5G has yet to bring innovation in connectivity pricing

It is reported that unlike its predecessor, 5G has not brought major innovations to the pricing strategies of global telecom operators. As early as 2011, with the introduction of LTE technology, data download speeds and capacity have been significantly improved, especially compared with existing technologies such as HSDP/HSPA+, WCDMA and EVDO. Operators used this as a basis to introduce premium prices to improve service quality.

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Depending on the local market environment, LTE offers different benefits over 3G. At the same time, challenger operators use this opportunity to undercut existing pricing to gain market share. Essentially, LTE pricing is structured around data allowances (data volume), access speeds (bitrates), service quality, and added value (including content bundling, etc.).

5G has been available in many markets for about two years now. Twimbit’s recent study on global 5G pricing trends and benchmarks noted that telecom companies are extending similar propositions to their existing 4G capabilities when introducing 5G to customers. Limited use cases coupled with limited IT capabilities have constrained service providers from offering more innovative pricing models.

Does 5G require telecom operators to think about pricing differently? There is no straightforward answer to this question. The relevance of effective pricing depends on the market environment, overall business strategy and the capabilities of the operator.

Operators see 5G as a revenue driver

About 41% of 5G service plans launched by operators worldwide are premium plans compared to 4G plans. Operators often use unlimited offers to upsell premium 5G plans. Examples from South Korea, Japan, and the United States show several options built around a basic unlimited 5G plan. The premium tiers of LG U+'s 5G unlimited plan are differentiated by additional benefits and services. By offering service packages at different prices with rich 5G services and content, the telecom company improves the overall value for its customers. According to LG U+, 70% of 5G users chose the premium tier starting at 85,000 won (US$76.2). twimbit estimates that 5G ARPU is 2.4 times the operator's average mobile ARPU.

5G pioneers defend and expand market share in a highly competitive market

Some operators have considered migrating users to 5G services without causing a lot of pricing disruption. They offer a wide range of service plans for different data buckets to ensure that 5G can satisfy a wider range of customer groups.

Twimbit found that about a quarter of 5G service plans offer monthly data allowances of less than 25GB. Take Three UK, for example, whose entry-level sim-only 5G plan starts with a 4GB data bucket per month. The operator offers monthly, annual, and 24-month contract plans. In each category, 5G has the most basic data tiers, 4GB, 8GB, 12GB, 30GB, up to unlimited.