In Business Model, Internet Access, Mobile, News

Bharti Airtel, in extending coverage of its Long Term Evolution fourth generation (4G) network to about 296 additional towns,  has had to again directly confront the matter of pricing: should LTE, as a fastest network, be priced at a premium to existing 3G networks?

The decision, likely dictated by the coming market entry of Reliance Jio into the mobile and LTE businesses, is to offer 4G at the same prices as 3G.

“Airtel customers can enjoy 4G at 3G data prices with packs starting at Rs 25,” Bharti Airtel said. Airtel also is offering other adoption inducements, such as six months of unlimited music streaming and downloads on ‘Wynk Music’ and five free movies per month for six months on the Wynk Movies” service, the company said.

Initially, most had hoped it would be possible to do so. Today, most are finding that equivalent to slightly-higher prices is required.

In the past, the launch of a next generation network has allowed higher pricing, as was the case for 3G. In some cases, the premiums were substantial.

By 2013, 4G price premiums over 3G had begun to narrow, globally. When 4G was launched in the U.S. market, for example, there was generally no price premium for 4G, compared to 3G.

Some observers also noted that 4G pricing models also did not represent significant innovations in pricing strategies, either.

Bharti Airtel seems to be only the most recent example of those trends. New 4G networks do generate more revenue for mobile service providers, but not because they feature higher prices per bit.

Instead, the benefits come because customers consume much more data than they did on 3G networks. In other words, 4G increases sales volume, rather than price per unit.

The other benefits for mobile operators likewise come in relatively indirect ways, such as reducing churn or spurring handset upgrades that allow new features to be supported.

But, as Bharti Airtel also has concluded, it often is not possible to price LTE 4G at a premium to 3G.

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