generally protected by the government, as table stakes and working conditions do generally favour domestic companies over international businesses. This does seem to be the playbook when it comes to making an impact on the international scene; generate a ridiculous cash cow in the domestic market before taking advantage of advantageous trading conditions on the global stage. It’s the best of both worlds; just ask Huawei.

Few countries have taken a stance against this apparent advantage Chinese companies have on the global stage, mainly because of the riches which are on offer should you be able to break into China. It is one of the largest and fastest growing economies in the world, the world’s largest manufacturing economy and exporter of goods and second-largest importer of goods. In terms of digital transformation, many of these businesses are behind the curve compared to Westernised economies, and the increasingly affluent and digital aware consumers are prime for profit.

This is where Trump has to be very careful. Yes, standing up to China fulfils one of his campaign promises and inspires US citizens to be the self-appointed defenders of the free world once again, but is this the most pragmatic approach to encourage growth in the US technology sector? We’re not too sure.

When you look at companies like IBM, Google, Amazon, eBay, Intel, Apple, Microsoft and HP, these are not organizations which are going to make the desired profits without looking to the growth economies of the world. These companies, the internet giants to a lesser degree, are looking to economies like China to replace the lingering growth which was previously in the US. Putting walls up around countries will not work out well for the US tech sector; growth and profitability is in the international markets not the US domestic market.

Another interesting consequence of such a trade-war is not just the selling side, but manufacturing as well. It would be perfectly reasonable to assume that as well as blocking trade from the US, the Chinese government would be just as difficult in terms of manufacturing goods in the country as well. This would be bad news for Apple.

On the surface, Apple being unable to manufacture its products in China would be a win for Trump, as it might possibly force jobs back in the US, but it could have a very detrimental impact on Apple as a business. This is a very interesting article which explains the disaster it would be.

In short, for Apple to maintain current profitability levels with the manufacturing process taking place in the US, each unit would have to be sold in the $30,000 – $100,000 range. This is down to capacity. The US does not have the skills to meet market demand, Tooling engineering is an example, meaning supply would be reduced from hundreds of millions to millions. The US would of course be able to generate this workforce, but this would take years. This would put Apple is a very difficult situation.

Tariffs sound fantastic to Trump supporters, some of whom are becoming increasing afraid of the term ‘globalization’, and they do keep the President honest to campaign promises, but it doesn’t seem to be a very pragmatic move. It seems to be a short-term gain for a long-term catastrophe.

Now your correspondent does not claim to be a genius and would assume the people advising the President are more intelligent; surely these scenarios have been examined. Perhaps President Trump doesn’t care about the long-term of the US economy. Logically, we are not too sure how this benefits the US tech sector. The global economy is a thing and there is no going back. Success in a digital world which does not recognise international borders will only come with cooperation. Anyone who thinks trade barriers are going to be a good thing are quite frankly deluded.

Ericsson says consumers want mobile data tariffs to be less rubbish

Ericsson’s ConsumerLab asked a bunch of smartphone users what they want from their operators as we move into the 5G era; here’s what they said.

The findings have been condensed into six ‘calls to action’ for operators, which Ericsson will result in them stampeding to Stockholm to by lots of shiny 5G kit and associated services. The report seems to be more of an attempt to offer some top tips to operators based on some consumer feedback, which Ericsson reckons represents 800 million consumers across Argentina, Brazil, China, Egypt, Finland, France, Germany, Indonesia, Ireland, Japan, Mexico, South Korea, the UK and the US.

So, without further ado, here they are.

  • Provide us with effortless buying experience – simplify tariffs and how they’re presented
  • Offer us a sense of the unlimited – make us less paranoid about bill shock
  • Treat gigabytes as currency – enable recycling of unused mobile data
  • Offer us more than just data buckets – how about trying to innovate a bit?
  • Give us more with 5G – as above, uncapped data might be nice
  • Keep networks real for us – stop lying about network metrics please

“Our latest study does not look at a consumer view on 5G in isolation, but rather uncovers unmet consumer needs that must be fulfilled by operators on the way to 5G,” said Jasmeet Sethi, Senior Advisor, Ericsson Consumer & Industry Lab. “From offering an effortless buying experience to focusing on real network performance, consumers are demanding changes they would like to see already made today.”

The calls to action could be further condensed into one simple request: make tariffs less rubbish. As ever unlimited data would be nice but there will always be people who don’t use much mobile data and would like a cheaper alternative. Ericsson has named the report ‘Towards a 5G consumer future’ but it’s hard to see what any of it has to do with 5G. But don’t worry, this is definitely the last time anyone will shamelessly shoehorn 5G onto an announcement this year. Definitely.