5G package prices have dropped, but is price really the factor that prevents consumers from upgrading to 5G?

5G is about to be officially commercialized for one year, but the replacement of 5G mobile phones has not come as fast as expected. According to data from the China Academy of Information and Communications Technology, from January to April 2020, the cumulative shipments of 5G mobile phones in the domestic market reached 30.441 million units, and a total of 65 new models were launched. Judging from the prices available on the market, the cheaper 5G mobile phones only cost 1,399 yuan. Such a friendly price has not aroused consumers' enthusiasm for replacing 5G mobile phones. Previously, the Strategy Analytics wireless smartphone team pointed out in the report "China Smartphones: Consumer Purchase Intentions after Covid-19" that in China, 37% of people have postponed the purchase of new smartphones, while 32% will postpone the use of 5G phones.

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What is the reason? Some people believe that the sudden outbreak of the epidemic in 2020 has led to a decline in consumers' enthusiasm for consumption, while more people believe that the root cause is that the 5G packages of the three major operators are too expensive.

As terminal manufacturers compete with each other to cut prices, the three major operators finally showed some sincerity. On the eve of 618, in order to further lower the entry threshold for ordinary consumers to upgrade to 5G, the three major operators quietly launched the first wave of price cuts since the commercial use of 5G. But will this price cut really encourage consumers to upgrade to 5G phones?

There are "conditions" for the price reduction of 5G packages

According to public information online, the price cuts by the three major operators were carried out in the name of preferential discounts. China Mobile's 5G package was directly reduced to 69 yuan/month, while China Unicom chose to reduce the original 129 yuan by 30% to 90 yuan/month. China Telecom also launched a 20% discount, with a discounted price of 103 yuan/month. Compared with the original 5G package price, it is indeed much cheaper.

However, consumers who are familiar with the daily operations of the three major operators must know that there is no such thing as a "simple and crude" price reduction. Sure enough, after checking the detailed rules of the 5G packages of the three major operators, the reporter found that these packages have restrictions:

The intensity of preferential activities in different regions varies. For example, the Wuhan Mobile number used by the reporter has a 5G package with a minimum package discount of 179-30 per month. The reporter actually pays a minimum of 149 yuan per month, and the discount only lasts for 3 months.

The preferential packages have a contract period ranging from 3 months to 2 years. During the contract period, you cannot cancel the network or switch networks;

Package rates can only be upgraded but not downgraded. For example, taking the 128 yuan 5G package as an example, the condition for enjoying the 88 yuan discount price is that the user's original package price must be 58 yuan or below. If you purchase a package with a discount price of 88 yuan at this time, during the discount period, you can only change to a higher-priced package and cannot lower it.

According to the above rules, when switching from 4G to 5G, the package fee will only increase, not decrease. So it seems that the 5G package price has dropped, but for users who are currently using the lower 4G package fee, the price has still increased. It can be seen that although the threshold for 5G terminals has been lowered, the threshold for network access is still very high.

Don’t worry, the 5G price reduction trend has just begun

Anyone who has experienced the 4G era knows that 4G has also gone through a process from excessively high initial charges to continuous speed increases and fee reductions to large-scale user migration, a process that lasted nearly three years. Although the speed of 5G construction is astonishing, the coverage rate of 5G base stations and the maturity of 5G technology still limit the operators' ability to lower 5G package charges, and the discounts of 4G package prices will not be as strong as they are today in a short period of time.

The construction cost and power consumption cost of 5G base stations mean that 5G package prices will not drop significantly before 5G technology matures. However, the 5G price reduction trend will only come in waves, as can be seen from the price of 5G terminals.

Starting from 2020, 5G terminal manufacturers have shifted from mid-range to high-end models to thousand-yuan phones. After completing a 76 billion-level order, the three major operators have also launched a series of strategies for terminals. In the online salon of smart terminals held by Communication World All Media in May, Wang Hengjiang, deputy general manager of China Mobile Terminal Company, pointed out: "5G phones that break the price range will continue to be launched, accelerating the scale development of 5G phones. It is expected that 1,699 yuan products will be launched in the second and third quarters, and 1,299 yuan products will appear in the fourth quarter." At present, it seems that the arrival of the thousand-yuan phone era will only come sooner rather than later.

Consumers who can wait might as well wait a little longer. With the upcoming start of school for new students and the completion of 600,000 base stations in October, operators may launch two waves of price cuts for 5G package rates.

Price is not the main factor preventing consumers from upgrading to 5G

On the first anniversary of the 5G licensing, Communication World All Media conducted a survey on 5G mobile phone consumers. Through the collection of 1,049 questionnaire samples and in-depth interviews with 9 5G mobile phone users of different ages and regions, we found that the reason why consumers are not in a hurry to upgrade to 5G is not just the high prices of 5G terminals and 5G package charges.

In the survey sample, 68.75% of consumers said they did not plan to buy 5G mobile phones for the time being. The reasons are: 1) 78.13% of users believe that the current 5G network speed and signal coverage are not good enough; 2) 56.25% of users believe that the current 4G mobile phones can meet all their needs, or 5G mobile phones do not provide new features worth changing phones; 3) 50.13% of users are due to economic reasons. Through in-depth interviews, we found that most iOS users are waiting for Apple to release new 5G phones.

Reasons why consumers do not replace 5G mobile phones

For C-end consumers, the perception of 5G is that the network speed is faster. However, the current construction scale of 5G network is still a long way from 4G. In 2020, the number of 5G base stations will only reach one-tenth of the total number of 4G base stations. The frequency characteristics of 5G determine that 5G needs to build more and denser base stations than 4G. Even with the increase in the "new infrastructure" policy, it will take several years to build a 5G network with good coverage across the country.

Therefore, during the construction period when 5G network coverage and network signals are not guaranteed, smart consumers are naturally unwilling to spend high prices to be "guinea pigs."

From another perspective, for consumers, the current C-end applications, 4G networks can meet all requirements. Although many 5G applications for epidemic prevention and control were urgently put into use during the epidemic, these applications are mainly concentrated on the B-end. For C-end consumers, there is no killer application that stimulates them to switch to 5G. 4G was officially commercialized in my country at the end of 2013, while short videos that change the way people interact and online mobile games that change the way people entertain have only appeared and risen in the past two years, so there are still some consumers who have only recently switched to 4G mobile phones.

It can be seen from this that if we want to see a large wave of 5G phone replacement, it will require long-term joint efforts from 5G chip manufacturers, 5G terminal manufacturers, operators and application manufacturers.